Chris Kim and Nate Williams formed Union Labs with the conviction that investors and companies aren’t collaborating closely enough to ensure the success of the startups they back.
Kim is the former co-founder and chief technology officer at the automatic lock company August. He first met Williams when the company was attempting to create a consortium of stakeholders for the Internet of Things market.
“Nate loved the go-to-market side when he came on board. He led the charge for us getting into retail,” Kim said.
Later, when August was acquired in 2017, the two men continued to work together after Williams took a role as an entrepreneur in residence at Kleiner Perkins. Kim would assist in due diligence as the two continued to refine the thesis that they’d worked on at August — that uniting stakeholders was a critical component of success for new technology companies.
That thesis became the organizing principle for their Union Labs fund, which has raised $29 million of a targeted $50 million fund.
“We’re starting to see this bifurcation between really, really hard deep tech firms versus other firms that might [have] one out of five of their deals being deep tech. Chris and I saw a lane for ‘applied’ deeptech,” said Williams.
This lane runs through the early-stage technology firms that need guidance from operators at hardware companies rather than the software-as-a-service experts that Williams and Kim said populate most venture capital firms. “Educating a SaaS partnership about ‘hard tech’ is super hard,” said Williams.
One example of the kinds of startups that the new Union Labs fund is hoping to back is Strella Biotechnology, a company that has developed sensors to monitor the ethylene gas emitted by produce to determine the freshness of fruits and vegetables.
Union Labs is targeting 20 investments with the first fund, including 15 direct investments and another three-to-five companies that it intends to incubate.
The other public investments in the company’s portfolio include the car rental optimization service Carnect and a toolkit for home safety called Encircle Labs (that’s not revealing too much about its business).
A fourth portfolio company, that has yet to publicly reveal its services, is working on solving problems in field service management related to training.
While these issues have presented challenges for industry, with the exception of the sensor business, none of them could be considered “hard tech” from a hardware perspective… and indeed, many of them resemble the software-as-a-service businesses that many firms are writing checks to support.
For its part, Union Labs is writing pre-seed and seed-stage checks with an average size of $890,000 for an 11% ownership stake. Williams says the firm will invest anywhere from $500,000 to $1.5 million.
For startups, one selling point for the firm is the connection it still maintains with the Internet of Things consortium Williams helped to establish for August Homes. Through the consortium Williams has been able to pull together corporate backers in telecommunications, utilities, consumer electronics and insurance, along with Kleiner Perkins and GV (which Williams said are investors).
“One of the things we’ve seen is the rise of corporate venture capital firms,” said Williams. And both Kim and Williams want their firm to act as a hybrid, between corporate venture capital and a traditional venture firm.
Time will tell if they can turn their mission into something more than a marketing message.