Startup Story: Cove.tool Makes History in Series A and B Funding

This is the third and final installment of a series covering the entrepreneurial journey of Sandeep Ahuja from architectural designer to CEO of tech company Cove.tool. Read part one here and part two here.

Raising funds for a startup business takes strategy, connections, and a bit of luck. My co-founders, Patrick Chopson, AIA, Daniel Chopson, and I did not have any experience with fundraising or connections with investors before we began our tech company, the Atlanta-based Cove.tool, which offers an energy analysis and cost-optimization platform for the AEC industry. We decided to go the competition route and enter Cove.tool in the Atlanta Startup Battle in May 2018. The competition gave us the opportunity to pitch to active venture capital investors based in Atlanta and Silicon Valley.

More than 500 companies signed up for the battle, and the competition was intense. After several successful presentation rounds, Cove.tool was one of the three finalists for the $100,000 prize. And we won!

This is one of the largest rounds ever raised by a company with a woman founder in Atlanta. With this funding, we’re going to continue to grow the product and advocate for climate action.

The competition opened doors for us to connect with several Atlanta investors. We used the funding to grow our sales team and continue building relationships in the tech industry. We began pitching our software to more VCs and honing our mission and messaging on fighting climate change.

In December 2018, we closed our $750,000 seed round and started to expand our marketing, sales, and software development teams. We secured funding from two of the four investors we pitched; one investor had experience with business-to-business software companies, and the other had worked with climate-focused startups. Their expertise was critical and helped us make decisions to grow our business. We continued to work with investors to expand our knowledge; advance our software; and maintain our financial metrics and key performance indicators, placing us in the 95th percentile of all startups that have existed (based on ability to raise capital).

In 2020, we decided the time was right to start raising funds for our series A round. This is the stage of investment when a startup company has demonstrated it has a viable product offering with high-growth potential, and the funding is much higher than the initial seed round, extending into the millions. We didn’t need to raise capital—we were at a point where if we didn’t make another sale, the company would remain stable for another few years. However, we wanted to continue to scale the team, build out our tool, and expand operations. A key strategy I learned from Mountain View, Calif.–based Y Combinator, one of the country’s largest VC firms, is to keep a tight process when raising funding to build momentum and generate competition. I would schedule all meetings with investors on the same day to keep everything streamlined and to ensure I had dedicated time to focus on growing the business and not just on fundraising.

In March 2020, I had lined up times with all the investors we wanted to meet. As we all now know, the COVID-19 pandemic hit, and we had to shelve our plans because no one wanted to invest money when the markets were unpredictable.

I would schedule all meetings with investors on the same day to keep everything streamlined and to ensure I had dedicated time to focus on growing the business and not just on fundraising.

By August 2020, the economy had settled down and six of the eight investors reconnected with us. We followed the same strategy, setting up meetings for September. We received competitive term sheets outlining the amount of money for each investment and the specific terms of each deal. For example, the standard Y Combinator term sheet includes the investment amounts, the current valuation, details about the board, as well as other legal terms governing stock and stockholder options.

Competitive term sheets helped in our decision-making process to negotiate the best terms for our company and find the best partners with which to work. Of the six VC firms, we signed with an investor who was mission-aligned and had the right expertise, having run their own startup. In October 2020, we announced our $5.7 million Series A round led by the Santa Monica–based Mucker Capital. The funding from this round enabled us to scale the Cove.tool platform internationally and accelerate the development of new products for AEC industries. In less than a year, we grew our staff from 19 employees to nearly 60, and launched two new product offerings, a free 3D-modeling platform called Drawing.tool and our HVAC design software, Loadmodeling.tool.

Throughout 2021, I have received frequent requests from VCs looking to invest in our company. I was committed to scaling our business and didn’t want investor meetings to steal my focus. Again, we didn’t need the capital, but this December, one particular fund went out of its way to highlight the value it could add to our team. It preempted us and made an offer we couldn’t refuse.

We are proud to announce that we closed our series B for $30 million. The round was led by the New York–based Coatue, an early investor in Apple, Tesla, and more recently Rivian; we received an additional investment from Robert Downey Jr.’s VC firm, FootPrint Coalition, based in Beverly Hills.

This is one of the largest rounds ever raised by a company with a woman founder in Atlanta. With this funding, we’re going to continue to grow the product and advocate for climate action. Many problems need to be solved to cut carbon emissions and improve building design and construction workflows in the AEC industry. We hope to continue to help actively change the industry by hiring more people on our software development, sales, marketing, business development, and customer success teams and by pushing our product development forward, faster.

Our company has been able to bridge the data gap between architects and engineers by solving the age-old building information modeling to building energy modeling (BIM to BEM) issue. Now, we’re working to do the same for structural engineers, cost estimators, and contractors with new tools in our product road map. By simplifying the decision-making process for building performance and carbon reduction for architects, engineers, contractors, and developers, we are building the foundation for our industry to have a significant impact in fighting climate change.