Defining the Companies that Hillside Seeks
Last week, Melvin dove into Hillside’s investment thesis, establishing our focus on early-stage startups that are either connected to alumni or within the edtech, sustainability, and insurtech industries. Maintaining these distinctions allows us to become experts in each industry, make better-informed decisions, and differentiate ourselves as a fund. Our industry diligence has helped us determine key opportunities for innovation in each space. I will define a few of the company varieties we are seeking and that we believe will be successful in their respective industries.
Within our most broad distinction, Hillside will limit its investments into early-stage companies, confident that our fund will be impactful to any business at this size. Hillside will utilize capital and the bright minds of consulting UConn students to accelerate early growth and bring further innovation to the table. As raw financial data is generally not available for companies raising pre-seed to series A, our search for an investable, early-stage business places a heavier emphasis on the three core elements of a startup: team, product, and market. For one, we must distinguish a passionate entrepreneur which research finds conducive to persistence of creativity and successful venture performance over the long run. That entrepreneur should be a member of a greater, balanced team that integrates relevant technical knowledge, industry expertise, and background in business leadership to gain success from every possible angle. Our search for early-stage startups is also limited to those entering a market size of at least $1 billion, or what we believe is large enough to sustain durable growth over the long term. In that space, we look for companies with a strong product/market fit to either disrupt a stagnant market or perform as a strong competitor in an increasingly active market.
Product/market fit is, then, best determined by consumer use metrics and reviews. To discern a high quality of product, Hillside will also consult student technical experts and individuals with extensive industry experience. We hope to leverage the breadth of knowledge brought to the fund by student analysts to gain a trusted opinion on the quality of a company’s product relevant to competitors in the space. In the case that the startup is so early that capital raised is used towards product development, we prioritize the founder’s traits, and closely research the proposed business model to determine suitability and the presence of an economic moat. As early-stage investors, we find it necessary that a startup demonstrates strength in each of the three core elements, especially in place of reliable financial data.
Amongst the novelty of insurtech, it is slightly more challenging to gauge which companies will disrupt the previously antiquated insurance industry. Hillside has decided to zero in on niche opportunities where they may appear across the value-chain or where an urgent need for insurtech arises in rapidly growing markets. An interesting case and example of the latter lies within the growing gig economy. Household names such as Uber, Airbnb, and Instacart have perpetuated the presence of a strong gig economy, and at the current growth rate, it is projected that half the U.S. workforce will conduct freelance employment by 2027. With such rapid growth increasingly accelerated by technology, Hillside recognizes the challenge for traditional insurers to keep up and the persisting, urgent demand for benefits on behalf of contract workers. A gap in insurance coverage for these employees has, hence, been made obvious and exacerbated by the speed at which novel gig economy roles are introduced. Hillside is confident that insurtech entrants can provide coverage solutions by employing innovations such as AI underwriting algorithms, digital APIs, or even providing collaborative services to large insurers. Though the gig economy is one of many opportunities that Hillside recognizes potential for value-add, I hope to leave you with an idea of the quickly emerging markets we look for and believe various insurtech startups can be successful within. As briefly mentioned above, these opportunities can manifest themselves in various areas across the value chain, from product development to marketing.
Hillside will use our focused diligence to identify any insurtechs providing value relevant to market-demand, especially within traditional and overlooked insurance roles.
Hillside’s advantage in seeking out edtech companies stems from our relevant experience and perspectives of education as it stands today. This is a thesis focus area we are passionate about as we recognize the lack of accessibility to and systemic issues within every aspect of our educational system. Therefore, our search for an investable edtech startup is not limited to one business model, market, or solution in the hopes of utilizing capital to empower education for all. It is clear that the pandemic has worsened particular issues, though, and emphasized a growing need for innovation within digital schooling platforms. Even as schools reopen and integrate novel technologies into blended learning, Hillside analysts will use our experience and industry research to recognize implications associated with such a shift. The Programme for International Student Assessment (PISA) outlined research results discovering the delicate balance between successful learning and technology, such as technology being unfavorable to student performance in lower-performing school systems. Again, Hillside seeks out any edtech opportunities for age groups or markets, while remaining mindful of the positive or negative impacts technology can have on the students that will be the leaders of our future.
Our last thesis focus area, sustainability, stems from an urgent need to protect the environment. For now, we are primarily concerned with opportunities that are most relevant to us as students and consumers. These opportunities appear in various forms, such as within the food we eat (vertical farming), reparations for our harmful actions (tracking and offset of carbon emissions), or even commercial solutions for the institutions we support (food waste monitoring). Hillside is excited to look for disruptive technologies that may help to slow the destructive impact we are wreaking on the planet. At this point, we have primarily focused on software solutions within each of the above categories as it is where we believe we have the most impact as students and consumers; however, we also recognize other areas with innovation potential such as sustainable fintech and startups developing solutions for CPG.
At Hillside, we are ultimately excited to recognize investable businesses emerging across all of our thesis focus areas. Stay tuned to future newsletters for more overarching venture trends and insights into the industries we cover.
By Karolina Tarnacki, Analyst
UConntrepreneurship Highlights:
Cate Rung (BUS ‘10) is the COO & Co-Founder of Pngme, an Africa-focused financial data platform which just closed a $3 million seed
Are we missing any exciting #UConntrepreneurship activity? Comment below or email noah.sobel-pressman@uconn.edu or karolina.tarnacki@uconn.edu to be featured in the next newsletter.