What Cultivation Capital Looks For
Cultivation Capital mostly invests in B2B startups, so when we look at opportunities in industries such as big data, we are really looking for a startup that is either developing some hard to collect data sets that will ultimately be valuable for other businesses that they can sell into. Or tools that help some of these large enterprises better collect and manage their own data. Ultimately the big data pieces are a means to an end. You ultimately are trying to develop an application that is going to improve the business productivity for one of our end customers.
We have a portfolio company that is international by birth. They have two co-founders from New Zealand, one from India, and they all met in Hong Kong. They started a business called Label Insight because of a family issue. Their dad got sick and needed to change his diet in order to improve his health. So they went to the grocery store and were looking at different packages. They realized that they didn’t have the ability to search and really look at consumer packaged goods and food. Look at them in a way that would really help them quickly identify the types of food he could eat. So they started this business by analyzing the nutritional labels for many different products. Then put them in an Amazon cloud database. Then ultimately they were able to build a number of ways to search that data set. Now it serves a whole bunch of customers.
So they have e-commerce customers who want to be able to sell different food products. But were struggling for a way that could be searched. So people wanted to search for gluten-free products. They wanted to search for products that were for specific diets. They can provide a service to that segment but then they also sell to retailers like Target and Wallmart. Those retailers are ultimately trying to develop more of their own products because they are encountering so much competition from Amazon.
Another component is selling to groups like Unilever. They want to use this data to be able to ultimately develop future products. I think this is a good example of just a couple of people who started collecting a lot of information. Then had a very high bar for quality in what they needed to put into the database. Ultimately they were able to build a very powerful tool that can serve a lot of different customers.
Have a Global Mindset
We have invested in companies all over the world and I think companies and startups can sell in many countries we tend to tell them to try to focus on an industry or a certain customer segment but in a lot of cases that customer segment will be all over the world. So, it is certainly important to have a global mindset from the get-go in order to be successful.
There are a lot of issues in trying to build a company across borders. Label Insights can only sell in the U.S. and Canada because labeling standards for foods are different everywhere in the world. Languages are also different. So the language barriers and the different regulatory environment definitely affects your ability to scale globally. So that is certainly a challenge, but it also creates a lot of value for customers and so many large enterprise companies really are global businesses anyways. When they are looking for service providers as startups, being able to help companies on a global basis makes them a lot more attractive vendor.