310. Why We Invested in Urban Sky (Andrew Antonio & Nate Williams)

On this special segment of The Full Ratchet, the following individuals are featured:

  • Nick Moran
  • Andrew Antonio
  • Nate Williams

This will be a unique segment where, Founder of Urban Sky, Andrew Antonio, will discuss his startup story and how he chose New Stack to participate in the funding round. Andrew is joined by Nate Williams of Union Labs to discuss why he invested in Urban Sky.

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The host of The Full Ratchet is Nick Moran, General Partner of New Stack Ventures, a venture capital firm committed to investing in the exceptions.

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Transcribed with AI:

On today’s special edition of Why We Invested we have Andrew Antonio of Urban Sky and Nate Williams of Union Labs. Back in 2019, New Stack led the pre seed round for Urban Sky. And more recently, Nate Williams and the team at Union labs co lead the seed round with Catapult. Andrew, Nate, it’s a sincere pleasure to work with you both and welcome to the show. 

Great, Nick, thank you so much for having us. Really excited to be here. Nick, it’s great to be here. I’m a huge fan of the podcast. And it’s great to become friends through operators as well. So we got a lot to talk about today. Likewise, man, good to see you both. Let’s start with Andrew here. Andrew, can you walk us through your background and your path to Urban’s Sky? 

Yeah, so my early background is actually in strategic go to market kind of product development and M&A at a Fortune 500 company called Danaher, I’ve always really had a passion for technology and aerospace in general. So I left the corporate grind. And I joined a startup called Worldview about seven or eight years ago, which was a stratospheric technology and space tourism company. So I was their first employee and I led many of their business functions. And that’s also where I met my now co-founder, Jared Lightstick. At the time, he was leading spacesuit design and operations for a project called Stratix, which holds the world record for the highest human skydive of all time. 

It’s a good video, everyone should check that out. 

Yeah, it was really fun. It was an awesome project and Rovi kind of supported it. And that’s where we met Alan Eustace, who’s the former SVP of knowledge at Google. He actually did that skydive, he jumped from 136,000 feet beneath the high altitude balloon. And side note, he was our first investor in  Urban Sky. So we’ve known him for quite a long time and actually just joined our board. But after that project review kind of started developing a space tourism experience via high altitude balloon. And we took that business through several rounds of venture from pre seed to series seed during my tenure at the company. During that time, the company really started looking at the potential of its technology for remote sensing applications rather than just space tourism. And in my free time, I became really interested in big data and digital twins and how remote sensing data would really help shape the future of the planet and help us manage the world better and more efficiently, in general, seem to me like customers in the remote sensing industry, were really just craving more better and lower cost data. And so my co founder and I have always believed that the stratosphere could offer a unique advantage to unlock a lot of that value for the industry. But no one had ever successfully been able to unlock that value from the stratosphere. You know, there’s always this immense capabilities gap with stratospheric technology, there were really only a small handful of companies developing stratospheric flight vehicles. And all of them were building these massive, operationally constrained and extremely expensive systems that were really not capable of capturing remote sensing data at a cost that could compete in the industry with satellites or aircraft. So around that same time, like we saw the venture environment heating up in the space industry, a lot of that interest was directed towards this idea of miniaturization of remote sensing satellites, and also the reusability of rockets and spacecraft. And so we quickly recognized that really, no one was applying those same principles to stratospheric technology, and that if we could, we would have a unique advantage against not only existing stratospheric flight systems, but more broadly against satellites and aircraft in general. So that’s where we started with Urban Sky was with a hypothesis that if we could develop really small, low cost and fully reusable stratospheric flight systems, we could finally unlock the full value of the stratosphere and deliver kind of the market Holy Grail and remote sensing, which for customers is very high resolution more frequently updated low costs, area data.

Yeah, it’s kind of amazing how little has been done in the stratosphere to date, part of the big opportunity here. Nate, can you give us a sense for your background and a brief overview of the thesis at Union labs? 

Yeah, the short version is I’m a three time entrepreneur, two exits, been Silicon Valley for 15 years, as opposed to even Nick being in Chicago. I grew up in New Haven, Connecticut, home of the best pizza in the world. So we can have a little bit of rivalry on pizza. Grad school at UCLA hosts UCLA, I was at Intel, and I actually made an investment back in 2008, where Kleiner Perkins was leading a company in home automation called eye control. It led me to leave icap, and I ended up running a startup called for home in the home automation space that Sanjay Jha from Motorola acquired in 2010. And so after Motorola was acquired by Google. I subsequently left and went back to the startups, most recently at August. That was backed by Mavar on and Bessemer. And Jeff Clark VA from Uncork, we sold that company for a reported 150 million. And I went to Kleiner Perkins as an EIR. And so as part of being an EIR, you get a chance to take a timeout and kind of see how the market progresses. And I think, Nick, you and I have talked about this through our operator affiliation. I felt like the main character, as they were trying to convince me what was to happen, I was saying venture is changing, like something is happening. Venture is becoming bigger, there’s bigger funds, there’s more money. And meanwhile, who are going to be these first funds that can help great technical or business entrepreneurs like Andrew and Jared, build a world changing company. And so with that kind of guidance, we created Union Labs and incubated at Kleiner Perkins. It’s a $45 million vehicle backed with six different corporates, across telecommunications, energy insurance, etc. We’ve made 11 investments out of the fund one, and our thesis is basically that the physical world will be impacted by these companies that use either IoT robotics or automation. And so Urban’s Sky an example of an investment where we see this amazing opportunity for them to change how insurance companies, utilities and others deal with data that’s captured in the physical world. 

So most of what you guys focus on is the deeptech space? 

Yeah, it’s an uncommon view that we hold, we feel like we’re starting to see the early asymptote of SAS investing. And so Nick, as you’ve seen the market, you know, when I came out of grad school, the investors that I looked up to came from places like Intel, or Cisco, or places like Netscape, if we look now, majority of the GPS that are investing in companies are coming from places like Slack, Facebook, LinkedIn, Twilio, they’re coming from SAS, or social, local, mobile. So when you see a company that has deep technical insights in physical hardware, like Urban Sky, it’s tougher to diligence. And so we saw that barbell approach happening. And we realized in an ecosystem of deep tech investors downstream, like Lux, capital, Founders Fund data collective, etc, we have to have companies in firms like Union labs, that basically is the first in the relay. So we’ll go in early, our average check size has been between 100,000 to a million dollars, we’ve co led half our deals. And we’re basically there to solve either a really deep go to market issue, or to help direct some of the technical capabilities of the team. 

Very good. And I think we’ve mentioned oper8tor a couple times sort of the YC for emerging funds. If you want to learn more about that. We covered that with Winter Mead on episode 297. But back to Urban Sky. So Andrew, give us like the one liner, what is Urban Sky? 

Yeah, so we provide the highest resolution, lowest cost, freshest, remote sensing data enabled by a unique stratosphere in flight. Very good. And what is the problem? What problem are you solving, it’s kind of too, like I touched on earlier, and there’s a customer problem. And there’s always been a big technology problem in the stratosphere. on the customer side, we just understand that customers again, one more better, fresher data. And they want it at the lowest possible cost that they can get it at and so there’s this big gap and a lot of industries that rely on remote sensing data where they’re looking at a picture of the planet that can be anywhere from two months to six months or a year old. So that data that they’re using with business intelligence systems that make decisions that drive their companies can be old. And that’s not good when you’re looking for a fresh picture of the planet, particularly in industries like insurance and might touch on that a little bit. But from the customer’s perspective, they want a fresher picture of the planet. They want it at a low cost, and they want it in really high quality. And so we believe that the stratosphere is uniquely positioned to allow us to get that type of data, we can get really high resolution imagery at a really low cost, we can collect it really frequently because of the capture costs that are enabled by being in the stratosphere. But again, like on the the problem in the tech side has been it’s incredibly difficult to capture remote sensing data from the stratosphere and to develop vehicles that can reliably and repeatedly access the stratosphere and get that imagery data for customers. So we’ve spent a lot of time solving that technology problem from a first principles perspective, and saying Why aren’t there a lot of vehicles operating in the stratosphere? And why is that the case? And how can we fix that? So for us that is really meant you know, every vehicle that’s operated in the stratosphere has been you know, these these massive systems literally stratospheric balloons and flight systems prior to Urban Sky were the size of apartment buildings or skyscrapers so you can only launch them with you know, maybe a few days a year when the weather allows

So you’re operationally constrained to put that vehicle over the area you want, because you can’t get it off the ground. So we put a lot of focus into miniaturizing. Our flight systems also make them really reusable to bring the cost down. And those two components allow us to launch regularly and fly over areas of interest for our customers on a frequent basis to get really high resolution data at a really low cost. 

The audience here can’t see your logo, but it’s a balloon based system that lifts the payload up to the stratosphere. 

That’s exactly right. Yeah, so we have what we call the stratospheric micro balloon. So it’s kind of just a kin to the micro satellites of the stratosphere. So these are very small balloons that we can launch from the back of a pickup truck with one or two people. And they carry very high resolution sensors that can be launched in about six or seven minutes. And once they get up to the stratosphere, which takes about an hour, they can image almost 1000 square kilometers per hour. So you kind of get the imaging capability of a satellite in a really small, inexpensive, rapidly deployable package, which is our stratospheric microvillar. 

Why can’t existing satellites and cubesats do this? Why can’t they get high quality fresh images? 

Yes, so no fresh imagery has been accessible for satellites, there have been a lot of constellations that can get fresh imagery, but they can’t get it in high resolution. And that’s as that’s really just a function of those satellites, being so far away from planet Earth, that if they want to achieve the type of resolution that we can get from the stratosphere, they need to be massive, extremely expensive satellites, multi billion dollar satellite constellations. And if they get that big, they can’t compete on costs, the data that they have to downlink, it’s incredibly expensive. So there’s also been some regulation in the industry that has kind of prevented the satellite industry from capturing data at a certain resolution that is legal to collect from the stratosphere from a different airborne platform. So we have both kind of a regulatory moat that’s going for us against satellites, and also just a massive cost advantage, when you compare the resolution and the quality of data you get from satellite to archive. 

And part of that cost is bandwidth as well, right? Like sending high quality data, in images at high volume, from a satellite down to the earth is just cost prohibitive, and maybe technologically prohibitive. 

Yeah, it’s possible but it to your point is outrageously expensive. So on a unit economic basis, to be able to sell imagery at scale at very high resolution, even if you were able to get you know, this multi billion dollar satellite constellation into the sky, there’s, you know, many segments of customers that just wouldn’t be able to pay to play given the cost of downlink and the bandwidth to bring that data back. 

Okay, and tell us a bit more about your solution. So we get it, it’s a balloon, there’s payload, it’s got a sensor, it’s taking images, how do you deploy these things? You know, what does the flight look like? And, you know, give us a sense for your positioning and your product offering? 

Yeah, so you know, from a customer’s perspective, our data is really the end product. I think the technology is really cool, but the customers care less about it. So you know, from a data product positioning perspective, you know, we’re building frequently updated initially, that will be monthly, very high resolution aerial imagery nationwide. So if we capture imagery every single month nationwide across the US, that will be four to five times more frequently captured than the standard today. So again, that allows us to shorten that gap between data collection for customers, and they get fresher insights. So we want to start with monthly, very high resolution data for our customers, from the technology perspective, are really again, what we do is we have the small stratospheric balloons takes one or two people to drive out to a launch location, we have a lot of custom software that predicts specifically where our balloons will go based on the point that we launched them. And that’s actually really cool. That’s probably one of the number one things that people didn’t believe was true of our business, when we started was that we could precisely tell you, hey, if I just let a balloon go at this location, it’s gonna fly over the city of Denver and then fly and land in a certain place and, and we’ve proven that we’ve flown 4050 times as a company, and we’ve been able to show that we can precisely fly balloons over the areas that we want with our custom lay prediction modeling software. So that’s how it works. We go out to a launch site, we pull up literally off the side of a road, it takes us about 10 minutes to deploy one of these systems out of the back of a pickup truck, a full mission can last anywhere from six hours to 12 hours, so they don’t fly multiple days at a time. A lot of attempts in the stratosphere to develop this market have been for longer duration balloons that can stay up for weeks or months at a time. But the problem there again is I can’t direct that balloon where you want it to go after about 12 to 24 hours. So that precise modeling that I just mentioned really is only accurate for the first 12 or 24 hours after you launch the system. And then it gets a bit more difficult to do after that. 

I gotta say, Andrew, your investor updates are the best. I’m a map guy. And like every update has maps and like here was the course for the balloon. And here’s the results, you know, the images, it’s, it’s just such cool stuff. Yeah, they’re always fun. Last quick question here for Andrew, then we’re going to flip it back to Nate, who is the customer? 

Yeah, so we believe in focus early stage as a deep tech company. So I think, you know, in general, ultimately, we’re building a catalog, I resolution, fresh aerial imagery. And we view it as the you know, kind of like original content, the Netflix model, we’re constantly developing this original content that can be leveraged by multiple industries that use remote sensing data. But early stage we believe in, in focus, and we want to prove that we can be profitable with just one vertical market early on before we start to broaden that reach. So we found a lot of interest in full from the insurer tech space. And so Nate has actually been really helpful in this area as well and Union Labs and directing us towards that vertical and bringing us some partners in that space. But they have a lot of problems of trying to solve the remote sensing in the insurance sector, both from an underwriting and a claims processing perspective. So you get multiple use cases, even within one vertical market, and you know, their main problems on the underwriting side. Or if you have a new property that you want to underwrite or renewal that’s coming up, you use aerial imagery to look at the condition of that property in this the aerial imagery is for six months old, you don’t really know what you’re looking at. So your options are, do I use really old data? Or do I pay three to $500, to send a drone and a pickup truck out to someone’s house to get a bunch of pictures? Well, you work with open sky, we have the freshest imagery. And we can give you that property for pennies on the dollar to take a look at high resolution data of that space. And then of course, in the claims processing part of the insurance function. If there’s a big major event like a flood, or even just a hailstorm of rapidly getting aerial imagery, city wide or countywide can be really valuable to help that company process a claim really quickly and get a customer back on their feet and in their home really fast. 

Sounds like lots of applications, lots of customer sets here. You know, based on your description of your thesis at the top, you know, this sounds like pretty deep techie. And in your wheelhouse, but talk us through your early interactions with the team at Urban Sky, and what sort of stood out to you and caused you to lean in? 

Yeah, for sure. And I thought Andrew did a really great job of sort of talking through the landscape and the why of the company. Maybe a couple other things from my perspective, to round it out. We do work and have a limited partner in our fund, who’s one of the largest insurance carriers in North America. So I think like point one on that would be we’re moving into a world where data capture has to be multimodal. So if you’re an insurance company, you really need to think about data that’s coming from satellites, from planes from drones, and then obviously a newer category like stratospheric balloon, so they’re doing some market making. But this is a problem that they understand the need the data. The next thing is like when we were thinking about bets in the space, we were looking at it from the rubric of data is now leading to better types of decision making. And so I don’t like that idea that data is new oil. But with newer technologies allow you to have datasets that can be very valuable, either for revenue enhancement, or for driving operational efficiencies. So three of the use cases prior to meeting Urban’s guy we were talking about is number one, this idea of behavioral based insurance. So post underwriting a policy, you have all this performance data that generally doesn’t get captured into thinking about do you renew the policy? Like how many people go into the restaurant? Is it takeout versus delivery? What’s the state condition of this resort? Are they actually salting their parking lot, that type of information that’s captured post close is super helpful. If we take a different frame with utilities, utilities are making constant decisions regarding distribution or their generation pipelines. So think of what happened out here in California with wildfires. Having access to Urban Sky data. In that planning process, you can actually see where there’s growth of trees, there’s intersection with poles, etc. And then another case that we’ve talked about is with urban planning, as we think about smart cities or even community development out in the suburbs, or in rural development. There’s an issue of tracking to conformance. You’re working either in the defense industry, or you’re working as a county assessor. You don’t know that this 30 acre plot was subdivided into 30 different, you know, one acre plots, this is a good way to check that conformance. And so with that background, you asked a question regarding how we got in touch with Urban’s guy was interesting. You know, one of the things that we try to pride ourself on is having a wide network. And so we got an introduction to Urban Sky to Jared and Andrew through Shawn at making LA. So he had met Andrew and Jared, prior to their acceptance of TechStars and said, Wow, I really like this team. They’re super interesting. We had a first touch, I looked at my notes in preparation for this in June of 2020. And we really saw kind of a spark in Andrew’s eye when talking about the opportunity, but they had already gone and started to raise money. So there was only a limited amount of allocation, so we made an introduction to a sister fund of ours, that’s also Kleiner Perkins, affiliated called Catapult ventures. And in that case, Darren Liccardo Is the ex-head of DJI, the drone companies, Silicon Valley office, they fell in love and actually wrote the check and took the allocation. So we had a sit basically on standby for about a year as we kept getting these updates from cattle, and then met you about how Urban Sky was doing. And then basically, over the summer catapult came to us and said, We have conviction of where they’re heading, we’re going to lead this round, would you want to come back in and CO lead it with us. And so we were able to make a deal to co-lead the round for Urban Sky to join New Stack, TechStars, and TenOneTen. And we’re excited to do it. 

It’s awesome. So is this the type of thing that you guys have a market map for and maybe a thesis around? And, you know, you’re kind of waiting on the right company to bring the right sort of tech with the right mindset? Or is this something that appears on your desk and you tie off with LPs and kind of put together a strategy around? 

Yeah, I mean, you know, the pre seed/seed game as well as I do, it helps to have a prepared mind. And to have some paradigms of what you think is investable. And so we had already invested in one company that was at the intersection of kind of data and insurance, a company that’s in stealth mode, they’re focused on risk decisioning for construction. And so we had a variety of interactions with a lot of the insurance carriers. And so we wanted to continue to pull on that riff to say, these insurance carriers need better data, and they’re not going to go get it themselves, like a company like State Farm is not going to go out and buy a bunch of drones or hire stratospheric micro balloons go do it. They’re gonna pay for a third party. And so we had a prepared mind. But the other thing that we’ve learned from our experience is startups at pre seed and seed is all about the founding team. And we look for highly ambitious, highly technical founders that want to solve a big, big problem. And so what we found with Urban Sky is this is a massive market, massive Tam. But this is something that can be done given their skill set. And one thing that we think differentiates Union Labs versus other funds out there is like, we’re not afraid of hardware. We’ve built and shipped millions of units of hardware over our years. And so when they said that it’s a combination of vision sensing, capturing software, combined with hardware, we said, hey, we can help on both sides with the software component, but also sourcing and building great scalable hardware. What if any hesitations did you have? It’s interesting, I think when it comes to this, I get asked about hardware a lot like it’s called hardware for a reason. It’s not called Easy where and it’s not called, like simple, where it’s hard. And so anytime that you’re on the precipice of making a hardware investment, you need to think twice, about what’s the actual per unit economics, the sourcing, the supply chain, it’s etc. So I’d say the bar on this was higher for us to get comfort. And maybe the other thing that we spent some time on is, we know insurance, by default, because they’re actual aerials. They take time to make decisions. And we wanted to do our own validation and diligence to make sure that we were betting on a company when insurance was ready to buy. And our diligence showed us that we could collaborate with Urban Sky to start to tip over some of these major carriers. And so I think those two things, speed of go to market deployment and sort of complexity on hardware, were two of the things that we dug in on diligence. 

Well, that may be maybe one more question for Nick, then we’ll go back to Andrew, as you think about this company developing from a, you know, seed stage all the way to scale, you don’t invest if you don’t think it can be done multi billion dollar potential, you know, what do you see as the key milestones? And where do you see this business, you know, progressing over the coming years? 

Yeah, it’s such a great question. And that’s why I think venture practitioners are so different from what we do, Nick, you and I pre seed and seed versus AES versus people who are growth investors, the growth investors, basically, you know, they know great companies, but they also know discounted cash flow and they want to move on to extra money. I think in an early stage, you have to have a toolkit that can look at risk and look at risk mitigation. So there are two components where we thought we could basically help support them and see real progression between now and the next stage of financing, which would be the series a first is on the pipeline. So you need to land, but you also have to have evidence of expansion. And so I think Andrew has done a good job of his start to plant the flag, and several really well known names, not only in the Midwest, and sort of the Mountain West region, but also across the country. And then second is to start to create some intellectual property moat around the way they’re doing things. So Andrew mentioned, given the regulatory environment regarding what we’re seeing him stratospheric, there’s an opportunity for Urban Sky to build something that’s got first mover advantage at different Fidelity’s kind of rate imaging. And so those are the two vectors that we’re working on. I think about how we do it again. I don’t want to give all the Union Labs kind of secret sauce, but a lot of it is text slack communication to XM month meetups. And then again, you know, Andrew assigns Chris your eye, some stuff that he needs to work on, and we’ll go to the workshop and come back with some ideas.

So Andrew, gonna put you on the spot here, you know, other companies have tried to disrupt in the stratosphere, big companies, right Google loon like, how are you guys gonna have success here, when well funded, maybe over capitalized efforts previously, you know, have not? 

Yeah, I think our constraints as first time founders, or maybe our advantage against big organizations like Google Loon, I think we took an approach to this market. And this technology that needed to be lean needed to be fast and needed to be really small. So this was a completely new approach to the stratosphere in general, that we were miniaturizing everything and trying to make the lowest cost, most operationally flexible piece of technology that we could, whereas a big organization like loon with hundreds of millions of dollars of funding, and unlimited pockets really was looking at a couple different things, one technology with potentially more capability and also looking at a different market than we were looking at. So they were looking at communications as a market and really weren’t particularly interested in the remote sensing space for a lot of different reasons we could get into but but in general, that market ended up being the cited reason that they shut down Google loon as a project that it was just too difficult for them to compete with the satellite communication solutions that were coming online like SpaceX is Starlink like one Webb and others that on a unit economic basis and communications, it was not going there stratospheric system was not going to compete. Whereas we were approaching a different market with a completely different lower costs, more nimble approach, and I still really believe in the market. And I think compared to the satellite approach, we do and we’ll always have that unique unit economic cost advantage. Whereas in the communications industry, that doesn’t exist between the stratosphere and space. You know, Andrew, it does strike me that data in this space, if you can canvass the country, at least, and get images, the freshness of data is super important. But I bet even the archive in the trends, and the changes over time, is going to have tremendous value. I mean, this is a unique data segment where it feels like there’s persistent value in the data over time, even historically, whereas in much of the data world, the value of data sort of falls off a cliff pretty quickly. 

Yeah, completely agree goes back to my analogy about you know, being the the Netflix of remote sensing data, we want to have as much original content as we can have and have a massive back catalogue, because something in particular happens on a certain day, and we happen to image it, that could be really important. 

And also for trending, think, again, right? Now you can get daily imagery from a satellite with really low resolution. So you’re constrained with the type of trending analysis you can do with that resolution of data. But we will have the freshest, highest resolution catalogue of archival imagery. And we think there’s a lot you can do with that historically over time, and that our back catalogue will generate a lot of revenue years and years down the line. I wanted to jump on something, Nick, that you mentioned, because I think it’s so interesting in the early startups, it’s a lot like jazz, as opposed to classical music, the big thrust of something like this, you’re basically creating a new set of data that these folks can consume. In some cases, some of the potential BD targets don’t even know that’s available. And so the complexity here is how you inform people about a new set of data that they can use to help their models run faster to drive financial efficiencies. And at the same time, don’t get stuck in this pilot purgatory. So an area that all startups struggle with is how do I determine what’s real? And so something that I’ve seen, just to give a shout out to Andrew on this is you almost have to think about running a pipeline per kind of channel. So when we talk about insurers in the case of Urban Sky, we’re basically you know, put five, put six in a box, and the two that run fastest, you got to work with them first, then you go into the other, and you put six in the box and go from there. Because in this case, because it’s so explosive, the market opportunity, you really have to rely on people. And in some cases, that’s part of the critical path. And so I think part of the kind of nuance here is knowing when to ask people for the deal versus stepping back and saying they’re about a year away from even getting their crap together to do a commercial agreement. And so good on you, Andrew, for having that kind of clarity. I think I heard they might have worked for a guy called Nick Moran before in a previous startup. So I think, Nick, I’d work to go. Who’s your boss at some point, right?

Yeah, Nick, I might have Nick taught me a lot of what I lost if Nick was the best boss. So to this day, I’d say that it’s great. New Stack was our first investor as well. So you know, everything goes full circle. You’re welcome back to the podcast anytime.

Talk us through the plan here and your next three to five years. What is the plan in the rollout for Urban Sky? 

Yeah, so in three to five years, we want to establish a nationwide infrastructure of this capability to launch stratospheric balloons above cities and areas of interest on a regular basis. So we’ve done a lot of talking about aerial imagery today. And that’s really our key focus. Again, in super early stages, deep tech companies have been picking one product, picking one vertical and being really good at that. But longer term, three to five years, once we’ve established this nationwide infrastructure of stratospheric balloon remote sensing, our vehicles are sensor agnostic, so you can swap them out with different types of instruments via infrared related imaging instruments, things that can detect emissions and methane. And so we should be able to capture different data sets nationwide, eventually worldwide. And then ultimately, you know, five plus years, we want to be the SpaceX of the stratosphere. That’s ultimately where we’re headed as a company, we think that there’s immense potential for other use cases and applications in the stratosphere. And again, we want to prove that we can win in one first but longer term, we believe that the stratosphere is so untapped and under commercialize that remote sensing is just the beginning that there’s a lot more that we can do in terms of capturing weather data, and helping influence new weather models with better higher resolution weather data and a whole number of different product opportunities just from the stratosphere layer. So does this become like a Data Platform as a Service area? Yes, data service and your term business model? So you know, we would not generally collect imagery on a tasking type model where one customer would call us and say, Hey, go out to Denver and get some imagery. You know, we intended to build a schedule where we’re collecting the areas that have the highest concentration of demand for remote sensing data on a regular basis, and then offer that data through actually various different types of models to customers, depending on the channel and then the vertical, but certainly a data as a service model. You know, Nick, your big student of the game and talk about a lot of business history on the podcast, I think of back in the day, they talked about Sam Walton scouting out locations for Walmart stores, or Ray Kroc from McDonald’s or some of these folks, and you’re just thinking like, wow, they had to basically go and fly in their own plane to try to look for intersections that were busy off the interstate, you know, where to put a Cracker Barrel or Howard Johnson. This is a type of data that once it’s there, it’s so reliable. If you think about where a hotel chain opens up? Where do you open up a Costco? What are you seeing in terms of the state conditions of housing, not only from an acute standpoint, like after a hurricane, like what’s happening if we start to have colder or more prolonged winters. And so this is a type of thing where I think data nerds can get really geeked out. And I know me and my partner, Chris spend a lot of time thinking of all these like what ifs, that can be used with Urban’s Sky. 

Love it. Any other final thoughts from you, Nate, on sort of the opportunity for Urban Sky? 

Yeah, you know, I had the benefit of working early with a company that recently went public called Matterport in spatial intelligence. So they’re the number one provider of spatial data for real estate. If you’ve bought a house recently, and you see that dollhouse or 3d view, that’s Matterport, Bill Brown, the former CEO, and I shared an office together at Google. And so seeing the rise of that company from basically a small startup to now a $5 billion company, really showed me that if you have a really interesting way to capture imaging data, and then you set it up with a really robust market, where you’re helping your channel partners get more, you’re not just taking value from them, but you’re building value together. I think you can create a big business. And so we love Union, this intersection between deep technology and kind of FinTech insurance markets. And so this has been a no brainer for us to support so yeah, we will be doing more kinds of investments in and around where hard tech and insurance come together. We can take a step back from Urban Sky for a second, get your guys’s take on broader industry stuff.

Andrew, you know, what do you think is the right playbook for building a deep tech startup in 2021? And how does that translate into good diligence for investors interested in deep tech or even space tech investing? 

Yeah, I mean, from my perspective, I don’t think it takes 10s and 10s of millions of dollars to build a deep tech company anymore, or startup and, and so, you know, for us, it’s really been about focusing again, on the customer first, and trying to make sure that we’re building a technology solution around the customer need. So that’s really where this business started . What does the remote sensing market look like? And what are the gaps? And can we fill that gap with a unique piece of technology? So, you know, our playbook has always been okay, we understand, we believe we understand the problem really well. And now let’s engineer around that and be really nimble and test test test, we have the unique advantage of you know, we’re not launching a satellite into orbit, so we can fly every single week and test something new and continue to iterate on our product. But I think it’s really important from our perspective, that, you know, we stay small, early, that we don’t grow too big, too fast. And, and that we really get to a place where we have not only significant product in market traction, and we can show that there’s scalability in certain vertical markets before we even raised a Series A but also that we’ve solved a lot of the really first principal risks from a deep technology perspective. And for us, there were many of them there you know, there are things like can you build a high resolution sensor that weighs under a certain mass capacity? Is that even possible? Can you get a balloon to stabilize at altitude, so you can get imagery that’s not blurry. And so we really started, you know, just listing off from the customer’s perspective, here’s what we need to build around. And then from a technology perspective, what are the highest risks that we need to buy down first and solve first and we’re through most of those, those high levels of technology even at a seed stage as a company. So pretty, pretty amazing the progress you’ve made. I don’t remember how many years ago it was, but I remember being in Denver, in the garage.

Yeah, not too long ago. That was like maybe a year and a half ago, and people always joke, like, Oh, such a cool story that you started in a garage. Isn’t that great? You know, my response to that is? Yeah, I mean, it’s not that great. When you’re in the garage. It’s cool to talk about it. Remember, it’s like tight to fun, right? Like you run a marathon, you do some crazy race. It’s terrible during it, but after it feels great. 

That’s my experience with startups. It’s like, yeah, it’s real tough when it’s happening, then you look back a couple years later, like we had so much fun playing foosball at 11 o’clock at night, over a holiday weekend, when we were shipping all these August locks, like no, no normal person would ever think that’s fun. But we like the best part better to remember them to go through probably that’s right. Nate, how about you like we’d love just some general thoughts on the industry, VC has been changing pretty rapidly. I mean, we’re seeing change, and we’re seeing news on firms and structural issues and changes almost by the week. Now. Give us some thoughts on that and predictions for 2022. 

Yeah, I mean, I think if we put in historical context, VCs going through kind of like the generational tectonic shift, right? This is not your father’s or mother’s venture capital landscape anymore, right? It’s grown up, it’s not the 60s Sandhill Road or Boston 95 128 corridor. It’s not the two thousands.com bubble, we’re talking about a market that’s 10x the scale. And we’re talking about companies that stayed private much longer. And so it’s no longer individual track riders or family offices or even some of the firm’s that folks know, that are well named firms. Now what we’re seeing is a real specialization. So we’re having kind of a barbell happen in venture, the bigger firms are getting bigger. And some of that’s because of SoftBank Tiger, Coatue, etc. But the smaller firms are competing because of their specialty focus. So you just cannot diligence 10 Deeptech companies at the same time, there’s too much heterogeneity. And it’s just too hard. There’s nothing about how an Urban Sky looks that helps you make a decision to do a different company in our portfolio. We have, you know, a hardware company that does recovery for sports, fitness and physical workers called Impact. Those are two different diligence processes. It’s not the same as like one HR software to finance. And so I think we’re going to see this striation in venture, if we assume that venture capital and I know Nick, you and I talk about this in the operator construct that we’re in, in venture capital dollars are fungible, then what’s different about the logos, and I would say what’s really different is like you’re getting the money, but you’re also hiring the GPS. And so I think what the future holds is GPs have to show that they’re more than money, and they have to show they can do that.

A combination of network infrastructure, empathy, etc. And so as it relates to 2022, I think we’re going to continue to see the rise of the solo GP and specialist firms as really the trusted kind of first or second check in, I believe fundamentally that a new stack or a Union or a caterpillar ventures or installation, when that deal goes to Kleiner or COSLA, or Founders Fund, or Andreessen or tiger, they see something behind it. They say, hey, they worked with this company to do x,y, & z. Reduce technical risk, help go to market. So that’s number one. Number two, is I see a fork in the road for founders, because just because money is somewhat free, and valuations are crazy, there’s going to be some founders that get bit by that. And just because you can raise 20 million doesn’t mean you should raise 20 million. And so I th ink there’s going to be some self-selection from VCs, like myself and you and your fund, which like, does this founder have the maturity to take the keys to the car and actually get it on the highway? Or are they going to basically take this money and do like 15 pivots, because in some cases, having more money doesn’t lead to a better startup. And then I would say, number three, again, there’s a whole, you know, I’d go through 10. But I say number three is, I’m really loving how people are starting to think about sustained performance. And so all this about mental health, working with executive coaches, I think that’s so important, because this is a grind, and you’re making sacrifices of your health, you’re making sacrifices of your relationships, you’re actually seeing at the upper limits, right, like, I would almost equate it to like in some cases, like a version of SEAL training, when you’re an entrepreneur, you’re in that Hell Week. And you didn’t even know you could push yourself that long. And so at Union, what we’re trying to do is be there with resources, whether it’s executive coaching, or empathy, to try to get them through those moments where it’s make or break. And we think in the first pre-seed and seed stage, there’s two to three hypercritical moments where they could turn left or right. And if we help them, guide them, give them good advice, and they make the decision. We think we can get them on a path where they go on to, you know, create companies that change the world. And that’s why we do it. Right. There’s a variety of different jobs we could do. I’m in the venture to back companies that can change the world like Urban Sky. Andrew, you know, it’s funny, you’ve got four VCs involved now, right? You got a catapult TenOneTen, and us.

Your take on working with VCs, maybe visor founders that are selecting their investors? 

Yeah, I mean, I think we’ve been incredibly lucky ever since. Nick, you and I have had a relationship for a long over a decade, and I was spoiled with you writing our first check, and you start writing our first check, because you’ve been incredibly helpful and just in the weeds with us every step of the way, when we needed help. And you really teed us up to introduce us to folks like Union catapult and, and they have kind of carried the baton to the next level for us. I mean, now we’re bringing in these firms, 10 110, Union and catapult that have deep tech and data experience, and they understand us really, really well. And so, you know, for me, I’m very lucky. And I think we are as a company that we have investors that have been through the trenches, like we have understood deep technology and hardware. And so we don’t have to have conversations every week about you know, where we’re at with certain SAS related metrics, when we have investors that understand that it’s a bit of a longer road, they understand how to do early stage commercialization, and they understand the obstacles that we’re going to run into. And with r&d In general, you know, failure is part of the process. And if you’re not failing, you’re not moving forward and succeeding. So, yeah, we’re just really fortunate that we have the types of investors that really understand our business. And for other founders looking for investors, that would be my number one piece of advice, find people that generally understand you really well or understand the type of business you want to build and, and also view them as team members. Because that’s what you guys are, to me is, you know, an extension of our team and, and we solve problems together. Well, I’m proud to call myself an investor in Andrew, you’ve come a long way and we both have come a long way since we were knee deep in market segmentation spreadsheets in corporate America.

You know, it’s awesome. It’s a privilege to be a service provider and get to work with you. They, you know, likewise, it’s a privilege to get a chance to work, you know, side by side with you on this one, and hopefully more. Let’s do some more. The future’s bright, congrats on all the success on the New Stack. I’m looking forward to finding some more deals that we can work on together. And Andrew, I promise that I never called Nick and ask for any feedback for you as an employee. never asked for any employment records. I never asked what you know, what are three things that were good, right? I just just need two thumbs up.

You know, Slack emoji and I said, Okay, if Nick said, Andrew is the real deal, I’m going to back them up. But Nick was being too kind. That was too nice, Nick.

Well, there I mean, there are some people, you, Nate, you probably had this experience a number of times, you mentioned some colleagues. But you know, there’s some people you work with, some women, some men, and you know that if you have the opportunity to work with them, or for them, or invest in them, you just, you don’t blink, you do it.

And Andrew is one of those people. And then when I got to know Jared, too, it was, it was, it was quite clear on this one. So it’s a killer team. And you bring up something interesting about venture right? We don’t have to bet on every single winner, right? There’s companies going public NASDAQ NYSE every day, you don’t have to be involved in everyone. Ted Schlein, one of the partners at Kleiner said to me when I was EIR, he’s like, you can choose who you invest in. Right? It’s a choice both ways. And I think it’s super interesting. It’s also a great responsibility. You know, when you have a seed fund that are seismic, either mine or yours, I’ve got $43.5 million fund, like I have to be selective of where I put my money, when you find that person that you know, is going to do it in an honest ethical way, you back her up 100%. And so my view is like in fund one, we’re going to make 18 to 20 bets on people in their dreams, and be there every step of the way to try to help them go farther. And at some point, they graduate away from Union, they become bigger, and they have bigger investors, and they probably have better snacks in their office. And I hope that feeling is that we were there at a critical time to help them, you know, propagate to being in the bigger leaks. So we have no goal of being big, we’re not trying to be a Tiger, Coatue, Andreessen Horowitz, we like really early, we want to be first. And that’s kind of where we’re keeping the firm.

Love it. I learned a lot today, namely as you probably relinquished the mic to Nate here and he can take over the show from now on his guest those, Nate, you’re pro Andrew, you as well. Thank you guys. Appreciate the time. We’ll do it again soon.

Thank you, Nick. Great to be here.

Transcribed by https://otter.ai