Hive Watch’s Guide to Raising Capital When VCs “Don’t Get” Your Industry
When your industry isn’t on venture capital’s radar, fundraising becomes a two-part challenge: first educate, then convince. In a recent episode of Category Visionaries, Hive Watch founder Ryan Schonfeld shared their journey from investor skepticism to active interest, offering valuable insights for founders in overlooked sectors.
The Initial Fundraising Challenge
“When we raised our seed round almost two years ago, almost every VC we talked to didn’t have a thesis on the physical security space and really just didn’t understand it,” Ryan reveals. “And security to them was cybersecurity.” This perception gap wasn’t just about education – it reflected a fundamental misunderstanding of the market opportunity.
Building the Investment Narrative
Rather than fighting the cybersecurity comparison, Hive Watch used it to their advantage. They highlighted how physical security departments were “substantially behind the rest of the organization with regard to technology adoption, shift to cloud, things like that.” This gap represented an opportunity that investors could understand: digital transformation in an analog industry.
Demonstrating Market Size
One key to shifting investor perception was highlighting the universal nature of their problem. As Ryan notes, their solution works across companies with “about 1000 employees and up” and is “pretty vertical agnostic.” This broad addressable market helped overcome concerns about market size that often plague industry-specific solutions.
From Skepticism to Interest
The transformation in investor interest was dramatic. By their Series A, Ryan found that “all these firms from looking at the growth of companies like Vercata for example, in the physical security space, all of a sudden these major VC firms had a thesis on physical security.”
Key Elements That Changed Investor Minds
- Execution Speed: Reducing implementation from 14 months to 30 days demonstrated their ability to drive adoption
- Market Evolution: COVID accelerated enterprise acceptance of new security technologies
- Customer Traction: Strong early customer adoption validated market demand
- Industry Transformation: Showing how they were modernizing “a very sleepy but very important industry”
Leveraging the Non-Traditional Background
Instead of hiding his unconventional path, Ryan used it to build credibility. “I’m kind of a weird background for Tech Founder because I started my career as a police officer,” he explains. This industry expertise helped validate their understanding of customer needs and market opportunities.
Building Momentum Between Rounds
The key to maintaining momentum was showing consistent progress in areas investors could understand: customer acquisition, deployment speed, and team growth. As Ryan notes, they expanded from “25 people at the end of last year to 65 plus people this year” while maintaining “almost no turnover.”
For founders targeting underappreciated industries, Hive Watch’s experience offers valuable lessons. Success isn’t just about educating investors – it’s about translating your opportunity into terms they already understand. By connecting physical security modernization to broader digital transformation trends, they turned industry ignorance into investment opportunity.
The story also highlights the importance of timing. Sometimes industries need external catalysts – like COVID’s impact on workforce distribution – to become attractive to investors. The key is being well-positioned when that shift occurs.