Dayna Grayson and Rachel Holt seemingly didn't have the best timing. It was late in 2019 when the two, who met six years ago in Washington through a mutual acquaintance, decided to act on earlier conversations and start a fund together called Construct Capital.
At the time, Grayson spied an opportunity to create a new venture brand that focused largely on the types of manufacturing-related deals that she was funding inside of the investing giant NEA, which she joined in 2012.
Holt, who'd joined Uber in 2011, rising from a city general manager in Washington to the eventual head of the company's mobility unit in 2018, was also ready for a change and excited about the prospect of investing full time, having been brought into NEA by Grayson to scout out nascent deals on the side.
"Of course, we didn't expect COVID," Holt says now. Still, it didn't stop them from moving forward with fundraising and, in the process, securing $140 million in capital commitments from what Holt describes as "the typical kind of institutional LP base, including endowments, foundations," and also some peers, including Aileen Lee of Cowboy Ventures, Josh Kopelman of First Round and Grayson's former NEA colleague, Scott Sandell.
Construct, which is focused primarily on five themes -- decentralized manufacturing, supply chain visibility, automation, transportation and mobility -- is already actively writing checks, in fact. Among the companies it has backed are Chef Robotics, a startup focused on assembling food at high throughput; Copia, an outfit whose tools aim to empower engineers to streamline workflows, increase productivity and decrease downtime; and ChargeLab, a maker of electric vehicle charging software that Holt likens to the "Android of the charging market."
To get a better sense of the types of startups that might be ideal for the firm going forward, we talked earlier with the pair, who recently signed a lease in D.C. for their team (Construct also has two junior investors), and who were together today at Holt's home.
Parts of that conversation follows, edited lightly for length and clarity.
TC: Rachel, what startups did you identify for NEA and how do they fit into your point of view as an investor?
RH: I was always attracted to businesses solving real-world problems, so among the investments [I made as a scout for] NEA is an auto-refinancing company called MotoRefi because that was a problem I saw firsthand, talking with Uber drivers. I'm still on the board of that company.
But Dayna and I have both been attracted to what we called foundational industries. I saw [opportunities] on the transportation side, on the supply chain side, on the logistics side [at Uber]. When we were running Jump [as part of the mobility unit of Uber], we were building an e-bike, which is actually a pretty complicated piece of equipment to pull together, and you would see that something had left a factory in China, then you would lose track of it for five weeks, then you would see that it entered a port in the U.S., and then you would lose track of it again and I knew there had to be a better way . . . and I think COVID only highlights the urgency around some of the cracks in the system.
TC: Right. I think we've all been stunned by the supply chain issues as they've related to the vaccines and PPE, certainly. Are you focused on global supply chain opportunities or just domestically?
DG: We're primarily focused domestically. We will do investments in Canada and occasionally in Europe. We wouldn't [invest in] Asia without some more dedicated personnel there, and that's not in the scope right now.
What we've seen in COVID is just a huge acceleration of consumer demand, so if you're a brand or an e-tailor and you were planning all these upgrades to meet that demand two years from now, that's happening today, so it's really put a crunch on the system. A company like Tradeswell -- which is one of our investments -- brings data visibility across the supply chain, from where sales are happening online to how they're being fulfilled in inventory. That's something that analysts and agencies could help you do, but when you're looking at just the crunch of having to have that real-time urgency and information at your fingertips, you can't wait for human intervention anymore. You have to automate.
TC: You invested in Tradeswell's seed round and its Series A. Will that be typical going forward? Relatedly, what size checks will you be writing and how much ownership will you be targeting when you invest in a company?
RH: Our typical size is $2 million to $6 million checks. We like to lead those rounds, but they can be part of a round that goes up to, say, $12 million.
DG: As for ownership, something reasonable is close to 15%. We're not going to have a huge portfolio. Every company really matters to the fund. Every company receives dedicated time and attention from us. There isn't a cookie cutter approach where if you work with Construct, you get X. It depends on the entrepreneur and what they need.
TC: How important are board seats to you both?
RH: What's more important to us is meeting the company where they are and understanding what the entrepreneur needs and how we can add value.
TC: You're in Washington. As investors who focus on what you do, is there any special advantage to being there?
DG: We're investing nationally. If we find great projects here, we'd love to be involved, but of our first investments, two are in the Bay Area and two are on the East Coast.
RH: Dayna [had been operating remotely at times before COVID] and I was running teams in the U.S and Canada [at Uber]. We don't have a backyard bias.
TC: So you're likely to do more remotely, even after the world returns to normal.
DG: I definitely think some things are here to stay, and that it's great for founders. Their ability to engage investors over Zoom, whether they're down the street or across the globe, is really in their interest and I'm glad to see a more efficient fundraise happen for a lot of them.
RH: I think for entrepreneurs, trying to find the best fit for what they are building, versus just who is the person they know because they run into them at the gym, is a big net positive [to come out of this whole thing]. It also enables them to build companies in the place where they're best-suited to build the company, rather than indexing for where they'll be seen from a funding perspective.
For a fuller look at what the team is building, you can check out their blog post here.