E10: Inside VC Deals - Rippling ($870m), Xaira ($1b), Nominal ($27m), Framework ($18m), Tines ($50m)

Welcome to the Superconnector podcast. I am Matt Joseph, your host. Today, we're going to cover five of the biggest deals in venture capital this week. I'm excited to jump into it. Let's do this.

Up first is Rippling. The HR platform raised 200 million in new funding at a $13.4 billion valuation. That's an eye watering amount.

So here's what TechCrunch had to say. We also reported that the round featured a separate 670 million secondary component meant to give some of the company's investors a bigger bite of the company while letting rippling employees, some of whom joined at the outset in 2016 cash out some of their shares.

This is actually a really juicy company to cover because of the story of its founder, and let's jump into that.

So Parker Conrad, featured right here, was also the founder of a company called Zenefits. Now Zenefits was a YC company as well, just like Rippling was, but Parker had to resign amid scandal, as this article from Forbes tells us.

Zenefits rose faster than any unicorn. Now it's falling just as quickly on Monday. Now remember this is from 2016 on Monday, Zenefits, co founder Parker Conrad resigned as CEO. And as a director of the company, the move comes as further questions are being raised about the steps Conrad took to put Zenefits into hyper growth, including flouting laws about who is allowed to sell insurance,

COO, David Sacks, who you might know from the All-In podcast.

Formerly of PayPal now steps in the CEO job at Zenefits. an email to employees He admitted the company has taken too many wrong steps. We sell insurance in a highly regulated industry in order to do that We must be properly licensed for us compliance is like oxygen without it. We die he wrote Sacks continued, The fact is that many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have been just plain wrong. As a result, Parker has resigned.

So the story here actually goes a little bit deeper. There were apparently employees who were having sex at the workplace.

There was all kinds of salacious stuff going on. basically Zenefits peaked at a $4.5 billion valuation,

had a massive fall from grace, and then ended up getting acquired by Trinet,

which is a leader in the HR space.

But not at a $4.5 billion valuation.

Parker Conrad went on to start rippling afterwards, and that takes us to the current arc of his story.

So at this point, you might actually just be wondering, what does this company even do? And I want to turn it over to Parker and his own words to describe where they sit in the marketplace.

In an interview he did with TechCrunch as a part of announcing this fundraise, here's what Parker Conrad had to say. The weird thing is Rippling is not actually a human capital management company, like an HR company. Yes, we have a very strong hr and payroll suite, but we also have an it and security suite We have a spend management suite where we do things like corporate cards and bill pay and expense reimbursements.

So he's saying there that they actually compete with companies like ramp and Brex in spend management. I don't know exactly how that's going for them, but that sounds like an interesting business line.

He goes on to say, actually, we're using the primary capital we raised in this round to fund the R and D efforts for a new fourth cloud.

That we intend to launch in a completely different area.

Classic example of companies that build software in this way is Microsoft. Microsoft is like the OG of compound software businesses.

They want to be this broad, all encompassing suite, which cover a wide range of business software and business services.

I think that's overall a good strategy. It makes sense when you're at that scale to be able to do that. The danger for companies like this is that sometimes they get a little bit distracted, but I think Parker Conrad has the chops and he has the experience to pull this off.

Now one thing I thought that was very interesting about this fundraise is hearing Parker talk about their AI strategy where he basically says There is no AI strategy and AI is Silicon Valley bullsh*t Here's what he has to say We are a company that is relatively free of any AI products right now. There's some stuff we're working on but I am always very skeptical of things that are like super trendy in Silicon Valley. So I can tell you what our AI strategy is not. I'm super skeptical of these chat bots. I don't think anyone wants to chat with their HR software.

Funny. And thrown in at the end of this article, which I just find to be hilarious, some shots of Bill Gurley,

the famous VC who kicked Travis Kalanick out of his company, Uber, in the name of compliance and regulation and so on and so forth. Here is what Parker Conrad had to say about Bill Gurley.

No, I've never met Bill. He's sort of a constant low grade antagonist, but I've never actually met him.

Constant low grade antagonist. I love it. Congratulations to Rippling on their new funding. And to those employees who cashed out 670 million. Lots of mansions being bought in San Francisco right now.

Let's move on.

Up next, Xaira, an AI drug discovery company, is launching with one billion dollars. And it says it's ready to start developing drugs. Now that is quite a headline. We've got a picture of the CEO here. More on him in a second.

So a billion dollars is a whole lot of money, even for a company in a space like biotech where you need long runway to get to actual drugs that people can use. It's very rare that we see these companies raise this amount of money coming out of the gate.

We've got a graph right here showing you this is the largest fundraise over the last year by a long shot.

The closest that we have here is hovering around 350 million. This is at a billion dollars. So these guys have a lot more dry powder to play with than just about anybody in their space over the last year, which is the AI boom coincidentally.

Xaira is being led by this guy, Marc Tessier Levine. Now he's particularly notable because he was the president of Stanford and he worked at Genentech in a senior role. Chief science officer, I believe is what he was.

Here's the story with his Stanford resignation. The president of Stanford University, Marc Tessier Levine, has resigned after an investigation opened by the Board of Trustees found several academic reports he authored contained manipulated data. Marc Tessier Levine, who has spent seven years as president, authored 12 reports that contained falsified information including lab panels that had been stitched together, panel backgrounds that were digitally altered, and blot results taken from other research papers.

So basically, he was part of a few research papers that had falsified data in them. And that reflected poorly on the university. The university actually found that he had no wrongdoing, which we don't really know the nature of the investigation or the findings, but that is what they said.

And they even allowed him to stay on as faculty. So his reputation in theory wasn't damaged by this, but it's highly controversial when a guy who goes through that kind of scandal, then comes out a year later with a billion dollars to go create new drugs,

The fundraising for this company is a who's who of the top investors in Silicon Valley and in the US as a whole. We've got Sequoia Capital, NEA, Lux Capital, Lightspeed Venture Partners, Menlo Ventures, Two Sigma, SV Angel, Arch Venture Partners led the round,

Marc was clearly very well connected. We haven't even gotten yet to what the company actually does. So why don't we talk about that?

We're going to hear a quote from Mr.

Tessier Levine himself.

The company is ready to start developing drugs that were impossible to make without recent breakthroughs in AI. We've done such a large capital raise because we believe the technology is at an inflection point where it can have transformative effect on the field. The advances in foundational models come from the University of Washington's Institute of Protein Design run by David Baker, one of Xaira's co founders. These models are similar to diffusion models that power the image generators like OpenAI's DALL-E and MidJourney. But rather than creating art, Baker's models aim to design molecular structures that can be made in a three dimensional physical world.

Now we have to be clear that there are a lot of companies that are claiming to have figured out how to do drug discovery with AI. The difference is that Xaira has a billion dollars to play around with.

I don't think that incrementally having a lot more money necessarily gets you closer to the end state. I think small companies are just as likely to succeed in an area like this as large companies are. It's why some of the biggest biotech companies pretty much now rely entirely on acquisition to find new product lines.

So I don't think this necessarily gets them over the hump, but it'll give them a lot of runway to figure things out. So congratulations. To Mr. Tessier Levine and Xaira, good luck to you.

Up next, a company called Nominal, based in Los Angeles, has raised 27 million across two rounds. A little bit of details about what this company does.

Nominal's platform is designed to handle sensitive government and industrial data. The company's leadership team brings over 15 years of combined experience in both hardware and software from organizations like SpaceX, Palantir, Anduril, Applied Intuition, NASA, Microsoft, and more.

Nominal specializes in creating software solutions for the aerospace, defense, industrial machinery, transportation, and energy sectors with various partnerships across the U S government.

So at its core, what this company is doing is trying to serve the industrial space. So that's things like aerospace, robotics, manufacturing, and they're trying to build a software platform that will serve the startups and the larger organizations that are building in this industry. Their argument is the software hasn't evolved in a long time so you get these patchwork workaround solutions, and that ends up being highly destructive to the process of actually building these things. And so what they need are better software. That's the argument here. Now, does it work? I have my doubts, but we'll see.

So a little bit on the founders here. nominal, is led by Cameron McCord, a former submarine officer who served in the US Navy as a nuclear engineer and a congressional liaison. McCord previously worked at defense tech companies and drill and Saildrone, and most recently as an investor at Lux Capital.

the thing that I would note just observing this space is that these big VC firms are pouring huge amounts of money into it. I think a lot of this fundamentally is driven by the success that Elon has had and then Bezos piling in.

It feels like this is an area of innovation because you have these two great entrepreneurs of our time who've invested so much time and money in it, so I expect to see more of that in the future.

Up next framework raised $18 million to take its modular laptop into other categories. Today, Framework is the modular, repairable laptop company. Tomorrow, it wants to be a consumer electronics company. Period. That's one of the biggest reasons it just raised 18 million in funding.

It wants to expand beyond the laptop into additional product categories.

The idea behind Framework was so interesting and ambitious, they were basically like,

hey, you should be able to change out any of the parts in your laptop for something better. If you want more storage, if you want more ram, if you want to make any kind of change to your laptop, you should be able to do it. That's what framework set out to do.

Now, a little bit about the company's fundraising history. The company's 9 million seed round paid for the original 13 inch laptop design, which has carried on for three generations of components. Frameworks 18 million series a in 2022 paid for the framework laptop 16. And now it's getting another 18 million dollars for its next expansion.

So these guys have raised a fair amount of money, not a huge amount of money for consumer electronic startup, but they are playing it close to the vest as to where exactly they're going to take this next round of funding.

Laptops are an area where we don't see much innovation outside of the giant tech companies and so anytime I see a startup that is coming along, trying to innovate in that space, I'm excited by it. The reality is it's very difficult to compete with Apple and Google and Microsoft and Dell and these behemoths, these giant companies that have been around forever, it's really, really tough to compete with them. And the main reason is that their production lines are so efficient and they are spending so much money developing these products that they have economies of scale. You can imagine a laptop which has thousands and thousands of parts in it. If Apple is the one who is buying those parts, they're buying millions of each part in one go.

That means that for each part, they're going to pay less. That's a challenge for a company like Framework, where Each of the parts in their computer, they're not buying at the same scale as an Apple or a Google or a Dell and that puts them in a position where they have to make the laptop more expensive, But I love what they're trying to do and I hope that this funding allows them to build some more cool stuff.

Up next Tines has raised $50 million to take its workflow automation tools beyond security teams.

So we also have a statement from the CEO where he is going to talk about this fundraise. Let's listen in.

The focus of this round really seems to be a combination of expanding out of the security ,teams who got them to where they are. And adding in a bunch of artificial intelligence as part of that expansion.They say, we now help over 33, 000 users automate tens of thousands of unique workflows. Tines performs over 40 million daily automated actions on behalf of our customers and users of our always free community edition. And those numbers are growing every single day.

They're raising a whole lot of money to drive this with the belief that people are going to be automating all their different workflows through it. And once you automate a workflow, you no longer have to go and do it in the same way.

And that is it for our deals of the week. Thank you for watching, thank you for listening, and we'll see you again soon.