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As it adds Jeremy Milken to the partnership, Watertower Ventures nears $50 million close for its new fund

Derek Norton and Jeremy Milken have known each other for twenty years. Over their longtime personal and professional relationship, the two Los Angeles-based serial entrepreneurs have invested in each other’s companies and investment firms, but never worked together until now.

Milken is taking the plunge into institutional investing, joining Norton as a partner in Watertower Ventures just as the firm prepares to close on a $50 million new fund.

It’s an auspicious time for both Los Angeles-based businessmen, as the LA venture community sees a wave of technology talent relocating from New York and San Francisco in the newly remote work culture created by the COVID-19 epidemic.

“I see two things happen. One people look at the effects of where the market’s going. We’re seeing a lot more companies that are starting up now as a result of a [the pandemic],” said Norton. “New company formation is happening faster than before covid. [And] a lot of venture capitalists that have relocated to LA. They’ve moved down to LA for lifestyle reasons and they’re saying that they don’t need to go back to San Francisco.”

For Milken, the opportunity to get into venture now is a function of the company creation and acceleration of digital adoption that Norton referenced. “The pandemic is accelerating change in the marketplace. Things that might have taken a decade are taking two years now,” Milken said.

These opportunities are creating an opening for Watertower Ventures in markets far beyond the Hollywood hills. The firm, whose original thesis focused on Los Angeles, San Francisco, and New York, is now cutting checks on investments in Texas and Utah, and spending much less time looking for companies in the Bay Area.

Derek Norton, founder, Watertower Ventures: Image Credit: Watertower Ventures

Norton’s latest fund is the only the most recent act in a career that has seen the investor traverse the financial services digital media and the early days of the internet. Norton built Digital Boardwalk, a pioneering internet service provider and the second commercial partner for the trailblazing browser service, Netscape.

Later, at Jeffries Technologies, and the $120 million Entertainment Media Ventures seed and early stage venture capital fund, Norton was intimately involved in bringing tech to market and focusing on early stage investments. With that in mind, the Watertower Ventures group, which launched in 2017 with a small, $5 million fund, is a return to those roots.

The plan, even at the time, was always to raise a larger fund. After founding and running the boutique investment banking business at Watertower Group, Norton knew he had to raise a starter fund to prove the thesis he was working on.

That thesis was to provide a bridge between early stage companies and large technology companies using the network that Norton has built in the Southern California tech and entertainment community over decades.

“We want to take our contacts at Google, Apple, Facebook, Disney, Microsoft, Cisco, Verizon, AT&T, Comcast, and other companies we believe should have a relationship with our portfolio companies, and help the CEOs and management teams more effectively do business development,” Norton told SoCal Tech when he closed his first fund in 2017. “We want to connect them to the right person at those companies to create a commercial relationship. That has a really large impact on early stage companies, who typically don’t have a deep network of relationships, and the ability to get to those type of people. It’s because of our advisory business that we have those relationships, and that’s also why those relationships stay fresh and active, versus people who aren’t in those businesses. It’s almost a full time job to maintain that, and that’s where our value-add is.”

Milken, who has spent his professional career in entrepreneurship, was ready to try investing, and was intimately familiar with Watertower and its portfolio, as an investor in the firm’s first $5 million fund.

“Two years ago we started having those conversations,” said Norton in an interview. “As Jeremy exited his business in September it created the opportunity to go out and raise together as the evolution of our partnership.”

Jeremy Milken, general partner, Watertower Ventures. Image Credit: Watertower Ventures

With the new capital coming in, Norton expects to back some 30 to 35 companies, he said. And, in a testament to the first fund’s performance, which has it in the top decile of venture funds for its vintage, Norton said he was able to raise the capital amidst the economic uncertainty caused by the COVID-19 pandemic. Some 70 percent of the existing portfolio has been marked up, according to Norton.

Even though limited partners, the investors who back venture funds, were reluctant to commit capital to new firms in March and April, fundraising returned with a vengeance in June and July, according to Norton. The paper performance likely was enough to woo additional limited partners and individual investors including TikTok chief executive Kevin Mayer, the former head of streaming at Disney.

Mayer’s presence in the firm’s investor base is a testament to the firm’s pitch to founders. “We view fundraising as a massive distraction for these early stage companies from their business. We try to deliver that network that’s ours to those founders,” said Norton.

“I think we’re in a unique position starting with a fresh fund here,” says Norton. “Uncertainty creates opportunity and people are bringing solutions. We haven’t noticed any slowdown whatsoever, we’re working with twenty five companies per week. Since the inception of the fund, we haven’t seen deal flow at this level.”

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3D-printed glasses startup Fitz is making custom protective eyewear for healthcare workers

A lot of startups have answered the call for more personal protective equipment (PPE) and other essentials to support healthcare workers in their efforts to curb the spread and impact of COVID-19. One of those is direct-to-consumer 3D-printed eyewear brand Fitz, which is employing its custom-fit glasses technology to build protective, prescription specs for front-line healthcare workers in need of the best protection they can get.

Fitz Protect is a version of Fitz’s eyewear that uses the same custom measurement tool Fitz created for use via its iOS app, made possible by Apple’s depth-sensing Face ID camera on newer iPhones and all iPad Pro models. The app allows virtual try-on, and provides millimeter-level accurate measurements for a custom fit. Protect is a version of the glasses that still supports a wide range of prescriptions, but that also extends further like safety glasses to provide more coverage and guard against errant entry of any fluids through the eyes.

Healthcare professionals are doing what they can to ensure their face, mouth, nose and eyes are protected from any coughs, sneezes or other droplet-spreading activity from COVID-19 patients that could pass on the infection. These measures have more broadly focused on face shields that feature a single transparent plastic sheet, and N95  masks (and alternatives when not available) to protect the mouth and nose.

Fitz CEO Gabriel Schlumberger explained via email that the design for Fitz Protect came from working front-line doctors and nurses from New York, LA and Texas who were all looking for something to source prescription protective eyewear.

“More than 60% of doctors are glasses wearers, and current guidance is for them to stop wearing contact lenses,” Schlumberger explained, adding that Fitz Protect is also designed to be worn in conjunction with a face shield, when that’s an available option, to provide yet another layer of defense.

“We heard from prescription glasses wearers that their standard glasses didn’t provide anywhere near adequate coverage, especially over the eyebrows, and in some cases they were adding cardboard cut-outs,” he said. “We leveraged our existing system to create something much better. ”

Fitz’s model also helps on the pricing side because it’s already designed to be an aggressively cost-competitive offering when compared to traditional prescription eyewear. Their glasses typically retail for just $95 including frames, lenses and shipping, and are also offered in a $185 per year unlimited frame membership plan. For doctors, nurses and hospital staff, the entire cost of Fitz Protect is being waived, and the company is seeking donations to help offset its own manufacturing costs, which currently stand at around $100 per set, though process improvements should bring that down, according to Schlumberger, as they expand availability.

Already, he said that nearly 3,000 healthcare professionals have signed up to receive a pair in their first week of availability, so they’re working on adding scale to keep up with the unexpected demand.

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With the real estate industry facing headwinds, SoftBank-backed Compass lays off 15% of staff

Compass, the real estate brokerage startup backed by roughly $1.6 billion in venture funding, has laid off 15% of its staff as a result of the shifting economic fortunes created by the global response to the novel coronavirus pandemic, according to an internal email seen by TechCrunch.
Citing economic fallout that has …

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Max Q: SpaceX succeeds with a spectacular Crew Dragon test launch

Max Q is a new weekly newsletter all about space. Sign up here to receive it weekly on Sundays in your inbox.

We’re off and running with good milestones achieved for NASA’s commercial crew program, which means it’s more likely than ever we’ll actually see astronauts launch from U.S. soil before the year is out.

If that’s not enough to get you pumped about the space sector in 2020, we also have a great overview of 2019 in space tech investment, and a look forward at what’s happening next year from Space Angels’ Chad Anderson. Plus, we announced our own dedicated space event, which is happening this June.

SpaceX launched its Crew Dragon commercial astronaut spacecraft on Sunday. No one was on board, but the test was crucial because it included firing off the in-flight abort (IFA) safety system that will protect actual astronauts should anything go wrong with future real missions.

The SpaceX in-flight abort test included this planned fireball, as the Falcon 9 rocket it launched upon broke up.

The IFA seems to have worked as intended, propelling the Crew Dragon away from the Falcon 9 it was launched on top of at high speed. In an actual emergency, this would ensure that the astronauts aboard were transported to a safe distance, and then returned to Earth at a safe speed using the onboard parachutes, which seem to have deployed exactly as planned.

SpaceX CEO Elon Musk is looking a bit further ahead, in the meantime, to when his company’s Starship spacecraft is fully operational and making regular trips to Mars. Musk said he wants to be launching Starships as much as thrice daily, with the goal of moving megatons of cargo and up to a million people to Mars at full target operating pace.

Secretive space launch startup SpinLaunch is adding to its operating capital with a new $35 million investment, a round led by Airbus Ventures, GV and more. The company wants to use rotational force to effectively fling payloads out of Earth’s atmosphere – without using any rockets. Sounds insane, but I’ve heard from people much smarter than me that the company, and the core concept, is sound.

I spoke to Space Angels CEO Chat Anderson about his company’s quarterly tracking of private investment in the space technology sector, which they’ve been doing since 2017. They’re uniquely well-positioned to combine data from both public sources and the companies they speak to, and perform due diligence on, so there’s no better place to look for insight on where we’ve been, and an educated perspective on where we’re going. (ExtraCrunch subscription required).

Rocket Lab was born in New Zealand, and still operates a facility and main launch pad there, but it’s increasingly building out its U.S. presence, too. Now, the company shared its plans to build a combined HQ/Mission Control/rocket fab facility in LA. Construction is already underway, and it should be completed later this year.

‘Rideshare’ in space means something entirely different than it does on Earth – you’re not hailing an Uber, you’re booking one portion of cargo space aboard a rocket with a group of other clients. Orbex has a new customer that bought up all the capacity for one of its future rideshare missions, planned for 2022. The new launch provider hasn’t actually launched any rockets, however, so it’ll have to pass that key milestone before it makes good on that new contract.

Yes, it’s official: TechCrunch is hosting its on space-focused tech event on June 25 in LA. This will be a one-day, high-profile program featuring discussions with the top companies and people in space tech, startups and investment. We’ll be revealing more about programming over the next few months, but if you get in now you can guarantee your spot.

Source: TechCrunch