Azafran Capital INSIGHTS — Vol. 14 by James F. Kenefick

YOUR EYE ON INNOVATIVE MACHINE LEARNING SOLVING REAL WORLD PROBLEMS

Azafran Capital Partners

INSIGHTS As Early Stage VC Investors, Our GP’s Deep Founder Experience + Global Network Provide the Critical Difference In the final issue of our Special Report Series, we highlight the intrinsic value and importance of combining a founder’s perspective with a global network of experts as principal ingredients for success. If you want to start or become great at fly fishing, all the reading, videos and study will not net that first rainbow trout. You must go through hours of trudging through mud and creek, untangling fishing line from the bushes, mending cuts from the hook, making cast after cast, there is no substitute. When investing in early stage companies, a deep perspective of the founder and startups is gained by investors who travelled a similar journey, spending years in the trenches understanding the market problem, assembling the team, productizing the solution to the problem, getting funding, going to market and identifying the exit trajectory. Some say it takes a degree of insanity to go through the startup process and it’s certainly not for everyone as it takes melding your passion with an incredible amount of faith, stamina, fortitude and vision. For Azafran, our LPs and portfolio companies, it starts with our intrinsic DNA as founders and operators - our General Partners have started and operated dozens of companies with 13 exits, participated in 120 M&As, creating $9B of enterprise value between them. Just as important for our formula is operationalizing our Global Network which we have been building for decades alongside all our ventures. Azafran’s Global Network, now reaches all corners of the globe with tens of thousands of experts, CEOs and founders at our reach. When researching and compiling background data for this issue, our team was surprised to find that only 40% of GPs at top tier VC firms have direct experience as startup founders and less than 20% of the GPs have experience as founders among the rest of firms surveyed. 100% of Azafran’s GPs are founders and 50% of the entire Azafran team are founders. (see survey results and accompanying chart on Page Two) This dynamic is particularly important in Early Stage investment, as founders and younger companies need hands-on assistance in a number of areas including building out the team, productizing, market development, connecting with partners and supply chain. The chart at the top of Page Two and associated research comes from the TechCrunch article, Entrepreneurial Experience Separates Top VCs From Other Investors - which concludes with their Recipe for Success: (continued on Page Two) Azafran INSIGHTS © Azafran Capital Partners 2020 - All Rights Reserved

SPECIAL REPORT SERIES Part Three

part three FOCUS Azafran Capital Partners is a 2020 vintage early stage venture fund investing in companies ($2M to $8M) that are using deep learning and machine learning, emphasizing voice, acoustics and imagery datasets in the health / wellness, and IoT / enterprise markets. Part One of our Special Report Series focuses on both the venture market and road ahead as seen through the lens of Azafran’s Investment Thesis, taking into account new global realities. Part Two looks at voice, acoustics and imagery being upgraded to mission - critical plus markets and research that tie to the Azafran Thesis. Part Three focuses on the Azafran team and network: Our founder’s perspective as operators, technologists, and investors plus operationalizing our global network. How this combination lays the foundation for seeking, ﬁnding, evaluating, investing in and helping grow disruptive, great companies to reach their full potential.

So what is it about entrepreneurial experience that seems to prepare people to become top-tier VC investors? It is likely a combination of three things. The ﬁrst is knowledge. Investors who have worked as founders and C-level executives have an inside perspective on what it takes to make a company scale and succeed. This expertise is difﬁcult to replicate in any other way. The second factor is the personal network that comes from working inside an entrepreneurial company. Investors can look to past colleagues at their former companies to help source investments and make useful connections for the entrepreneurs in their portfolios. Finally, there is probably an attraction factor at work, as well. Some founders are likely to prefer to partner with an investor who has been on a similar journey.” - Entrepreneurial Experience Separates Top VCs From Other Investors, Rhett Morris, TechCrunch Special Report Series, Part Three - Page One

YOUR EYE ON INNOVATIVE MACHINE LEARNING Early Stage: Founders + Network (Continued from Page One)

SOLVING REAL WORLD PROBLEMS from the FRONTLINES

“Investors who have worked as founders and C-level executives have an inside perspective on what it takes to make a company scale and succeed. This expertise is difﬁcult to replicate in any other way...the second factor is the personal network that comes from working inside an entrepreneurial company... founders are likely to prefer to partner with an investor who has been on a similar journey.” So, what does it take to be great early stage VC investor? The Azafran Formula: 1) Deal ﬂow from our decades of building companies and networks, as well as our research team; 2) Investment judgement from starting and building dozens of startups combined with the value we add to each company from our hands-on approach, and; 3) The Azafran X Factor, where we bring our deep Global Network of experts from every niche to provide value for each company in our portfolio.

The Azafran X Factor: Our Global Network While the Azafran team is intentionally lean, we are surrounded by tens of thousands of experts in every possible technology and market niche, a network we call into action with each company from the due diligence phase through to growth and exit.

After coronavirus, AI could be central to our new normal (VentureBeat) When we came out of the ﬁnancial crisis of 2008, cloud computing kicked into high gear and started to become a pervasive, transformational technology. The current COVID-19 crisis could provide a similar inﬂection point for AI applications. While the implications of AI continue to be debated on the world stage, the rapid onset of a global health crisis and concomitant recession will accelerate its impact.

SPECIAL REPORT SERIES Part Two

Times of crisis bring rapid change. Efforts to harness AI technologies to discover new drugs – either vaccine or treatment – have kicked into hyperdrive. Startups are racing to ﬁnd solutions and established companies are forming partnerships with academia to ﬁnd a cure. Other companies are researching existing drugs for their potential applicability. AI is proving a useful tool for dramatically reducing the time needed to identify potential drug candidates, possibly saving years of research. AI uses already put into action are screening for COVID-19 symptoms, decision support for CT scans, and automating hospital operations. A variety of healthcare functions have started to be performed by robots, from diagnosis to temperature monitoring.

Key to this global network is the Azafran Partner’s decades-long membership and stewardship in Young Professionals Organization (YPO). YPO, highlighted on the following page, is comprised of 28K founders/CEOs in 130 countries whose companies produce $9 Trillion in annual sales, equivalent to the GDP of the 3rd largest global economy. Through YPO and other elements of our collective networks, we operationalize the Azafran network by recruiting proven and successful entrepreneurs and executives with deep domain experience as well as time, talent and treasury to rapidly help evaluate and grow each investment.

Only 3% of Business Investment Goes to Women, and That’s a Problem for Everyone

We call this the Azafran Network Effect, where we are able to place expert voices, who intimately know and understand the prospective investment and associated market, into active diligence alongside our deal team and researchers. They provide a critical role by offering an independent view on the prospective investment and may even go on to take an active board/advisory role in that company, assisting via mentorship with strategy, business development, partnerships, and governance.

(Crunchbase) Women received a record amount of U.S. startup venture capital in 2019, according to recent ﬁgures. But while female founders securing 2.8 percent of total startup investment in the United States may be lauded as a historic achievement, it’s not something we should be complacent about.

Finally, founders / entrepreneurs choose Azafran for the intrinsic value-add we bring to each investment, aligning with the key operational and leadership experience we bring to every company’s journey. We are...

A 2020 Crunchbase report shows that even if we combined VC investment in female-founded and mixed co-founded companies in 2019, it still amounts to only 9 percent of all investment. Considering women represent over 40 percent of all entrepreneurs in the country, and plenty of statistics showing that women signiﬁcantly outperform men in business, a lot more needs to be done.

● ● ● ●

Entrepreneurs that support / understand the entrepreneurial journey and vision; Technologists and data scientists embracing technology evolution; Financiers who understand and underwrite the ﬁnancial path; Experienced humans that understand the importance of strong culture as a company evolves.

Crunchbase, April 2020

Special Report Series, Part Three - Page Two

Network Focus: YPO

from the HEADLINES

YPO is the global leadership community of more than 28,000 chief executives in 130 countries who are driven by the belief that the world needs better leaders. To qualify for membership each YPO CEO has achieved signiﬁcant leadership success at a young age.

Most LPs Not Planning to Adjust Private Market Allocations Amid Market Turmoil

Combined, they lead businesses and organizations contributing USD 9 trillion in annual revenue. YPO members become better leaders and better people through peer learning, training and exceptional experiences in an inclusive community of open sharing and trust.

“Many VC investors came into 2020 under

allocated into the asset class. They want to wait until the market stabilizes to assess if portfolios need to be rebalanced.

Azafran Managing Partner James Kenefick leading a panel at YPO Innovation Event @ CES 2020 in Las Vegas featuring Ken Sutton, CEO of Yobe, an Azafran Portfolio company

More than two-thirds of about 400 LPs polled by PitchBook responded that they are not planning to change their allocation percentage to private market investments over the next six months, said James Gelfer, senior strategy and lead venture analyst at PitchBook.” Source: Venture Capital Journal, April 2020

market SOLUTIONS Top 10 Business Functions That Are Ready To Use Artificial Intelligence In the grand scheme of things, artificial intelligence (AI) is still in the very early stages of adoption by most organizations. However, most leaders are quite excited to implement AI into the company’s business functions to start realizing its extraordinary benefits.

NEWSWORTHY… AI can overhaul patient experience, but knowing its limitations is key Healthcare may be bracing for a major shortage of providers and services in the coming years, but even now the industry is straining to meet an ever-growing demand for personalized, patient-friendly care. Artificial intelligence has often been touted as the panacea for this challenge, with many pointing to finance, retail and other industries that have embraced automation. But the consumerism adopted by other sectors doesn't always translate cleanly into healthcare, says Nagi Prabhu, chief product officer at Solutionreach. Whereas people may be ready to trust automation to handle their deliveries or even manage their finances, they still prefer the human touch when it comes to their personal health. "That's what makes it challenging. There's an expectation that there's an interaction happening between the patient and provider, but the tools and services and resources that are available on the provider side are insufficient," Prabhu said during a HIMSS20 Virtual Webinar on AI and patient experience. "And that's what causing this big disconnect between what patients are seeing and wanting, compared to other industries where they have experienced it.” - David Muoio, mobihealthnews, April 2020 Azafran INSIGHTS © Azafran Capital Partners 2020 - All Rights Reserved

While we have no way of knowing all the ways artiﬁcial intelligence and machine learning will ultimately impact business functions, here are 10 business functions that are ready to use artiﬁcial intelligence: ● ● ● ● ● ● ● ● ● ●

Marketing Sales Research and Development (R&D) IT Operations Human Resources Contact Centers Building Maintenance Manufacturing Accounting and Finance Customer Experience

Source: Bernard Marr via LinkedIn, Top 10 Business Functions That Are Ready To Use Artiﬁcial Intelligence

Special Report Series, Part Two - Page Three

ACP Portfolio News

healthcare AI TRENDS How the Coronavirus could be the catalyst for a healthcare revolution

Tech Comes to The Forefront with Social Distancing Recognizing the new realities of COVID-19, real estate augmented reality visualization platform RealAR recently partnered with location-based AR experience company tagSpace to launch a strategic partnership. (Globe St.) SAN FRANCISCO—With COVID-19 now a global emergency, the heightening of travel restrictions, limitation of mass gatherings and social distancing, and people being required to work from home are all affecting multiple sectors including the real estate industry. Sellers targeting foreign buyers for instance, are recording drops in very high percentage rates. Recognizing these realities, real estate augmented reality visualization platform RealAR recently partnered with location-based AR experience company, tagSpace, to launch a strategic partnership. “This partnership solidiﬁes RealAR as the go-to solution for property professionals to understand plans as easily as physical property,” said Dan Swan, CEO of RealAR. “We have been watching tagSpace’s progress into areas such as Smart Cities for a number of years and now together we’re bringing the best experiences to both residential and commercial real estate, especially now with property professionals using technology in new ways to reach customers.”

Mohawk Group Reports Strong Preliminary Q1 2020 Net Revenue $26M, 43% Growth vs. Prior Year Mohawk Group Holdings, Inc., (NASDAQ: MWK), the tech-enabled e-commerce consumer products company, announced preliminary net revenue results for the ﬁrst quarter ended March 31, 2020 driven by stronger demand from Amazon customers, as the Company continues to manage a highly challenging and uncertain business environment arising from the pandemic.

According to one stakeholder, COVID-19 could end up driving the AI in healthcare revolution faster than anyone previously imagined (Healthcare IT News) Is the U.S. ready for another moonshot? Kevin Scott, CTO at Microsoft, is, but he’s not talking about taking to space any time soon. Rather, in a recent interview with the Seattle Times, Scott argues that AI is poised to take the country’s healthcare system to a whole new level in a way similar to how the Apollo space program changed our relationship with outer space. “Instead of a ‘moon shot,’ our moon shot should be something like radically transforming health care for the public good,” Scott said in talking up his new book, titled Reprogramming The American Dream: From Rural America to Silicon Valley — Making AI Serve Us All. “We all know the cost of delivering ubiquitous, high-quality health care is very high and growing faster than (gross domestic product).”

“So, if you want to change that calculus, you are going to have to have some sort of technology intervene that will help change the shape of the curve. I think AI, if we make a deliberate set of investments, can make than happen.” Like an increasing number of healthcare stakeholders, Scott believes the current coronavirus pandemic heightens the need for a dramatic reshaping of our healthcare system around new technology. “I think our reaction to this horrible pandemic we’re having now could produce a wave of investment and innovation in biotechnology that deﬁnes the next 75 years,” he said. “The way that the industrialization of the modern world post-World War II has deﬁned the past 75 years.”

RESEARCH

voice-acoustics-imagery & AI/ML Company Tracker & Industry Snapshot At a Glance: Top 6 Markets & Global Totals

Special Report Series, Part Two - Page Four

A Year of INSIGHTS

Below is a quick snapshot of some of the covers from Azafran’s INSIGHTS over the past year - please let us know if you would like PDFs of any issues - just email us at insights@azafranpartners.com and we’ll send along.