Founder-focused venture studio aligned with entrepreneurs
by Jack Glenn, FreightWaves
Silicon Valley’s illustrious launching of tech startups has brought venture capital to the mainstream. A bright idea for a business is pitched to a group of investors who in turn fund the early stages of the so-called “seed company.”
But new ways of thinking have changed the venture capital structure. Enter the venture studio, a model by which startups are built through the leveraging of internal resources and external partnerships, matching them with experienced founders who will guide them to a successful launch. The cost to start and fund new businesses has come down dramatically, and the studio model maximizes the benefits of the trend in lower costs. Studios mitigate time, capital and complexity by leveraging a team of operators to lift companies faster.
“The venture studio [model] has been around for 25 years, but the market has only taken off in the last five years,” Rule 1 Ventures CEO Todd Ehrlich said. “Rule 1 Ventures is one of the first venture studios with a focus in the transportation space.”
The venture studio is completely founder focused and aligns entirely with entrepreneurs, according to Ehrlich, who said that unlike traditional venture capital firms, Rule 1 doesn’t place artificial timelines on a business to facilitate its return on investment. In addition, the studio never makes mandates with its partners regarding expenditure, team size or other artificial goals.
Rule 1 Ventures takes its name from a Warren Buffett quote: “Rule #1: Never lose money. Rule #2: Never forget Rule #1.”
The Atlanta-based venture studio focuses on profitability before rapid growth, providing shared services to entrepreneurs in residence. These services include sales, marketing, technical development and financial, legal and strategic support, which frees the entrepreneur to focus entirely on growing the business.
Rule 1 believes that not all startups are the right fit for the traditional venture capital model. The venture studio has experience building business-to-business (B2B) software-as-a-service (SaaS) platforms, with one of its main focuses being the transportation and logistics space.
So far, the venture studio has co-created TruckerCloud, a trucking visibility gateway tool that offers real-time freight visibility and reduces check calls; FactorCloud, a software platform that allows factoring and brokerage companies to reduce costs, increase efficiencies, reduce errors and lower risks while advancing funds to carriers; Firebolt, a computer vision invoice, bill of lading, rate confirmation and remittance check reader that digitizes data to create automated processes; and other stealth startups. Outside of transportation, Rule 1 has invested in startups in the fintech space, including Bank Shot, as well as cybersecurity, including Red Sentry.
Ehrlich believes carriers and brokers are hindered by high transactional friction, which reduces their margins. Rule 1 aims to find more elegant ways to make data more affordable, easier and cheaper for transportation companies to utilize.
The venture studio believes that industry-specific technology will proliferate. Broadly targeted software usually leaves target audiences and investors confused, ultimately leaving the brand unable to gain traction in multiple verticals.
Rule 1 builds partnerships with entrepreneurs and companies eager to build new technology but that are struggling to develop it internally and get it to market.
“It’s hard to build a company in a company, so we find ourselves talking to a lot of businesses who want to build new technology but need focused help to commercialize it,” Ehrlich said. “We’re co-founding businesses with people that can run it on their own, but we help them de-risk it. Rule 1 makes the startup grow faster with less capital needed to get it done.”
Before co-founding Rule 1, Ehrlich served as a SEAL. He then served as a vice president at United Rentals and Jacobs Private Equity before jumping into the entrepreneurial ecosystem. Spanning a 15-year period, he was instrumental in launching several companies, including Kill Cliff beverages and BAMFi, an online lender for the transportation space. He was also the founder of Atlanta-based Triserv Appraisal Management Solutions.
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More on FactorCloud participating in the factoring industry here.