Industry Dispatches #2

Fundraises, Toast, and eVTOLs

Hey folks,

Happy Friday! Let’s get to it:

Fundraises

• Karat, a creator economy startup, announced 70m in funding, across debt and equity.

If you buy that creators are getting more sophisticated and capable of launching real businesses, it makes a lot of sense to become their financial platform. And with creator-led businesses ranging from Mr. Beast’s Feastables to Kim K.’s Skims showing the path, why not aim to become the bank for the next generation of these massive companies?

• Several Fractal companies were recently funded. I’ll quote directly from Zach Fredericks:

Breadboard, which sells procurement software to electronics manufacturers, raised $4M led by Twelve Below. CurbWaste, which is building a vertical solution for waste and recycling management, raised $4M led by TTV Capital with participation from Mucker Capital and B Capital. These are just two good examples. In addition to Breadboard, a number of the companies that got funded this quarter came out of the Fractal Software venture studio, including DashFuel, a vertical solution for petroleum distributors; TripleAxle, a platform for heavy-haul truckers; and Belfry, a security guard management software.

I’m particularly excited about Belfry for reasons that may feature in a future piece.

Around the Ecosystem

• Matt Harney has been putting out some killer content around SaaS for a while. His recent podcast with Patrick McGovern of Bowery Capital is well worth a listen.

• One of my favorite subplots in the restaurant industry over the past month has been around Toast. Toast had rolled out a digital ordering platform and made the decision to charge end users (ie not the restaurant) a $.99 fee.

  This was not received well to say the least.¹ The backlash has been so immense, Toast has now rolled back the fee and indicated that this will probably mean increasing fees restaurants themselves pay for the Toast platform. The core mistake seems to be adding any friction whatsoever between restaurants and their customers. That fee is uncontrollable by the restaurant, has a solid chance of pissing a long-time restaurant guest off, and very well might impact the long term value of a customer.² At the same time, Toast needs a path to profitability. That will necessitate increased pricing power in some form or fashion, something emerging restaurant tech platforms are picking up on and competing against.

Industry Bites: eVTOLs

Staying on theme this week with aviation, there has been a lot of hope that eVTOLs are finally market-ready.

eVTOLs have a lot of promise. First, they are obviously electric with climate benefits, but this also leads to lower maintenance costs for aviation companies. Second, they’re safer than helicopters, with far more rotors than the single rotor on a helicopter. Third, they are incredibly quiet, leading to no noise pollution in locales where they are used. For all these reasons, there is a lot of excitement that eVTOLs aren’t simply a helicopter replacement, but instead a vehicle for market expansion.

There’s plenty of 150 mile or less road trips that could reasonably take to the sky if the cost is sufficiently low. The business aviation market wants these things in part because they see a clear future where travel reorients around eVTOLs for short-mile trips.³ Where we stand today, we’ve been waiting on the FAA to clear a path for the industry to commercialize with industry leaders like Joby anticipating 2025.

On that note, this week the FAA finally released their plan to make all of this happen.

The reactions I’ve seen are mostly negative. The plan comes with a 2028 commercialization target date, environmental reviews for any new eVTOL dedicated takeoff builds, and plenty of other onerous regulation on pilot certification, and enough additional regulation that the costs for the industry stack up substantially.⁴

There’s a growing dissatisfaction with the onerous regulatory regime that while beneficial in some areas seems to be reducing our ability to innovate towards better industry solutions. NEPA is a large culprit - the demand for environmental reviews is massively slowing down our ability to transition to greener (and simply better) solutions.⁵

Instead, we have to look forward to 2028 - and that’s assuming that environmental reviews go according to plan.

That’s all for this week! Have a fantastic weekend.

1. Restaurants were getting their congressmen involved.

2. Fees have gotten completely out of control in consumer land and anecdotally consumer frustration seems to be heightening.

3. Uber has also placed bets in the industry for similar reasons.

4. https://twitter.com/dronelaws/status/1681395393626611724

I am once again asking Twitter and Substack to sort out their issues and allow for Twitter threads to be embedded.

5. There’s a lot of great writing these days on the impact.