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Freshworks’ valuation could crest $10B in upcoming IPO

Earlier today, TechCrunch examined the new IPO price range for Toast. The U.S. software-and-fintech company moved its valuation materially higher in anticipation of pricing tomorrow after the bell and trading on Wednesday. It was not alone in doing so.

Freshworks is also targeting a higher IPO price range, it disclosed today in a fresh SEC filing. The customer service-focused software firm now expects to charge between $32 and $34 per share in its debut, up from the $28 to $32 per-share range that it initially disclosed.

Doing some back-of-the-envelope math, Freshworks’ IPO valuation could just pass the $10 billion mark, calculated on a fully diluted basis. Its simple IPO valuations, while rising, are lower than that figure.

Mathing that out, Freshworks expects to have 284,283,200 shares outstanding when public, inclusive of its underwriters’ option, but not inclusive of vested shares present in RSUs or options. At its new IPO price range, Freshworks would be worth between $9.1 billion and $9.7 billion.

Bzaar bags $4M to enable US retailers to source home, lifestyle products from India

Small businesses in the U.S. now have a new way to source home and lifestyle goods from new manufacturers. Bzaar, a business-to-business cross-border marketplace, is connecting retailers with over 50 export-ready manufacturers in India.

The U.S.-based company announced Monday that it raised $4 million in seed funding, led by Canaan Partners, and including angel investors Flipkart co-founder Binny Bansal, PhonePe founders Sameer Nigam and Rahul Chari, Addition founder Lee Fixel and Helion Ventures co-founder Ashish Gupta.

Nishant Verman and Prasanth Nair co-founded Bzaar in 2020 and consider their company to be like a “fair without borders,” Verman put it. Prior to founding Bzaar, Verman was at Bangalore-based Flipkart until it was acquired by Walmart in 2018. He then was at Canaan Partners in the U.S.

“We think the next 10 years of global trade will be different from the last 100 years,” he added. “That’s why we think this business needs to exist.”

Traditionally, small U.S. buyers did not have feet on the ground in manufacturing hubs, like China, to manage shipments of goods in the same way that large retailers did. Then Alibaba came along in the late 1990s and began acting as a gatekeeper for cross-border purchases, Verman said. U.S. goods imports from China totaled $451.7 billion in 2019, while U.S. goods imports from India in 2019 were $87.4 billion.

Bzaar screenshot. Image Credits: Bzaar

Small buyers could buy home and lifestyle goods, but it was typically through the same sellers, and there was not often a unique selection, nor were goods available handmade or using organic materials, he added.

With Bzaar, small buyers can purchase over 10,000 wholesale goods on its marketplace from other countries like India and Southeast Asia. The company guarantees products arrive within two weeks and manage all of the packaging logistics and buyer protection.

Verman and Nair launched the marketplace in April and had thousands users in three continents purchasing from the platform within six months. Meanwhile, products on Bzaar are up to 50% cheaper than domestic U.S. platforms, while SKU selection is growing doubling every month, Verman said.

The new funding will enable the company to invest in marketing to get in front of buyers and invest on its technology to advance its cataloging feature so that goods pass through customs seamlessly. Wanting to provide new features for its small business customers, Verman also intends to create a credit feature to enable buyers to pay in installments or up to 90 days later.

“We feel this is a once-in-a-lifetime shift in how global trade works,” he added. “You need the right team in place to do this because the problem is quite complex to take products from a small town in Vietnam to Nashville. With our infrastructure in place, the good news is there are already shops and buyers, and we are stitching them together to give buyers a seamless experience.”

 

Announcing the Startup Battlefield companies pitching at TechCrunch Disrupt 2021

Today, TechCrunch is excited to announce the 20 startups pitching on stage in this year’s Startup Battlefield. Selected from the most competitive batch in TC history, selected founders from across the globe will pitch on the virtual stage at TechCrunch Disrupt 2021. Startups will be competing for $100,000 in equity-free prize money and the attention of international press and top investors from around the world.

With just over a 1.5% acceptance rate, the startups in this year’s cohort are phenomenal. From lithium battery chemical recycling to smart media, blockchain infrastructure to student-centric educational software, and Sub-Saharan African fin tech to cultured meat production, this batch of companies is sure to wow the investors and the audience. Startups featured range across all verticals with groundbreaking innovation in ag tech, women’s genetics and lifestyle based therapeutics, cyber security, lasers, fin tech and consumer hardware.

TC aims to pick companies from a range of industries. It’s apparent that this next wave of founders are very much focused on building unicorns and also building deeply impactful technologies.  A unique highlight of this batch are more companies in both the healthtech/medtech space and clean tech/sustainability space.

Each founder has trained with the Startup Battlefield team to develop their pitch, craft their stories, polish their launch strategy, strengthen their go to market and create amazing live product demos so you can see the innovation first hand. Each team will have six minutes to pitch followed by a six-minute Q&A with our esteemed panel of judges – all experts in VC and successful companies. On Thursday, a select few startups will pitch in the Startup Battlefield Final Round — with a new panel of expert judges.

Startup Battlefield starts on Monday, September 14th at 10:30 a.m. Pacific Time, with Startup Battlefield moderator and TechCrunch Managing Editor, Matt Burns. To watch the pitches, join us at TechCrunch Disrupt 2021 here. Videos of the pitches will be made available after the event as well.

Let’s check out the companies:

Tuesday 

Session 1: 10:45 a.m. – 11:50 a.m. PT

Enlightapp, Luos, HerVest, Tatum, Happaning*

Session 2: 12:55 p.m. – 2:00 p.m. PT

Verdi, EyeGage, Animal Alternative Technologies, RoboDeck, Adventr

Wednesday

Session 3: 9:45 a.m. – 10:50 a.m. PT

Prenome, Tide Foundation, The Blue Box Biomedical Solutions, Koa, Cellino*

Session 3: 12:00 p.m. – 1:05 p.m. PT

StethoMe, FLITE Material Sciences, Knight by Keep Technologies, Carbix, Nth Cycle

Thursday

Finals begin at 10:35 a.m. PT. Companies will be announced online Thursday night.

*As a part of Startup Alley, companies are eligible for the Wild Card. These are the companies selected for Wild Card and can compete in Startup Battlefield. They are selected shortly before the event.

Flippa raises $11M to match online asset and business buyers, sellers

Flippa, an online marketplace to buy and sell online businesses and digital assets, announced its first venture-backed round, an $11 million Series A, as it sees over 600,000 monthly searches from investors looking to connect with business owners.

OneVentures led the round and was joined by existing investors Andrew Walsh (former Hitwise CEO), Flippa co-founders Mark Harbottle and Matt Mickiewicz, 99designs, as well as new investors Catch.com.au founders Gabby and Hezi Leibovich; RetailMeNot.com founders Guy King and Bevan Clarke; and Reactive Media founders Tim O’Neill and Tim Fouhy.

The company, with bases in both Austin and Australia, was started in 2009 and facilitates exits for millions of online business owners, some that operate on e-commerce marketplaces, blogs, SaaS and apps, the newest data integration being for Shopify, Blake Hutchison, CEO of Flippa, told TechCrunch.

He considers Flippa to be “the investment bank for the 99%,” of small businesses, providing an end-to end platform that includes a proprietary valuation product for businesses — processing over 4,000 valuations each month — and a matching algorithm to connect with qualified buyers.

Business owners can sell their companies directly through the platform and have the option to bring in a business broker or advisor. The company also offers due diligence and acquisition financing from Thrasio-owned Yardline Capital and a new service called Flippa Legal.

“Our strategy is verification at the source, i.e. data,” Hutchison said. “Users can currently connect to Stripe, QuickBooks Online, WooCommerce, Google Analytics and Admob for apps, which means they can expose their online business performance with one-click, and buyers can seamlessly assess financial and operational performance.”

Online retail, as a share of total retail sales, grew to 19.6% in 2020, up from 15.8% in 2019, driven largely by the global pandemic as sales shifted online while brick-and-mortar stores closed.

Meanwhile, Amazon has 6 million sellers, and Shopify sellers run over 1 million businesses. This has led to an emergence of e-commerce aggregators, backed by venture capital dollars, that are scooping up successful businesses to grow, finding many through Flippa’s marketplace, Hutchison said.

Flippa has over 3 million registered users and added 300,000 new registered users in the past 12 months. Overall transaction volume grows 100% year over year. Though being bootstrapped for over a decade, the company’s growth and opportunity drove Hutchison to go after venture capital dollars.

“There is a huge movement toward this being recognized as an asset class,” he said. “At the moment, the asset class is undervalued and driving a massive swarm as investors snap up businesses and aggregate them together. We see the future of these aggregators becoming ‘X company for apps’ or ‘X for blogs.’ ”

As such, the new funding will be used to double the company’s headcount to more than 100 people as it builds out its offices globally, as well as establishing outposts in Melbourne, San Francisco and Austin. The company will also invest in marketing and product development to scale its business valuation tool that Hutchison likens to the “Zillow Zestimate,” but for online businesses.

Nigel Dews, operating partner at OneVentures, has been following Flippa since it started. His firm is one of the oldest venture capital firms in Australia and has 30 companies in its portfolio focused on healthcare and technology.

He believes the company will create meaningful change for small businesses. The team combined with Flippa’s ability to connect buyers and sellers puts the company in a strong leadership position to take advantage of the marketplace effect.

“Flippa is an incredible opportunity for us,” he added. “You don’t often get a world-leading business in a brand new category with incredible tailwinds. We also liked that the company is based in Australia, but half of its revenue comes from the U.S.”

Xata is a database service for serverless apps

Meet Xata, a startup with a new take on managed databases. The company runs your database for you and turns it into an API so that you can query and update it from your serverless app. Xata has raised a $5 million funding round. Its product is not yet ready for prime time but the company is sharing details.

Xata seems particularly well suited for Jamstack websites. Jamstack has been a popular way of developing and deploying websites at scale. Popular Jamstack hosting platforms include Netlify, Vercel and Cloudflare Pages.

Applications are deployed on a global edge network and most of the logic is handled by API calls. The result is a website or an application that loads quickly and can handle a lot of traffic.

Deploying a Jamstack website is quite easy as it often integrates tightly with your Git repository. When you commit code changes, serverless platforms take care of deploying your application. Integrating with API-based developer tools is relatively effortless as well as you don’t manage the logic yourself.

For instance, deploying a website with static content and a Stripe checkout module doesn’t require a ton of effort — Stripe manages the payment servers for you. It gets a bit more complicated if you want to use a live database and interact with it. Traditional database software doesn’t rely on API calls across the internet to add a row, search through multiple rows and find data.

Xata is focusing on databases and want to make it easier to integrate a database with your serverless app. You don’t have to take care of the underlying infrastructure as Xata can scale the database for you. You don’t have to update software, move data to a new server, etc.

Your database is distributed across multiple data centers to improve response times and redundancy. It supports many data types including images. After that, interacting with the database works like any RESTful API out there.

The startup is also drawing some inspiration from popular no-code startups, such as Airtable. You can open your database in a web browser and interact with your data directly from there. For instance, you can filter the current view, sort data using a specific criteria and get the API query that you can use in your code.

If you store a lot of data in your database, you can search through your data using a free-text search feature. You can also leverage Xata for analytics by creating charts and visualizations.

The ability to interact with your data from a web browser is Xata’s competitive advantage. Many companies rely on Airtable as their first backend to prototype a new project. Xata could become a production-ready version of this Airtable-as-a-backend data management model.

The $5 million round was led by Index Ventures. Operator Collective, SV Angel, X-Factor and firstminute capital also participated. Some business angels, such as Shay Banon and Uri Boness from Elastic, Neha Narkhede from Confluent, Guillermo Rauch from Vercel, Elad Gil from Color Genomics and Christian Bach and Mathias Biilmann from Netlify also invested.

The startup was founded by Monica Sarbu, who used to be the Director of Engineering at Elastic. So she probably knows a thing or two about scaling databases.

Image Credits: Xata

Inside GitLab’s IPO filing

While the technology and business world worked towards the weekend, developer operations (DevOps) firm GitLab filed to go public. Before we get into our time off, we need to pause, digest the company’s S-1 filing, and come to some early conclusions.

GitLab competes with GitHub, which Microsoft purchased for $7.5 billion back in 2018.

The company is notable for its long-held, remote-first stance, and for being more public with its metrics than most unicorns — for some time, GitLab had a November 18, 2020 IPO target in its public plans, to pick an example. We also knew when it crossed the $100 million recurring revenue threshold.

Considering GitLab’s more recent results, a narrowing operating loss in the last two quarters is good news for the company.

The company’s IPO has therefore been long expected. In its last primary transaction, GitLab raised $286 million at a post-money valuation of $2.75 billion, per Pitchbook data. The same information source also notes that GitLab executed a secondary transaction earlier this year worth $195 million, which gave the company a $6 billion valuation.

Let’s parse GitLab’s growth rate, its final pre-IPO scale, its SaaS metrics, and then ask if we think it can surpass its most recent private-market price. Sound good? Let’s rock.

The GitLab S-1

GitLab intends to list on the Nasdaq under the symbol “GTLB.” Its IPO filing lists a placeholder $100 million raise estimate, though that figure will change when the company sets an initial price range for its shares. Its fiscal year ends January 31, meaning that its quarters are offset from traditional calendar periods by a single month.

Let’s start with the big numbers.

In its fiscal year ended January 2020, GitLab posted revenues of $81.2 million, gross profit of $71.9 million, an operating loss of $128.4 million, and a modestly greater net loss of $130.7 million.

And in the year ended January 31, 2021, GitLab’s revenue rose roughly 87% to $152.2 million from a year earlier. The company’s gross profit rose around 86% to $133.7 million, and operating loss widened nearly 67% to $213.9 million. Its net loss totaled $192.2 million.

This paints a picture of a SaaS company growing quickly at scale, with essentially flat gross margins (88%). Growth has not been inexpensive either — GitLab spent more on sales and marketing than it generated in gross profit in the past two fiscal years.

Aurora Propulsion Technologies closes €1.7M seed for spacecraft maneuvering and deorbiting tech

More spacecraft will be sent to orbit this year than ever before in human history, and the number of satellite launches is only anticipated to increase through the rest of the decade. Under these crowded conditions, being able to maneuver satellites in space and deorbit them when they reach the end of their useful life will be key.

Enter Aurora Propulsion Technologies. It’s one of a handful of startups that has emerged in the past few years to help simplify the problem of spacecraft propulsion. Since its founding in 2018, the Finnish company has developed two products – a tiny thruster engine and a plasma braking system – and will be testing both in an in-orbit demonstration in the fourth quarter of this year. Aurora’s activities have caught the eye of investors: the company has just closed a €1.7 million ($2 million) seed round to bring its technology to market.

The round was led by Lithuanian VC firm Practica Capital, with additional participation from the state-owned private equity company TESI (Finnish Industry Investment Ltd.) and Kluz Ventures. Individual investors also participated.

Aurora’s first in-orbit demonstration, Aurora Sat-1, will be heading to space on a Rocket Lab rideshare mission, the company announced last month. On that satellite will be two modules. The first module will contain six Aurora “resistojet” engines, designed to help small spacecraft adjust their attitude (the satellite’s orientation, not its mood) and de-tumble. Aurora will also test its Plasma Brake technology, which could be used to de-orbit satellites or even to conduct deep space missions.

Each resistojet thruster comes in at just around one centimeter long, and it moves the spacecraft using microliters of water and propellant. The six thrusters are distributed around the satellite in such a way to facilitate movement in virtually any direction, and the thruster can also modulate the temperature of the water and the strength of the puff of steam that’s discharged to generate movement.

Aurora CEO Roope Takala, who previously worked for Nokia, likened the innovations in weight and size in the space industry – which we see in the resistojet – to what happened to cell phones and computers twenty years ago. “The industry moves very slow,” he said in a recent interview with TechCrunch. “In the old space era, it took a quarter to develop a rocket engine – that would be a quarter of a century. Now, it takes two quarters of a year. That’s what we did.”

The Plasma Brake uses an electrically charged microtether to generate a lump of protons to generate drag. That’s ideal for de-orbiting a spacecraft, but interestingly (and counterintuitively), the Plasma Brake could also be used for traveling away from the planet, Takala said. That’s because when you go outside the Earth’s magnetosphere, the Plasma Brake becomes unstable and moves with solar wind (which is also plasma). “The same product can jump onto that flow of plasma from the sun and extract energy from that,” Takala explained. “In that context we can use it as an interplanetary traveling tool.”

Theoretically, if a spacecraft was equipped with multiple tethers extending different directions, it could be used to rotate and guide the spacecraft, like a sailboat, he added. This technology is only scalable to a certain degree, however, so don’t expect it to be sending a crewed spacecraft into deep space anytime soon. That’s mostly due to limitations in the material strength of the Plasma Brake tethers, but the tech can be used for satellites up to around 1,000 kilograms.

“That’s our future. That’s where we’re aiming,” Takala said. “We’re focused now for the short term on low Earth orbit with the Plasma Brake and the attitude control [resistojet], and later on when the moon businesses kick off as they are slowly starting to do, then we’ll probably be looking at that way.”

The Plasma Brake and resistojet thruster would need to be put on spacecraft before they launch to orbit, but Aurora is in conversation with other companies of the potential of in-orbit installation of Plasma Brakes for existing space junk. Looking to the short-term, the company is going to use the funding to productize the technology for low Earth orbit and to serialize its production, as well as to add features to the products to equip them for satellites larger than CubeSats.

In the longer term, Aurora has a vision of conducting missions in deep space. “We started off from the idea that we want to make a technology that fits into a really small spacecraft, [and] travels really fast so that we can catch up with the Voyager probes,” Takala said.

“First to the moon and then to Mars, Venus, and then one day we may be able to catch up with the Voyagers and take a big trip.”

Reid Hoffman is returning to Disrupt

You’ve probably learned from Reid Hoffman before, either through his inventions, investments or inspirational words. The entrepreneur is the co-founder of LinkedIn, a partner at Greylock and the author of a new book based off of his hit podcast, Masters of Scale. 

His storied past makes him chock-full of interesting anecdotes and lessons, which is why we’re excited to have him back on the TechCrunch Disrupt stage happening next week from September 21-23. I’ll sit down with him to learn about his perspective on some of the biggest tensions that entrepreneurs face today. Hoffman’s advice is often fueled by his raw conversations with top tech CEOs and founders, so we’ll broaden access to his speed-dial list to understand how even his own perceptions on blitzscaling, growth and entrepreneurship are changing amid the pandemic. As I explained in my review of his new book, his words read like a well-networked mentor giving you a pep talk — so even if you’re not building a startup, there will be useful lessons to learn just by listening.

Here’s how it impacted my interview process, for example:

While press wasn’t a main character in the book, “Master of Scale” has already changed my perspective on how I interview founders. Lessons from Tristan Walker made me want to ask more questions about founders, and their most controversial beliefs, rather than how they plan to spend their new round of funding. A note from Andrés Ruzo made me realize that a startup that makes too much sense might be a comfortable read, but it might not be a moonshot that disrupts the world; in other words, pursue the startups that have too much seemingly foolish ambition — because they may be where the best strides, and stories, are made. Finally, it confirmed my belief that the best litmus test for a founder is if they are willing to talk about the hardships ahead of them in an honest, humble way.

OK, that’s all I’m hinting. Join me at Disrupt, where I’ll put Hoffman on the hot seat, balance out the cheerfulness with some cynical takes and push him to explain what his inevitable next book is about. Buy your tickets to TechCrunch Disrupt using this link, or use promo code “MASCARENHAS20” for a little discount from me.

4 ways to leverage ROAS to triple lead generation

Xiaoyun TU
Contributor

Xiaoyun TU is the global director of demand generation at Brightpearl, a leading retail operating system. She is passionate about setting up innovative strategies to grow sales pipelines using data-driven decisions.

Businesses that don’t invest in their future may not have a future to look forward to.

Whether you’re investing in your human resources or in critical tech, some outlay in the short term is always needed for long-term success. That’s true when it comes to marketing as well — you can’t market your product or service without investing in advertising. But if that investment isn’t turning into leads and conversions, you’re in trouble.

A “good” ROAS score is different for each company and campaign. If your figure isn’t where you’d like it to be, you can leverage ROAS data to create targeted campaigns and personalized experiences.

It’s vital to identify and apply the most suitable metrics based on business goals, and there’s no one best practice or one-size-fits-all method.

However, smart use of the return on advertising spend (ROAS) data can triple lead generation, as I discovered when I joined Brightpearl to restructure the marketing campaigns. Let’s take a look at some of the ways Brightpearl used ROAS to improve campaigns and increase lead generation. The key is to work out what represents a healthy ROAS for your business so that you can optimize accordingly.

Use the right return metric

It is paramount to choose the right return metric to calculate your ROAS. This will depend partly on your sales cycle.

Brightpearl has a lengthy sales cycle. On average it’s two to three months, and sometimes up to six months, meaning we don’t have tons of data on a monthly basis if we want to use new customer’s revenue data as the return metric. A company with a shorter sales cycle could use revenue, but that doesn’t help us to optimize our campaigns.

We chose to use the sales accepted opportunity (SAO) value instead. It usually takes us about a month to measure, so we can get more ROAS data at the same time. It’s the last sales stage before a win, and it’s more in line with our company goal (to grow our recurring annual revenue), but takes less time to gather the data.

By the SAO stage, we know which leads are good quality­ — they have the budget, are a good fit, and our software can meet their requirements. We can use them to measure our campaign performance.

When you choose a return metric, you need to make sure it matches your company goal without taking ages to get the data. It also has to be measurable at the campaign level, because the aim of using ROAS or other metrics is to optimize your campaigns.

Accept that less is more

I’ve noticed that many companies harbor a fear of missing out on opportunities, which leads them to advertise on all available channels instead of concentrating resources on the most profitable areas.

Prospects usually do their research on multiple channels, so you might try to cover all the possible touch points. In theory, this could generate more leads, but only if you had an unlimited marketing budget and human resources.

For the love of the loot: Blockchain, the metaverse and gaming’s blind spot

Jonathan Stringfield
Contributor

Jonathan Stringfield, PhD, is VP and Global Head of Business Marketing, Measurement and Insights at Activision Blizzard Media and Esports.

The speed at which gaming has proliferated is matched only by the pace of new buzzwords inundating the ecosystem. Marketers and decision makers, already suffering from FOMO about opportunities within gaming, have latched onto buzzy trends like the applications of blockchain in gaming and the “metaverse” in an effort to get ahead of the trend rather than constantly play catch-up.

The allure is obvious, as the relationship between the blockchain, metaverse, and gaming makes sense. Gaming has always been on the forefront of digital ownership (one can credit gaming platform Steam for normalizing the concept for games, and arguably other media such as movies), and most agreed upon visions of the metaverse rely upon virtual environments common in games with decentralized digital ownership.

Whatever your opinion of either, I believe they both have an interrelated future in gaming. However, the success or relevance of either of these buzzy topics is dependent upon a crucial step that is being skipped at this point.

Let’s start with the example of blockchain and, more specifically, NFTs. Collecting items of varying rarities and often random distribution form some of the core “loops” in many games (i.e. kill monster, get better weapon, kill tougher monster, get even better weapon, etc.), and collecting “skins” (e.g. different outfits/permutation of game character) is one of the most embraced paradigms of micro-transactions in games.

The way NFTs are currently being discussed in relation to gaming are very much in danger of falling into this very trap: Killing the core gameplay loop via a financial fast track.

Now, NFTs are positioned to be a natural fit with various rare items having permanent, trackable, and open value. Recent releases such as “Loot (for Adventurers)” have introduced a novel approach wherein the NFTs are simply descriptions of fantasy-inspired gear and offered in a way that other creators can use them as tools to build worlds around. It’s not hard to imagine a game built around NFT items, à la Loot.

But that’s been done before… kind of. Developers of games with a “loot loop” like the one described above have long had a problem with “farmers”, who acquire game currencies and items to sell to players for real money, against the terms of service of the game. The solution was to implement in-game “auction houses” where players could instead use real money to purchase items from one another.

Unfortunately, this had an unwanted side-effect. As noted by renowned game psychologist Jamie Madigan, our brains are evolved to pay special attention to rewards that are both unexpected and beneficial. When much of the joy in some games comes from an unexpected or randomized reward, being able to easily acquire a known reward with real money robbed the game of what made it fun.

The way NFTs are currently being discussed in relation to gaming are very much in danger of falling into this very trap: Killing the core gameplay loop via a financial fast track. The most extreme examples of this phenomena commit the biggest cardinal sin in gaming — a game that is “pay to win,” where a player with a big bankroll can acquire a material advantage in a competitive game.

Blockchain games such as Axie Infinity have rapidly increased enthusiasm around the concept of “play to earn,” where players can potentially earn money by selling tokenized resources or characters earned within a blockchain game environment. If this sounds like a scenario that can come dangerously close to “pay to win,” that’s because it is.

What is less clear is whether it matters in this context. Does anyone care enough about the core game itself rather than the potential market value of NFTs or earning potential through playing? More fundamentally, if real-world earnings are the point, is it truly a game or just a gamified micro-economy, where “farming” as described above is not an illicit activity, but rather the core game mechanic?

The technology culture around blockchain has elevated solving for very hard problems that very few people care about. The solution (like many problems in tech) involves reevaluation from a more humanist approach. In the case of gaming, there are some fundamental gameplay and game psychology issues to be tackled before these technologies can gain mainstream traction.

We can turn to the metaverse for a related example. Even if you aren’t particularly interested in gaming, you’ve almost certainly heard of the concept after Mark Zuckerberg staked the future of Facebook upon it. For all the excitement, the fundamental issue is that it simply doesn’t exist, and the closest analogs are massive digital game spaces (such as Fortnite) or sandboxes (such as Roblox). Yet, many brands and marketers who haven’t really done the work to understand gaming are trying to fast-track to an opportunity that isn’t likely to materialize for a long time.

Gaming can be seen as the training wheels for the metaverse — the ways we communicate within, navigate, and think about virtual spaces are all based upon mechanics and systems with foundations in gaming. I’d go so far as to predict the first adopters of any “metaverse” will indeed be gamers who have honed these skills and find themselves comfortable within virtual environments.

By now, you might be seeing a pattern: We’re far more interested in the “future” applications of gaming without having much of a perspective on the “now” of gaming. Game scholarship has proliferated since the early aughts due to a recognition of how games were influencing thought in fields ranging from sociology to medicine, and yet the business world hasn’t paid it much attention until recently.

The result is that marketers and decision makers are doing what they do best (chasing the next big thing) without the usual history of why said thing should be big, or what to do with it when they get there. The growth of gaming has yielded an immense opportunity, but the sophistication of the conversations around these possibilities remains stunted, due in part to our misdirected attention.

There is no “pay to win” fast track out of this blind spot. We have to put in the work to win.

Concreit closes on $6M to allow more people to invest in the global private real estate market

Concreit, a company that wants to open real estate investing to a broader group of people, announced today that it has closed $6 million in a seed funding round led by Matrix Partners. 

Hyphen Capital also participated in the round, in addition to individual investors such as Betterment founder and CEO Jon Stein; Andy Liu, partner at Unlock Venture Partners; and investor and advisor Ben Elowitz. Concreit raised the capital at a $22.5 million post-money valuation.

The Seattle-based startup also today launched its app, which it claims allows “anyone” to invest in the global private real estate market for as little as $1. 

It’s a lofty claim. But first let’s start with some background.

Concreit is not the first time that co-founders Sean Hsieh and Jordan Levy have worked together. The pair previously founded and bootstrapped VoIP communications platform Flowroute before selling it to West Corp. in 2018. Upon the sale of that company, Hsieh and Levy set out to build a company that, in their words, “could help everyday people become more financially secure.”

Hsieh, a second-generation immigrant, worked in his family’s restaurant where they shared the dream of achieving financial freedom through real estate. Similarly, Levy says he grew up watching his parents build a small construction business from scratch. He was intrigued by the idea of passive income through single-family rental homes but became disillusioned with the overhead, risk and hassle of managing one’s own single-family rental investments. 

So the duo worked together to design a mobile-first offering that could enable small investors to benefit from real estate “without the burden of making repairs at 2 a.m. on a Saturday.” Enter Concreit. 

Today, most investors can open a Concreit account and make their first investment in just minutes on their mobile device, the company claims. The company’s free mobile app allows consumers to invest as little as $1 into a fund managed by a team of investment professionals. Withdrawals can be requested at any time through the app and sent upon approval.

The platform facilitates weekly earned payouts, automated investments and on-demand withdrawals while compounding earned payouts weekly.

After selling Flowroute, Hsieh says he “saw the opportunity to earn a great APR through private real estate investing while gaining less correlation with traditional public stocks or bonds markets,” Hsieh said. “But they were only for the already wealthy or required multiyear commitments of capital. Concreit gives everyone access to a real estate portfolio and the ability to have access to withdrawals when they need them.”

Put simply, the startup wants to make it easy for anyone — not just the wealthy — to invest in real estate.

Concreit, Hsieh said, offers “regular people” the ability to access real estate strategies typically used by large hedge funds and private equity. 

“We’re seeing a surge of retail demand for alternatives and other ways to invest outside of the public markets and the crypto space for those that value diversification,” Hsieh told TechCrunch. Most other competitors are focused on marketing and selling securities, but we knew in order to be an innovator in this space we had to produce a truly unique experience for our investors.”

Concreit’s platform is designed to be a more connected investment experience.

“We knew early on that digital natives deserved a whole new real estate investing experience and that it had to be 100x better than just taking traditional real estate investment opportunities and offering them digitally,” Hsieh said. 

So on the platform side, Concreit has built a cloud-based proprietary securities accounting engine that allows the company to process fractional calculations and pull in a lot of mutual fund practices, applying them toward the “more labor-intensive” private equity markets, with a focus on real estate.

“We’ve taken a lot of the cloud-architectural work that we’ve pioneered in the telecommunications space and applied it towards a back-office accounting solution that gives us a competitive edge around what we offer to our investors,” Hsieh said. “This affords the ability to run accounting at a higher frequency, which is how we are able to run weekly dividends, process fractional redemptions and ultimately a more real-time experience for our users.”

Concreit’s first private REIT fund, focused on passive income, consists of lower-risk fixed-income private market residential and commercial real estate first-lien mortgages. The fund, which the company says has an annualized return of 5.47%, is managed by a team of industry professionals. The startup has added over 18,000 customers to its platform since it was qualified by the SEC (slightly over a year ago), and doubled its user base in the month of August.

“Our current users can invest with any dollar amount, no lock-ups, weekly payouts, and an experience that’s as easy & familiar as a savings account,” Hsieh said.

Matrix’s Dana Stalder, who joined Concreit’s board as part of the financing,  believes Concreit has leveled the playing field for real estate investing by making it more accessible. 

“What Concreit has built is incredibly hard to do from both a technology and regulatory standpoint,” he told TechCrunch. “Alternative asset classes, in particular, have been notoriously closed off to the average consumer, leaving high yield returns exclusively to wealthy investors. “

Volta Trucks raises €37 million to bring electric delivery trucks to the streets of London and Paris

Trucking tends to be associated with highways, but it’s not uncommon to find large delivery vehicles trundling down the tightly packed streets of the world’s most populated cities. According to EV startup Volta Trucks, that’s far from ideal: in London, large commercial vehicles cause around 26% of pedestrian fatalities and around 80% of cyclist fatalities, and account for an outsized portion of carbon emissions.

Volta’s solution is to electrify and redesign the large cargo vehicle — called Heavy Goods Vehicles (HGVs) in Europe — for middle- and last-mile delivery in urban centers. “The traditional design of trucks and city centers really don’t work together, but you can’t just ban trucks from city centers,” a company spokesperson told TechCrunch.

Volta Trucks has raised a €37 million ($44 million) funding round to accelerate its plans, starting with a fleet of pilot vehicles in London and Paris.

The round was led by New York-based Luxor Capital Group and returning investor Byggmästare Anders J Ahlström Holding of Stockholm. New investors included U.S. electric truck and battery manufacturer Proterra and supply chain management company Agility.

The idea for the company came to Volta co-founder and Swedish serial entrepreneur Carl-Magnus Norden when Elon Musk revealed the Tesla Model 3. Norden realized that there was very little equivalent movement to electrify the world of commercial vehicles, despite the fact that they produce a large share of carbon emissions.

Four years later, Volta (not to be confused with Volta Charging, the European EV charging station company) has come up with a truck that gives the driver a 220-degree view, similar to what one might see on a city bus. The driver’s seat is also in the center of the cab. On the inside of the 16-ton truck, called Volta Zero, will sit a single unit containing an electric motor, transmission and rear axle supplied by OEM supplier Meritor. This unit, called an eAxle, leaves more space between the chassis rails for the battery.

Those batteries will have a 95- to 120-mile range and will be designed by Proterra, a supplier (and now investor) that Volta says will be able to furnish batteries into the longer term and at higher production levels. Volta is imagining that it will produce up to 5,000 trucks by the end of 2023, 14,000 to 15,000 by 2024, and 27,000 trucks by 2025.

Volta plans to also offer a “truck as a service” model, which is a leasing agreement including insurance, charging infrastructure, service repair and maintenance. While Volta also plans on selling trucks outright, the spokesperson said the company anticipates the leasing model will make up 50%, and as high as 80%, of its business.

Volta is gearing up to launch a fleet of six R&D vehicles in London and Paris at the beginning of the year. These trucks will be used for internal validation. The company plans to start about a 33-vehicle pilot program with customers in two major European cities by the middle of next year.

The plan is that this will allow Volta to start full-scale production by the end of 2022. All of the vehicles, with the exception of the six beta trucks, will be manufactured by Steyr Automotive in Austria. The two announced the manufacturing agreement last week.

Volta says it has letters of intent for 2,500 trucks. The goal is to convert these to binding deposit-led orders as Volta moves closer to series production. This round now brings its total funding to date to around €60 million ($71 million).

Skello raises $47.3 million for its employee scheduling tool

French startup Skello has raised a $47.3 million funding round (€40 million). The company has been working on a software-as-a-service tool that lets you manage the work schedule of your company. What makes it special is that Skello automatically takes into account local labor laws and collective agreements.

Partech is leading today’s funding round. Existing investors XAnge and Aglaé Ventures are also participating. The startup had previously raised a €300,000 seed round and a €6 million Series A round in 2018.

Skello works with companies across many industries, such as retail, hospitality, pharmacies, bakeries, gyms, escape games and more. And many of them were simply using Microsoft Excel to manage their schedule.

By using Skello, you get an online service that works for both managers and employees. On the manager side, you can view who is working and when. You can assign employees to fill some gaps.

For employees, they can also connect to the platform to see their own schedule. Employees can also say when they are unavailable and request time off. And when something unexpected comes up, employees can trade shifts.

“We really want to put employees at the center of the product,” co-founder and CEO Quitterie Mathelin-Moreaux told me. “They have a mobile app and the idea is to make the work schedule as collaborative as possible in order to allocate resources as efficiently as possible and increase team retention.”

At every step of the scheduling process, Skello manages legal requirements. For instance, Skello remembers mandatory weekly rest periods. The platform knows that your employees can’t work across a long time range. And Skello can count overtime hours, holiday hours, Sunday shifts, etc.

When you’re approaching the end of the month, Skello can generate a report with everyone’s timesheet. You can integrate Skello directly with your payroll tool to make this process a bit less tedious as well.

Skello is currently used across 7,000 points of sale. Now, the company wants to expand to more European countries and increase the size of the team from 150 employees to 300 employees by 2022.

The responsibilities of AI-first investors

Ash Fontana
Contributor

Ash Fontana, a managing director at Zetta Ventures, is the author of “The AI-First Company: How to Compete and Win with Artificial Intelligence.”
More posts by this contributor

Investors in AI-first technology companies serving the defense industry, such as Palantir, Primer and Anduril, are doing well. Anduril, for one, reached a valuation of over $4 billion in less than four years. Many other companies that build general-purpose, AI-first technologies — such as image labeling — receive large (undisclosed) portions of their revenue from the defense industry.

Investors in AI-first technology companies that aren’t even intended to serve the defense industry often find that these firms eventually (and sometimes inadvertently) help other powerful institutions, such as police forces, municipal agencies and media companies, prosecute their duties.

Most do a lot of good work, such as DataRobot helping agencies understand the spread of COVID, HASH running simulations of vaccine distribution or Lilt making school communications available to immigrant parents in a U.S. school district.

The first step in taking responsibility is knowing what on earth is going on. It’s easy for startup investors to shrug off the need to know what’s going on inside AI-based models.

However, there are also some less positive examples — technology made by Israeli cyber-intelligence firm NSO was used to hack 37 smartphones belonging to journalists, human-rights activists, business executives and the fiancée of murdered Saudi journalist Jamal Khashoggi, according to a report by The Washington Post and 16 media partners. The report claims the phones were on a list of over 50,000 numbers based in countries that surveil their citizens and are known to have hired the services of the Israeli firm.

Investors in these companies may now be asked challenging questions by other founders, limited partners and governments about whether the technology is too powerful, enables too much or is applied too broadly. These are questions of degree, but are sometimes not even asked upon making an investment.

I’ve had the privilege of talking to a lot of people with lots of perspectives — CEOs of big companies, founders of (currently!) small companies and politicians — since publishing “The AI-First Company” and investing in such firms for the better part of a decade. I’ve been getting one important question over and over again: How do investors ensure that the startups in which they invest responsibly apply AI?

Let’s be frank: It’s easy for startup investors to hand-wave away such an important question by saying something like, “It’s so hard to tell when we invest.” Startups are nascent forms of something to come. However, AI-first startups are working with something powerful from day one: Tools that allow leverage far beyond our physical, intellectual and temporal reach.

AI not only gives people the ability to put their hands around heavier objects (robots) or get their heads around more data (analytics), it also gives them the ability to bend their minds around time (predictions). When people can make predictions and learn as they play out, they can learn fast. When people can learn fast, they can act fast.

Like any tool, one can use these tools for good or for bad. You can use a rock to build a house or you can throw it at someone. You can use gunpowder for beautiful fireworks or firing bullets.

Substantially similar, AI-based computer vision models can be used to figure out the moves of a dance group or a terrorist group. AI-powered drones can aim a camera at us while going off ski jumps, but they can also aim a gun at us.

This article covers the basics, metrics and politics of responsibly investing in AI-first companies.

The basics

Investors in and board members of AI-first companies must take at least partial responsibility for the decisions of the companies in which they invest.

Investors influence founders, whether they intend to or not. Founders constantly ask investors about what products to build, which customers to approach and which deals to execute. They do this to learn and improve their chances of winning. They also do this, in part, to keep investors engaged and informed because they may be a valuable source of capital.

Tiger Global-led $100M investment makes Apna India’s fastest unicorn

A 22-month-old startup that is helping millions of blue- and gray-collar workers in India learn new skills and find jobs has become the youngest firm to join the coveted unicorn status in the world’s second-largest internet market.

Apna announced on Thursday that it has raised $100 million in a round led by Tiger Global. The new round — a Series C — valued Apna at $1.1 billion. TechCrunch reported last month that Tiger Global, an existing investor in Apna, was in talks to lead a $100 million financing round in the startup at the unicorn valuation.

Owl Ventures, Insight Partners, Sequoia Capital India, Maverick Ventures and GSV Ventures also participated in the new round, which is the third investment secured by Apna this year. Apna was valued at $570 million in its Series B round in June this year.

The investors’ excitement comes as Apna has demonstrated an impressive growth in recent months. The startup has amassed over 16 million users on its 15-month-old eponymous Android app, up from 10 million in June this year.

Indian cities are home to hundreds of millions of low-skilled workers who hail from villages in search of work. Many of them have lost their jobs amid the coronavirus pandemic that has slowed several economic activities in the South Asian market.

Apna has built a platform that provides a community to these workers. In the community, they engage with each other, exchange notes to perform better at interviews and share tips to negotiate better compensation.

Image Credits: Apna

On top of this, Apna connects these workers to potential employers. In an interview with TechCrunch, Apna founder and chief executive Nirmit Parikh said more than 150,000 employers — including Zomato, Bharti AXA, Urban Company, BYJU’S, PhonePe, Burger King, Delhivery, Teamlease and G4S Global — are on the platform, and over 5 million jobs are active.

The startup, whose name is inspired from a cheerful 2019 Bollywood song, has facilitated over 18 million job interviews in the past 30 days, he said. Apna is currently operational in 28 Indian cities.

The idea for Apna came, Parikh has said, after he was puzzled to find that even as there are hundreds of millions of blue- and gray-collar workers in India, locating them when you need assistance with a task often proves very difficult.

Prior to starting Apna, Parikh, who previously worked at Apple, met these workers and went undercover as an electrician and floor manager to understand the problems they were facing. The problem, he found, was the disconnect. Workers had no means to find who needed them for jobs, and they were also not connected with one another. The community aspect of Apna, which now has over 70 such groups, is aimed at addressing this challenge.

The Apna app allows these workers to learn new skills to become eligible for more work opportunities. Apna has emerged as one of the fastest growing upskilling platforms — and that would explain why GSV Ventures and Owl Ventures, two high-profile firms known to back edtech startups, are investing in the Bangalore-based firm.

“Apna’s viral adoption is driven by a novel social and interactive approach to connecting employers with job seekers. We expect job seekers in search of meaningful connections and vetted opportunities to drive Apna’s continued explosive growth across India — and the world,” said Griffin Schroeder, partner at Tiger Global, in a statement.

Now the startup, which has started to monetize the platform, is ready to aggressively expand. Parikh said Apna will continue to expand to more cities in India and by early next year, Apna will begin its global expansion. Parikh said the startup is eyeing expansion in the USA, South East Asia and Middle East and Africa.

“We have already created a dent. Now we want to impact the lives of 2.3 billion,” he said. “We will require crazy amounts of resources and a world-class team to deliver. It’s a herculean task, and is going to take a village. But somebody has to solve it.”

5 things you need to win your first customer

Bryan Dsouza
Contributor

Bryan Dsouza leads product marketing at Grammarly, and previously led various product management and product marketing roles across B2C and B2B at Microsoft.

A startup is a beautiful thing. It’s the tangible outcome of an idea birthed in a garage or on the back of a napkin. But ask any founder what really proves their startup has taken off, and they will almost instantly say it’s when they win their first customer.

That’s easier said than done, though, because winning that first customer will take a lot more than an Ivy-educated founder and/or a celebrity investor pool.

To begin with, you’ll have to craft a strong ideal customer profile to know your customer’s pain points, while developing a competitive SWOT analysis to scope out alternatives your customers can go to.

Your target customer will pick a solution that will help them achieve their goals. In other words, your goals should align with your customer’s goals.

You’ll also need to create a shortlist of influencers who have your customer’s trust, identify their decision-makers who make the call to buy (or not), and create a mapped list of goals that align your customer’s goals to yours.

Understanding and executing on these things can guarantee you that first customer win, provided you do them well and with sincerity. Your investors will also see the fruits of your labor and be comforted knowing their dollars are at good work.

Let’s see how:

1. Craft the ideal customer profile (ICP)

The ICP is a great framework for figuring out who your target customer is, how big they are, where they operate, and why they exist. As you write up your ICP, you will soon see the pain points you assumed about them start to become more real.

To create an ICP, you will need to have a strong articulation of the problem you are trying to solve and the customers that experience this problem the most. This will be your baseline hypothesis. Then, as you develop your ICP, keep testing your baseline hypothesis to weed out inaccurate assumptions.

Getting crystal clear here will set you up with the proper launchpad. No shortcuts.

Here’s how to get started:

  1. Develop an ICP (Ideal Customer Profile) framework.
  2. Identify three target customers that fit your defined ICP.
  3. Write a problem statement for each identified target customer.
  4. Prioritize the problem statement that resonates with your product the most.
  5. Lock on the target customer of the prioritized problem statement.

Practice use case:

You are the co-founder at an upcoming SaaS startup focused on simplifying the shopping experience in car showrooms so buyers enjoy the process. What would your ICP look like?

2. Develop the SWOT

The SWOT framework cannot be overrated. This is a great structure to articulate who your competitors are and how you show up against them. Note that your competitors can be direct or indirect (as an alternative), and it’s important to categorize these buckets correctly.

Beware the hidden bias behind TikTok resumes

Nagaraj Nadendla
Contributor

Nagaraj Nadendla is SVP of development at Oracle Cloud HCM, where he leads the development of cloud recruitment solutions including Oracle Recruiting and Taleo.

Social media has served as a launchpad to success almost as long as it has been around. The stories of going viral from a self-produced YouTube video and then securing a record deal established the mythology of social media platforms. Ever since, social media has consistently gravitated away from text-based formats and toward visual mediums like video sharing.

For most people, a video on social media won’t be a ticket to stardom, but in recent months, there have been a growing number of stories of people getting hired based on videos posted to TikTok. Even LinkedIn has embraced video assets on user profiles with the recent addition of the “Cover Story” feature, which allows workers to supplement their profiles with a video about themselves.

As technology continues to evolve, is there room for a world where your primary resume is a video on TikTok? And if so, what kinds of unintended consequences and implications might this have on the workforce?

Why is TikTok trending for jobs?

In recent months, U.S. job openings have risen to an all-time high of 10.1 million. For the first time since the pandemic began, available jobs have exceeded available workers. Employers are struggling to attract qualified candidates to fill positions, and in that light, it makes sense that many recruiters are turning to social platforms like TikTok and video resumes to find talent.

But the scarcity of workers does not negate the importance of finding the right employee for a role. Especially important for recruiters is finding candidates with the skills that align with their business’ goals and strategy. For example, as more organizations embrace a data-driven approach to operating their business, they need more people with skills in analytics and machine learning to help them make sense of the data they collect.

Recruiters have proven to be open to innovation where it helps them find these new candidates. Recruiting is no longer the manual process it used to be, with HR teams sorting through stacks of paper resumes and formal cover letters to find the right candidate. They embraced the power of online connections as LinkedIn rose to prominence and even figured out how to use third-party job sites like GlassDoor to help them draw in promising candidates. On the back end, many recruiters use advanced cloud software to sort through incoming resumes to find the candidates that best match their job descriptions. But all of these methods still rely on the traditional text-based resume or profile as the core of any application.

Videos on social media provide the ability for candidates to demonstrate soft skills that may not be immediately apparent in written documents, such as verbal communication and presentation skills. They are also a way for recruiters to learn more about the personality of the candidate to determine how they’d fit into the culture of the company. While this may be appealing for many, are we ready for the consequences?

We’re not ready for the close-up

While innovation in recruiting is a big part of the future of work, the hype around TikTok and video resumes may actually take us backward. Despite offering a new way for candidates to market themselves for opportunities, it also carries potential pitfalls that candidates, recruiters and business leaders need to be aware of.

The very element that gives video resumes their potential also presents the biggest problems. Video inescapably highlights the person behind the skills and achievements. As recruiters form their first opinions about a candidate, they will be confronted with information they do not usually see until much later in the process, including whether they belong to protected classes because of their race, disability or gender.

Diversity, equity and inclusion (DE&I) concerns have had a major surge in attention over the last couple of years amid heightened awareness and scrutiny around how employers are — or are not — prioritizing diversity in the workplace.

But evaluating candidates through video could erase any progress made by introducing more opportunities for unconscious, or even conscious, bias. This could create a dangerous situation for businesses if they do not act carefully because it could open them up to consequences such as damage to their reputation or even something as severe as discrimination lawsuits.

A company with a poor track record for diversity may have the fact that they reviewed videos from candidates used against them in court. Recruiters reviewing the videos may not even be aware of how the race or gender of candidates are impacting their decisions. For that reason, many of the businesses I have seen implement an option for video in their recruiting flow do not allow their recruiters to watch the video until late in the recruiting process.

But even if businesses address the most pressing issues of DE&I by managing bias against those protected classes, by accepting videos there are still issues of diversity in less protected classes such as neurodiversity and socioeconomic status. A candidate with exemplary skills and a strong track record may not present themselves well through a video, coming across as awkward to the recruiter watching the video. Even if that impression is irrelevant to the job, it could still influence the recruiter’s stance on hiring.

Furthermore, candidates from affluent backgrounds may have access to better equipment and software to record and edit a compelling video resume. Other candidates may not, resulting in videos that may not look as polished or professional in the eyes of the recruiter. This creates yet another barrier to the opportunities they can access.

As we sit at an important crossroads in how we handle DE&I in the workplace, it is important for employers and recruiters to find ways to reduce bias in the processes they use to find and hire employees. While innovation is key to moving our industry forward, we have to ensure top priorities are not being compromised.

Not left on the cutting room floor

Despite all of these concerns, social media platforms — especially those based on video — have created new opportunities for users to expand their personal brands and connect with potential job opportunities. There is potential to use these new systems to benefit both job seekers and employers.

The first step is to ensure that there is always a place for a traditional text-based resume or profile in the recruiting process. Even if recruiters can get all the information they need about a candidate’s capabilities from video, some people will just naturally feel more comfortable staying off camera. Hiring processes need to be about letting people put their best foot forward, whether that is in writing or on video. And that includes accepting that the best foot to put forward may not be your own.

Instead, candidates and businesses should consider using videos as a place for past co-workers or managers to endorse the candidate. An outside endorsement can do a lot more good for an application than simply stating your own strengths because it shows that someone else believes in your capabilities, too.

Video resumes are hot right now because they are easier to make and share than ever and because businesses are in desperate need of strong talent. But before we get caught up in the novelty of this new way of sharing our credentials, we need to make sure that we are setting ourselves up for success.

The goal of any new recruiting technology should be to make it easier for candidates to find opportunities where they can shine without creating new barriers. There are some serious kinks to work out before video resumes can achieve that, and it is important for employers to consider the repercussions before they damage the success of their DE&I efforts.

Logistics startup Stord raises $90M in Kleiner Perkins-led round, becomes a unicorn and acquires a company

When Kleiner Perkins led Stord’s $12.4 million Series A in 2019, its founders were in their early 20s and so passionate about their startup that they each dropped out of their respective schools to focus on growing the business.

Fast-forward two years and Stord — an Atlanta-based company that has developed a cloud supply chain — is raising more capital in a round again led by Kleiner Perkins.

This time, Stord has raised $90 million in a Series D round of funding at a post-money valuation of $1.125 billion — more than double the $510 million that the company was valued at when raising $65 million in a Series C financing just six months ago.

In fact, today’s funding marks Stord’s third since early December of 2020, when it raised its Series B led by Peter Thiel’s Founders Fund, and brings the company’s total raised since its 2015 inception to $205 million.

Besides Kleiner Perkins, Lux Capital, D1 Capital, Palm Tree Crew, BOND, Dynamo Ventures, Founders Fund, Lineage Logistics and Susa Ventures also participated in the Series D financing. In addition, Michael Rubin, Fanatics founder and founder of GSI Commerce; Carlos Cashman, CEO of Thrasio; Max Mullen, co-founder of Instacart; and Will Gaybrick, CPO at Stripe, put money in the round.

Founders Sean Henry, 24, and Jacob Boudreau, 23, met while Henry was at Georgia Tech and Boudreau was in online classes at Arizona State (ASU) but running his own business, a software development firm, in Atlanta.

Over time, Stord has evolved into a cloud supply chain that can give companies a way to compete and grow with logistics, and provides an integrated platform “that’s available exactly when and where they need it,” Henry said. Stord combines physical logistics services such as freight, warehousing and fulfillment in that platform, which aims to provide “complete visibility, rapid optimization and elastic scale” for its users.

About two months ago, Stord announced the opening of its first fulfillment center, a 386,000-square-foot facility, in Atlanta, which features warehouse robotics and automation technologies. “It was the first time we were in a building ourselves running it end to end,” Henry said.

And today, the company is announcing it has acquired Connecticut-based Fulfillment Works, a 22-year-old company with direct-to-consumer (DTC) experience and warehouses in Nevada and in its home state.

With FulfillmentWorks, the company says it has increased its first-party warehouses, coupled with its network of over 400 warehouse partners and 15,000 carriers.

While Stord would not disclose the amount it paid for Fulfillment Works, Henry did share some of Stord’s impressive financial metrics. The company, he said, in 2020 delivered its third consecutive year of 300+% growth, and is on track to do so again in 2021. Stord also achieved more than $100 million in revenue in the first two quarters of 2021, according to Henry, and grew its headcount from 160 people last year to over 450 so far in 2021 (including about 150 Fulfillment Works employees). And since the fourth quarter is often when people do the most online shopping, Henry expects the three-month period to be Stord’s heaviest revenue quarter.

For some context, Stord’s new sales were up “7x” in the second quarter of 2020 compared to the same period last year. So far in the third quarter, sales are up almost 10x, according to Henry.

Put simply, Stord aims to give brands a way to compete with the likes of Amazon, which has set expectations of fast fulfillment and delivery. The company guarantees two-day shipping to anywhere in the country.

“The supply chain is the new competitive battleground,” Henry said. “Today’s buying expectations set by Amazon and the rise of the omni-channel shopper have placed immense pressure on companies to maintain more nimble and efficient supply chains… We want every company to have world-class, Prime-like supply chains.”

What makes Stord unique, according to Henry, is the fact that it has built what it believes to be the only end-to-end logistics network that combines the physical infrastructure with software.

That too is one of the reasons that Kleiner Perkins doubled down on its investment in the company.

Ilya Fushman, Stord board director and partner at Kleiner Perkins, said even at the time of his firm’s investment in 2019, that Henry displayed “amazing maturity and vision.”

At a high level, the firm was also just drawn to what he described as the “incredibly large market opportunity.”

“It’s trillions of dollars of products moving around with consumer expectation that these products will get to them the same day or next day, wherever they are,” Fushman told TechCrunch. “And while companies like Amazon have built amazing infrastructure to do that themselves, the rest of the world hasn’t really caught up… So there’s just amazing opportunity to build software and services to modernize this multitrillion-dollar market.”

In other words, Fushman explained, Stord is serving as a “plug and play” or “one stop shop” for retailers and merchants so they don’t have to spend resources on their own warehouses or building their own logistics platforms.

Stord launched the software part of its business in January 2020, and it grew 900% during the year, and is today one of the fastest-growing parts of its business.

“We built software to run our logistics and network of hundreds of warehouses,” Henry told TechCrunch. “But if companies want to use the same system for existing logistics, they can buy our software to get that kind of visibility.”

The Disrupt Desk will help you catch everything you missed at Disrupt 2021

This year at TechCrunch Disrupt (happening just next week), there is more to explore than ever before. From the scores of Startup Alley companies to the Startup Battlefield presentations to the Disrupt Stage, Extra Crunch Stage and beyond.

We’ll hear from big name VCs like Chamath Palihapatiya, a16z’s Katie Haun, GC’s Niko Bonatsos, Forerunner’s Kirsten Green and more. Founders, such as Stewart Butterfield (Slack), Tope Awotona (Calendly), Brian Armstrong (Coinbase) and Melanie Perkins (Canva), will share how they’ve grown an idea into a unicorn. We’ll even have policy folks like Transportation Secretary Pete Buttigieg and the SEC’s Erin Schneider at the show, with celebrities Ryan Reynolds and Seth Rogen to boot.

On the Extra Crunch stage, panels on how to raise your first dollars, how to craft your pitch deck, how to land your first B2B customers and how to find product market fit will include audience Q&A, to make sure you leave with everything you need to know to be successful.

Obviously, it would be impossible to catch it all in real time. But the Disrupt Desk is making its grand return after debuting in 2020.

The Disrupt Desk will hit you with all the biggest highlights from the show, complete with analysis of breaking news and meaningful insights from our speakers. Plus, the Disrupt Desk will have a few never-before-seen demos and breaking news announcements.

Of course, alongside catching up with the Disrupt Desk, Disrupt attendees can catch everything from the show on-demand with their complementary 3-month Extra Crunch membership.

TechCrunch Disrupt 2021 goes down in just a few days (September 21-23 to be exact), so snag your pass soon before it’s too late! Prices are less than $100 to get access to it all but just until Monday when prices increase by $200.

Locus Robotics just raised another $50M

Seems Locus Robotics is striking while the iron is hot. Seven months after raising a sizable $150 million Series E, Tiger Global is investing another $50 million in the Massachusetts firm. The last round made Locus a unicorn, and this one brings the company’s total funding to around $300 million.

Locus specializes in warehouse and fulfillment robotics, making a more modular solution that doesn’t require the sort of “ground-up build” of a Berkshire Grey. The company’s approach is closer to that of Fetch, which was acquired by Zebra Technologies back in July. Locus seems prime for an acquisition from a logistics firm or retailer grappling to compete with the monolith of Amazon.

The continued funding rounds, on the other hand, seem to point to a company looking to continue to go it alone.


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CEO Rick Faulk confirmed as much with me back in February, stating, “We have no interest in being acquired. We think we can build the most and greatest value by operating independently. There are investors that want to invest in helping everyone that’s not named ‘Amazon’ compete.”

Faulk adds this morning that the new funds are a kind of validation for Locus. Certainly they’re yet another sign in accelerated interest in automation amid the pandemic. “At a time of increasing volumes and ongoing labor shortages, this new round of funding underscores how critical flexible, scalable, intelligent robotics automation has become to the warehouse and the supply chain,” the executive says. “Locus is uniquely positioned to drive digital transformation in this enormous global market.”

Funding will be used to further expand Locus’ global operations.

SoftBank commits $3B more to investing in Latin American tech companies

SoftBank Group Corp. is doubling down on its commitment to Latin America.

Today, the Japanese investment conglomerate is announcing the launch of the SoftBank Latin America Fund II, its second dedicated private investment fund focused on tech companies located in LatAm. SoftBank is launching the new fund with an initial $3 billion commitment.

“Fund II will explore options to raise additional capital,” SoftBank said in a statement.

The new fund builds upon SoftBank’s $5 billion Latin America Fund, which was first announced in March 2019 and was formerly called the Innovation Fund with an initial $2 billion in committed capital.

According to the firm, that fund has generated a net IRR of 85% — with SoftBank having invested $3.5 billion in 48 companies with a fair value of $6.9 billion as of June 30. SoftBank has invested in 15 unicorns out of that fund, including proptech startup QuintoAndar, Rappi, Mercado Bitcoin, Gympass and MadeiraMadeira. Recently, it co-led a $350 million Series D round in Argentine personal finance management app Ualá.

The firm also claims to have “created significant value uplift” for portfolio companies, including 4.4x each for Kavak and VTEX; 2.6x for QuintoAndar and 3.5x for Banco Inter (as of June 30).

It has backed companies across the region including in Brazil, Mexico, Chile, Colombia, Argentina and Ecuador.

Marcelo Claure, Executive VP and COO of SoftBank Group, leads the SoftBank Latin America Funds. Managing Partners Shu Nyatta and Paulo Passoni run the region’s investment team. Operating Partner Alex Szapiro, also head of Brazil for SoftBank, leads the fund’s operations team.

Combined, the investment and operations teams total over 60 people who operate out of Miami, São Paulo and Mexico City.

Fund II intends to back technology-enabled companies across countries and industries at every stage of their development, from seed to public, throughout Latin America, with a focus on e-commerce, digital financial services, healthcare, education, blockchain and enterprise software, among others. 

In a statement, SoftBank Chairman and CEO Masayoshi Son described Latin America as “one of the most important economic regions in the world.”

“SoftBank will continue to drive technology adoption that will benefit hundreds of millions of people in this part of the world,” he said. “There is so much innovation and disruption taking place in Latin America, and I believe the business opportunities there have never been stronger. Latin America is a critical part of our strategy – this is why we are expanding our presence and doubling down on our commitment with Marcelo at the helm.”

Claure said the success and returns from the SoftBank Latin America Fund “far exceeded” the firm’s expectations. Looking ahead, he expects that 2022 will be the “biggest IPO year” in the region’s history.

Earlier this year, TechCrunch looked at why global investors were flocking to Latin America. At that time, Nyatta told me that technology in LatAm is often more about inclusion rather than disruption.

“The vast majority of the population is underserved in almost every category of consumption. Similarly, most businesses are underserved by modern software solutions,” Nyatta explained. “There’s so much to build for so many people and businesses. In San Francisco, the venture ecosystem makes life a little better for individuals and businesses who are already living in the future. In LatAm, tech entrepreneurs are building the future for everyone else.”

The Equity crew riffs on the Intuit-Mailchimp news

Hello and welcome back to Equity, TechCrunch’s venture-capital-focused podcast where we unpack the numbers behind the headlines.

We are back! From this morning, I suppose. But the news cycle doesn’t wait for our publishing schedule, so the Equity crew got together to yammer all about the Intuit-Mailchimp acquisition.

A $12 billion deal composed of stock and cash, it’s a big one. And as Mailchimp has both a history of bootsrapping and a founding story in a non-Silicon Valley city we had lots to chat about.

As a general reminder, if you do listen to the show, hit us up on Twitter as we are doing more and more of these Spaces. They are good and relaxed fun, so don’t take them too seriously. We like to have fun.

Alright, Equity is back on Wednesday with our regularly scheduled programming. Chat then!

Equity drops every Monday at 7:00 a.m. PDT, Wednesday, and Friday at 6:00 a.m. PDT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts!

3 keys to pricing early-stage SaaS products

Yousuf Khan
Contributor

Yousuf Khan is a partner at Ridge Ventures. Prior to joining Ridge, he was the first CIO of Automation Anywhere, CIO and Vice President of Customer Success at cloud-based AI platform Moveworks, as well as CIO of Pure Storage, Qualys and Hult International Business School.

I’ve met hundreds of founders over the years, and most, particularly early-stage founders, share one common go-to-market gripe: Pricing.

For enterprise software, traditional pricing methods like per-seat models are often easier to figure out for products that are hyper-specific, especially those used by people in essentially the same way, such as Zoom or Slack. However, it’s a different ball game for startups that offer services or products that are more complex.

Most startups struggle with a per-seat model because their products, unlike Zoom and Slack, are used in a litany of ways. Salesforce, for example, employs regular seat licenses and admin licenses — customers can opt for lower pricing for solutions that have low-usage parts — while other products are priced based on negotiation as part of annual renewals.

You may have a strong champion in a CIO you’re selling to or a very friendly person handling procurement, but it won’t matter if the pricing can’t be easily explained and understood. Complicated or unclear pricing adds more friction.

Early pricing discussions should center around the buyer’s perspective and the value the product creates for them. It’s important for founders to think about the output and the outcome, and a number they can reasonably defend to customers moving forward. Of course, self-evaluation is hard, especially when you’re asking someone else to pay you for something you’ve created.

This process will take time, so here are three tips to smoothen the ride.

Pricing is a journey

Pricing is not a fixed exercise. The enterprise software business involves a lot of intangible aspects, and a software product’s perceived value, quality, and user experience can be highly variable.

The pricing journey is long and, despite what some founders might think, jumping head-first into customer acquisition isn’t the first stop. Instead, step one is making sure you have a fully fledged product.

If you’re a late-seed or Series A company, you’re focused on landing those first 10-20 customers and racking up some wins to showcase in your investor and board deck. But when you grow your organization to the point where the CEO isn’t the only person selling, you’ll want to have your go-to-market position figured out.

Many startups fall into the trap of thinking: “We need to figure out what pricing looks like, so let’s ask 50 hypothetical customers how much they would pay for a solution like ours.” I don’t agree with this approach, because the product hasn’t been finalized yet. You haven’t figured out product-market fit or product messaging and you want to spend a lot of time and energy on pricing? Sure, revenue is important, but you should focus on finding the path to accruing revenue versus finding a strict pricing model.

What to make of Freshworks’ first IPO price range

Two major private tech companies announced IPO price ranges this morning, with Toast targeting a market value of nearly $18 billion at the top end of its range and Freshworks looking to price its equity between $28 and $32 per share. TechCrunch calculates that the company would be worth around $8.9 billion at $32 per share, not employing a fully diluted share count.

Inclusive of shares represented by fully vested options and the like, Freshworks’ valuation could reach $9.6 billion, Renaissance Capital reports.

Unlike Toast, with a revenue mix including four distinct products, Freshworks is a more straightforward software company. That means we can do much more interesting work to understand its valuation. So, this morning, let’s unpack how Freshworks is considering valuing itself in its IPO at its present range, look at some market comps, and come to a conclusion regarding whether or not we expect the unicorn to raise its valuation before it floats.

Lies, damned lies and revenue multiples

As a refresher, in the first half of 2021 (Q1 and Q2), Freshworks posted revenues of $168.9 million. That annualizes to $337.9 million, thanks to numerical rounding.

At a valuation of $9.6 billion — recall that simple IPO valuations for the company and lower share-price points from its IPO range generate lower valuations and therefore more conservative multiples than what we’ll be discussing here — Freshworks would be worth 28.4x its current revenue run rate, set during H1 2021.

Toast looks toward $18B valuation in upcoming IPO

As if the Boston startup market needed additional momentum, it appears restaurant software startup Toast will dramatically bolster its valuation in its upcoming IPO.

For a city perhaps best known internationally for its hard tech and biotech efforts, to see Toast not only rebound from its early-pandemic layoffs to a public debut, but to target a valuation closer to $20 billion than $10 billion, is a coup.


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In a new S-1/A filing this morning, Toast indicated an early IPO range of between $30 and $33 per share, leading to a maximum fundraise of $825 million in its IPO. The company was last valued at $4.9 billion in early 2020, when Toast raised $400 million. The company is set to dramatically supersede that valuation mark thanks to expanding revenues and an especially strong second quarter.

Let’s dig into the company’s new IPO price range, calculate simple and fully diluted results, and see what we can learn from where Toast may price. Recall that the company has a mix of recurring software (SaaS) incomes as well as fintech revenue (payments, mostly). Its revenue mix is interesting, and how Toast prices could help us better understand how to value vertical SaaS startups that are pursuing a payments-and-SaaS business approach.

Into the filing!

Toast’s IPO valuation

Toast is selling 21,739,131 Class A shares in its IPO. They get one vote. Class B shares get 10. If you were considering buying into Toast’s IPO in hopes of having a say in its future, don’t. You won’t. The company’s IPO is really a method by which public-market investors can endorse the company’s current management group — or decline to buy any ownership at all.

Regardless of how we feel about corporate governance structures designed to eliminate the influence of common shareholders, Toast will have 499,332,681 shares outstanding after its IPO, or 502,593,550 if its underwriters choose to purchase their allotted greenshoe option.

At the company’s expected IPO price range of $30 to $33 per share, Toast is worth $14.98 billion at the low end, and $16.48 billion at the top. Inclusive of shares from its underwriters’ option, Toast’s simple IPO valuation range expands from $15.08 billion at the bottom to $16.59 billion at the top.

Indonesia-based Rey Assurance launches its holistic approach to insurance with $1M in funding

Rey Assurance co-founders Bobby Siagian and Evan Tanotogono

Rey Assurance co-founders Bobby Siagian and Evan Tanotogono

Health insurance is the kind of thing people usually only think about only when they need it. Otherwise, their policies are just paperwork in their files or cards in their wallet. Indonesian insurtech Rey Assurance is taking a new approach. Once someone becomes a member, they also get access to a platform of health services, including AI-based self-assessment tools, 24/7 telemedicine consultations for no added fee and pharmacy deliveries. The startup is launching out of stealth today, having already raised $1 million in pre-seed funding from the Trans-Pacific Technology Fund (TPTF). 

Rey was founded this year by Evan Tanotogono, former head of digital channel at Sequis, one of Indonesia largest insurers, and Bobby Siagian, who held lead engineering roles at companies including Tokopedia and Sea Group. They are joined by insurance industry veteran David Nugrho as their chief business officer. 

They created Rey to address the low penetration of life and health insurance in Indonesia. “When you look at the root causes and pain points, you are looking at problems that are systemic here,” Tanotogono said. These include low awareness, expensive distribution channels like agents and telemarketing, high premiums and complicated policies.

“People feel like the product is really complex, the process is difficult and they don’t get the best value for the money. It’s been that way for many, many years,” he told TechCrunch. “We believe that we cannot just go into the market and digitize part of the value chain.”

Plans start from about $4 USD per month and are available for individual or groups, like families, and small businesses. Rey’s wellness ecosystem was created to give customers more value for their money, and help differentiate it from other companies in Indonesia’s growing insurtech industry. Some other startups that have recently raised funding include Lifepal, PasarPolis and Qoala.

“Right now, if you look at insurance in Indonesia, if the premium is high, maybe 80% or 90% of that is used for the distribution channel. Now if we optimize something for digital distribution, then we can reduce the price and use the rest for the wellness features,” Tanotogono added. 

TPTF managing partner Glenn Kline told TechCrunch that Rey’s founding team was “really the driver” for its investment. “We felt these people really know where the pain points are and they understand clearly how not to try to change the legacy system, but create a whole new platform from the very beginning, where the core value proposition is an integrated solution that is simple and hassle-free.” 

Instead of doing the underwriting themselves, Rey works with insurance partners to design proprietary policies. The goal is to have an onboarding process that is completely online and only takes about five minutes, and a mostly cashless claim and reimbursement system through Rey’s payment cards. If its payment card can’t be used at healthcare provider, claims can be submitted by uploading receipt photos to the app. 

Tanotogono said this is much faster than traditional insurance providers, which can take up to 14 working days to reimburse a claim, and made possible with Rey’s proprietary claim adjudication technology. 

Rey’s wellness ecosystem currently covers primary care services, including chats and video calls with medical providers. In the future, it plans to add specialists to the platforms.

Customers can also link their health wearables for incentives. For example, if they hit certain step or activity goals, they get rewards like discounts or shopping vouchers. Rey’s long-term plan is to link wearables more deeply to its insurance policies, using data to personalize policies and premiums.

With sales momentum, Bookshop.org looks to future in its fight with Amazon

If Gutenberg were alive today, he’d be a very busy angel investor.

With book sales booming during the COVID-19 lockdowns last year, the humble written word has suddenly drawn the limelight from VCs and founders. We’ve seen a whole cavalcade of new products and fundings, including algorithmic recommendation engine BingeBooks, book club startups like Literati and the aptly named BookClub, as well as streaming service Litnerd. There have also been exits and potential exits for Glose, LitCharts and Epic.

But the one company that has captured the imagination of a lot of readers has been Bookshop.org, which has become the go-to platform for independent local bookstores to build an online storefront and compete with Amazon’s juggernaut. The company, which debuted just as the COVID-19 pandemic was spreading in January 2020, rapidly garnered headlines and profiles of its founder Andy Hunter, an industrious publisher with a deep love for the reading ecosystem.

After a year and a half, how is it all holding up? The good news for the company is that even as customers are returning to retail including bookstores, Bookshop hasn’t seen a downturn. Hunter said that August sales this year were 10% higher than July’s, and that the company is on track to do about as many sales in 2021 as in 2020. He contextualized those figures by pointing out that in May, bookstore sales increased 130% year over year. “That means our sales are additive,” he said.

Bookshop now hosts 1,100 stores on its platform, and it has more than 30,000 affiliates who curate book recommendations. Those lists have become central to Bookshop’s offering. “You get all these recommendation lists from not just bookstores, but also literary magazines, literary organizations, book lovers, and librarians,” Hunter said.

Bookshop, which is a public-benefit corporation, earns money as all ecommerce businesses do, by moving inventory. But what differentiates it is that it’s fairly liberal in paying money to affiliates and to bookstores who join its Platform Seller program. Affiliates are paid 10% for a sale, while bookstores themselves take 30% of the cover price of sales they generate through the platform. In addition, 10% of affiliate and direct sales on Bookshop are placed in a profit-sharing pool which is then shared with member bookstores. According to its website, Bookshop has disbursed $15.8 million to bookstores since launch.

The company has had a lot of developments in its first year and a half of business, but what happens next? For Hunter, the key is to build a product that continues to engage both customers and bookstores in as simple a manner as possible. “Keep the Occam’s razor,” he says of his product philosophy. For every feature, “it’s going to add to the experience and not confuse a customer.”

That’s easier said than done, of course. “For me, the challenge now is to create a platform that is extremely compelling to customers, that does everything that booksellers want us to do, and to create the best online book buying and book selling experience,” Hunter said. What that often means in practice is keeping the product feeling “human” (like shopping in a bookstore) while also helping booksellers maximize their advantages online.

Bookshop.org CEO and founder Andy Hunter. Image Credits: Idris Solomon.

For instance, Hunter said the company has been working hard with bookstores to optimize their recommendation lists for search engine discovery. SEO isn’t exactly a skill you learn in the traditional retail industry, but it’s crucial online to stay competitive. “We now have stores that rank number one in Google for book recommendations from their book lists,” he said. “Whereas two years ago, all those links would have been Amazon links.” He noted that the company is also layering in best practices around email marketing, customer communications, and optimizing conversion rates onto its platform.

Bookshop.org offers tens of thousands of lists, which provide a more “human” approach to finding books than algorithmic recommendations.

For customers, a huge emphasis for Bookshop going forward is eschewing the algorithmic recommendation model popular among top Silicon Valley companies in lieu of a far more human-curated experience. With tens of thousands of affiliates, “it does feel like a buzzing hive of … institutions and retailers who make up the diverse ecosystem around books,” Hunter said. “They all have their own personalities [and we want to] let those personalities show through.”

There’s a lot to do, but that doesn’t mean dark clouds aren’t menacing on the horizon.

Amazon, of course, is the biggest challenge for the company. Hunter noted that the company’s Kindle devices are extremely popular, and that gives the ecommerce giant an even stronger lock-in that it can’t attain with physical sales. “Because of DRM and publisher agreements, it’s really hard to sell an ebook and allow someone to read it on Kindle,” he said, likening the nexus to Microsoft bundling Internet Explorer on Windows. “There is going to have to be a court case.” It’s true that people love their Kindles, but even “if you love Amazon… then you have to acknowledge that it is not healthy.”

I asked about whether he was worried about the number of startups getting funded in the books space, and whether that funding could potentially crowd out Bookshop. “The book club startups — they are going to succeed by putting books — and conversations about books — in front of the largest audience,” Hunter believes. “So that is going to make everyone succeed.” He is concerned though with the focus on “disruption” and says that “I do hope they succeed in a way that partners with independent bookstores and members of the community that exist.”

Ultimately, Hunter’s strategic concern isn’t directed to competitors or even the question of whether the book is dead (it’s not), but a more specific challenge: that today’s publishing ecosystem ensures that only the top handful of books succeed. Often dubbed “the midlist

problem,” Hunter is worried about the increasingly blockbuster nature of books these days. “One book will suck up most of the oxygen and most of the conversation or the top 20 books [while] great innovative works from young authors or diverse voices don’t get the attention they deserve,” he said. Bookshop is hoping that human curation through its lists can help to sustain a more vibrant book ecosystem than recommendation algorithms, which constantly push readers to the biggest winners.

As Bookshop heads into its third year of operations, Hunter just wants to keep the focus on humans and bringing the rich experience of browsing in a store to the online world. Ultimately, it’s about intentionality. “I really want people to understand that we are creating the future we live in with all of these small decisions about where we shop and how we shop and we should remain very conscious about how we deliberate about those,” he said. “I want Bookshop to be fun to shop at and not just a place to do your civil duty.”

Is it so bad to take money from Chinese venture funds?

Denis Kalinin
Contributor

Denis Kalinin works at venture fund Runa Capital as Asia Business development manager, devoted to connecting the Western and Asian VC worlds and bringing long-term value to both.

China is becoming a superpower in the tech industry. According to Straits Times, China is the only place in the world where it takes less than six years for a startup to become a unicorn — it takes seven years in the U.S., eight years in the U.K. and 11 years in Germany. Despite geopolitical tensions and recent amendments in CFIUS, it is hard to ignore China.

When I joined Runa Capital almost a year ago, my task was to help our portfolio companies enter the Chinese market, find the right partners and raise funding from Chinese investors. And almost on every call with our startups, colleagues from Runa or other global VCs, I heard: Is it a good idea to raise from a Chinese VC? Is it OK to co-invest with Chinese investors? I was surprised to learn that there is little research answering such questions, as there is a lack of adequate information in English about Chinese investments.

Access to the Chinese market seems to be an obvious reason to invite Chinese funds aboard, but only about 20% of Western startups with Chinese capital have operations in China.

So as a Mandarin-speaking specialist, I decided to fill this gap by conducting a study based on Chinese VC database ITjuzi (the Chinese version of Crunchbase) with the help of our powerful data science resources developed by Danil Okhlopkov.

Below, I will try to answer the following questions using statistics and a case-based approach:

  • How much do Chinese funds invest abroad?
  • What is the current trend?
  • Can Chinese investors bring any value to Western startups?
  • Who are the most active Chinese investors abroad?
  • In which areas can Chinese funds bring the most value?
  • What value can Chinese investors bring?
  • When is it better to invite a Chinese investor?

Chinese investors are interested in Western startups

After studying data from ITjuzi, we estimated that Chinese funds invested around $250 billion in 2020 (three times higher than the figure in Crunchbase). This figure puts Chinese VC investments only 30% lower than investments by U.S. funds, but three times that of U.K. funds and 12.5 times more than German funds.

Comparison of investment amount from different countries in 2020, $bn. Source: Crunchbase, ITjuzi

Fig. 1 — Comparison of investment from different countries in 2020, $bn. Source: Crunchbase, ITjuzi. Image Credits: Denis Kalinin

However, only 15% of investments in 2020 and 17% of investments in the first half of 2021 were in companies outside China, significantly lower than in 2019. This appears to be because during COVID, China’s economy recovered much faster than other countries’, so many Chinese investors preferred to redirect their capital flows to the domestic market.

On the other hand, there is great potential for overseas investments to rebound as soon as the borders reopen and the global economy starts to recover.

Dynamics of Chinese investments. $bn. Source: Crunchbase, ITjuzi

Fig. 2 — Dynamics of Chinese investments. $bn. Source: Crunchbase, ITjuzi. Image Credits: Denis Kalinin

We can also see that Chinese investors are eyeing European startups favorably, which is related to U.S.-China geopolitical tensions as well as the fact that the European VC market is becoming mature.

Is India’s BNPL 2.0 set to disrupt B2B?

Anubhav Jain
Contributor

Anubhav Jain is co-founder and CEO of Rupifi, India’s first embedded lending fintech. He has more than a decade of experience in credit risk, analytics, customer management and portfolio development.

Both as a term and as a financial product, “buy now, pay later” has become mainstream in the past few years. BNPL has evolved to assume various forms today, from small-ticket offerings by fintechs on consumer checkout platforms and marketplaces, to closed-loop products offered on marketplaces such as Amazon Pay Later (which they are now extending for outside use as well). You can also see some variants offered by companies that want to expand the scope of consumption and consumer credit.

Globally, BNPL has seen the most growth in the consumer segment and has driven retail consumption and lending over the past few years. Consumer BNPL offerings are a good alternative to credit cards, especially for people who do not have a credit history and can’t get credit from banks. That said, a specific vertical of BNPL products is gaining traction — one targeted toward small and medium enterprises (SMEs). This new vertical is known as “SME BNPL.”

BNPL can be particularly useful when flow-based underwriting or transaction-based underwriting is used to offer credit to small businesses.

B2B commerce in India is moving online

E-commerce has seen tremendous growth in India over the past decade. Skyrocketing smartphone and internet penetration led to rapid growth in e-commerce across large cities and smaller towns alike. Consumer credit has also taken off in parallel as credit cards and digital lending spurred credit-based consumption across offline and online stores.

However, the large B2B supply chain enabling the burgeoning retail market was plagued by bottlenecks and inefficiencies because it involved a plethora of intermediaries and streamlining became a big problem. A number of tech players responded by organizing the previously disorganized B2B commerce market at various touch points, inserting convenience, pricing and easier product access through tech-enabled logistics and a modern supply chain.

Online B2B and B2C penetration in India in 2019

Image Credits: Redseer

India’s B2B e-commerce space has developed rapidly since 2020. Small businesses have moved from using paper to smartphone apps for running a significant part of their day-to-day business, leading to widespread disruption in how businesses transact today. The COVID-19 pandemic also forced small businesses, which were earlier using physical means to procure goods and services, to try new and online models to conduct their affairs.

Graph depicting growth of India's B2B retail market

Image Credits: Redseer

Moreover, the Indian government’s widespread promotion of an instant payments system in the form of the Unified Payments Interface (UPI) has changed how people send money to each other or pay merchants for their goods and services. The next step for solving the digital B2B puzzle is to embed credit inside every transaction and invoice.

Investments in online B2B in india 2016-19

Image Credits: Redseer

If we compare online B2B transactions to the offline world, there is only one missing link: The terms offered to small businesses by their supplier/distributor or vendor. Businesses, unlike consumers, must buy goods and services to eventually trade them, or add value and sell to consumers or others down the value chain. This process is not immediate and has a certain time cycle attached.

The longer sales cycle means many small businesses require credit payment terms when buying inventory. As B2B commerce scales and grows through digital means, a BNPL product that caters to the needs of SMEs can support their growth and alleviate the burden on their cash flows.

How does consumer BNPL differ from SME BNPL?

An SME BNPL product is a purchase financing product for small businesses transacting with suppliers, distributors, aggregator platforms or B2B marketplaces.

Quizlet plans for IPO over a year after hitting unicorn status

Quizlet, a flashcard tool turned artificial intelligence-powered tutoring platform, is planning an initial public offering nearly a year after it was valued at $1 billion. According to people familiar with the matter, Quizlet is considerably far along in the process to go public. A recent job filing shows that it is hiring for senior roles to “help build the financial systems and processes as we move towards an IPO.”

In an email to TechCrunch, the San Francisco-based edtech startup declined to comment. Quizlet hasn’t said much about its revenue specifics or if it’s profitable. Last year, the still-private startup claimed it was growing revenue 100% annually. On its website, Quizlet says that it has 60 million monthly learners, up 10 million learners compared to its 2018 totals.

Quizlet has built a large-scale business around simple to share and simple to use products. Its free flashcard maker helps students spin up study guides on topics to prepare for exams. Those insights fuel Quizlet Plus, the startup’s subscription product that charges $47.88 a year for access to more features, including tutoring services.

Quizlet’s tutoring arm, also known as Quizlet Learn, is the company’s most popular offering, per CEO Matthew Glotzbach. As a student goes through the system, Quizlet Learn consistently assesses students to see where they are making mistakes — and where they are making progress.

“It obviously doesn’t yet replace and can’t come anywhere close to replacing a human, but it can provide that guidance and point you in the right direction and help you spend your time in the right places,” he said. “Just even helping you set goals is such a critical step in learning.”

Most recently, Quizlet announced the launch of explanations, a feature that offers a step-by-step solution guide for problem sets from popular textbooks. The feature is “written and verified by experts” and is aimed to help “students better understand the reasoning and thought process behind study questions so they can practice and apply their learnings on their own,” it said in a statement. It also reclaimed the Q from its less fortunate predecessor, amid an entire rebrand.

Quizlet’s quiet march toward the public markets has been slow yet steady. The startup was founded in 2005 by a 15-year-old, Andrew Sutherland. It was fully bootstrapped until 2015. Glotzbach, who was previously an executive at YouTube, then joined in 2016. The startup still doesn’t appear to have a CFO, which is rare for companies that are going public.

Quizlet has raised a majority of its $62 million in venture capital under Glotzbach. Now, investors in the company include General Atlantic, Owl Ventures, Union Square Ventures, Costanoa Ventures and Altos Ventures.

Quizlet’s pursuit of the public markets comes as other edtech companies are proving the market’s reception to the sector. Duolingo, for example, is another consumer-focused education company, albeit one that focuses on one vertical versus Quizlet’s choice to stay broad. Duolingo went public in July, and is currently trading above its open price at $169.75 per share.

 

Startup insurance provider Vouch raises $90M, now valued at $550M

Vouch, a provider of business insurance to startups and high-growth companies, announced today it has raised $90 million in new funding.

The $90 million figure was raised across two rounds: a $60 million Series C co-led by SVB Capital (a subsidiary of Silicon Valley Bank) and Ribbit Capital that values the company at $550 million, and a previously unannounced $30 million Series B1 led by Redpoint Ventures.

With the latest financing, San Francisco-based Vouch has now raised a total of $160 million since its 2018 inception. Other investors include Allegis Group, Sound Ventures and SiriusPoint.

While there are many insurance technology companies out there that serve consumers, there are far fewer that offer it to companies, much less startups. Vouch describes itself as “a new kind of insurance platform” for startups that offers fully digital, “tailored coverage that takes minutes to activate.”

Over the past year, Vouch has seen impressive growth. The company declined to reveal hard revenue figures, but said it saw “7x” increase in its customer base year over year and currently protects over $5.7 billion in risk across thousands of policies. Today, Vouch has more than 1,600 clients, including Pipe, Middesk, Neighbor and Routable. It is also the “preferred” business insurance provider to the customers of Silicon Valley Bank, Brex, Carta and WeWork. Y Combinator too also refers Vouch to its portfolio companies. 

To Vouch co-founder and CEO Sam Hodges, the ability to attract some of the highest-profile businesses in the startup world speaks to the company’s understanding of the startup ecosystem. 

“It’s our responsibility to meet startup founders where they are, and give startups flexibility as they navigate changing laws, regulations and the virtual and physical locations of their businesses,” he said.

Like many other companies, Vouch had to shift its model during the pandemic to adapt to the different types of emerging risks businesses have faced. For example, last year, Vouch saw a change in where its startup clients’ teams were distributed. Before the pandemic, nearly 30% of the teams were remote. During the pandemic, that figure has shifted to over 53%. As a result, Vouch developed a broader range of insurance coverages to adapt to the “new normal.”

Included in its new line of proprietary products and services aimed at startups are: work from anywhere coverage, broader cyber coverages and embedded insurance. It also expanded its underwriting capabilities to serve early-stage to growth-market startups.

In particular, the work from anywhere coverage is in direct response to the pandemic-related shift in remote work and can insure up to $500,000 per occurrence and can include a specified property owned by a startup regardless of the location of that property.

One major differentiator for Vouch, said Hodges, is that it is now the only business insurance provider for startups that has its own insurance carrier, which means the company backs its own policies.

“This capability means we have a lot of control over how we build and underwrite our policies — which translates into superior coverage and a better experience for our clients,” he said.

 Hodges co-founded Vouch with Travis Hedge three years ago after seeing how challenging it could be for a company to get the business insurance it needs to start and then scale.

The goal is to make it as easy as possible to onboard new customers and personalize the coverage as much as possible based on each company’s needs based on what they do, their customer base, stage of growth and the founder’s threshold for risk.

“A typical client can get a quote and bind their coverage online in under 10 minutes, without any phone calls or paperwork,” he told TechCrunch. “Vouch also has many coverage features that are uniquely geared for startups. For example, our directors and officers coverage includes a cap table coverage feature meant specifically to protect startups.”

Vouch looks at startups that need business insurance on a case by case basis, Hodges added. 

For example, it asks questions like, “Does an e-commerce company handle a very limited amount of client-sensitive information?” If so, it could make sense that it has a lower cyber insurance coverage limit and pay less for its policy. 

Conversely, if a startup is trying to raise money, it might need to invest more in Vouch’s directors and officers insurance to make sure it is covered should disputes arise in the future. 

Looking ahead, Hodges said the new capital would go toward continued investment in technical capabilities, an expansion of its product offerings, more hiring and building embedded insurance for its partners.

With regard to the embedded capabilities, within the next 12 months, all of the company’s partners’ customers will be able to purchase Vouch insurance directly from those partners’ websites. Vouch’s headcount has more than doubled, from 55 employees in September 2020 to 125 full-time employees presently, and Hodges expects that will continue to grow.

Greg Becker, president and CEO of SVB Financial Group, said that Vouch’s mission aligns with SVB’s in that they both aim to “empower the innovation economy.” 

That’s what Vouch is doing today, helping startups and tech innovators mitigate their risks as they grow,” he wrote via email. “We are proud to co-lead Vouch’s latest funding round to give startups access to the insurance they need as they add headcount, increase their customer base, or raise funding rounds of their own.”

Nigerian one-click checkout platform OurPass raises $1M pre-seed, wants to build ‘Fast for Africa’

We like to buy things online ranging from e-commerce stores to subscription-based sites. However, no one enjoys the hassle when you have to always re-log into different sites and stores. I mean, shopping can be a whole lot more fun if a fast logging and checkout system existed across all your favorite online stores.

In the U.S., high-flying startup Fast already caters to this need. Although the company is building a global product, it is limited in Africa, and OurPass has taken an interest to build one for the market.

The Abuja-based startup, which describes itself as the “Fast for Africa”, has also closed a $1 million pre-seed round to scale across the country. The round was led by Tekedia Capital and angel investors from Fortune 500 companies, the company said. 

E-commerce checkout problem is one founder and CEO Samuel Eze is familiar with, but through a second-hand experience.

“I watched my mother struggle to shop online where I saw her set up multiple accounts on different platforms while going through a rigorous checkout process,” he told TechCrunch in an interview. “In many cases, she ended up dropping the card and moving on to a different online store. Seeing the same pattern happen with other friends and family, I had to dive into it and found that it was actually a major headache for consumers and online retailers.”

Nigeria’s e-commerce market is still heavily reliant on cash on delivery. In fact, as of 2019, 70% of Nigerians in a survey said they prefer cash on delivery options to making online payments.

But the narrative is slowly changing with the likes of Paystack and Flutterwave, making it easier for merchants to collect online payments.

Per Statista, 27% of online payments made on e-commerce sites are now carried out with cards, topping cash and bank transfers as the most common payment method.

Yet checkout still remains a major issue for merchants. Yearly, about 75% of shopping carts are abandoned due to how cumbersome the checkout experience can be with long forms and re-log ins.

Attempting to tackle this challenge, OurPass provides a mobile application that enables consumers to shop with one click. The first time consumers sign up on the OurPass platform, they enter their names, email and shipping addresses. OurPass then creates an identity for each customer, which is passed across every online store they shop.

“We built an identity layer across the web to enable consumer identity to be sent across to every single online store they go to check out from,” said Eze.

In essence, OurPass customers would not need to fill out any form anymore and do not have to deal with re-logging issues. But here’s the thing: they can only shop with merchants that have OurPass API linked to their platforms. And that’s a big ask. 

So why has OurPass decided to go this route of creating its own ecosystem of merchants and consumers? For instance, in Fast’s case, only the merchants need to install Fast Checkout, while users can access the service via an e-commerce or merchant’s website. But for OurPass, users need to download an application and shop with merchants using the platform.

Initially, OurPass allowed users to fill in their payment card details when completing their forms for the first time without the need to download an application. But after several instances of payment gateways flagging many cards used by OurPass consumers and failed card transactions, the company chose to adopt a wallet strategy and created an application for consumers.

“We did not want to defeat our USP of one-click checkout by allowing consumers to try to check out in one-click only for them to see their cards flagged as fraudulent,” Eze said. “Hence the reason why we had to build our system on a wallet system to enable that one-click checkout.”

That means consumers and merchants are assigned virtual account numbers to be used in a wallet. For consumers to check out from a store, they’ll need to fund their wallets, and once they check out, the money moves into the merchants’ wallets. Eze says this helps OurPass capture value end to end and offers instant settlement of payments which, according to him, was not the case with payment gateways.

OurPass has gathered a few merchants on its platform. Most of its clients are small businesses that use Storemia, an online storefront provider OurPass acquired recently. The company also plans to work with merchants on e-commerce platforms, including WooCommerce, Magento, Squarespace and Shopify in the future and social commerce platforms like WhatsApp, Facebook and Instagram.

Alongside its one-click checkout, OurPass also offers free delivery on all orders for customers. The company partnered with logistics companies like MAX.ng and Gokada to execute on this front.

The one-year-old company charges 0.8% per transaction, capped at N1,000 (~$20) for merchants and a commission of 5% on every product sold — Eze also hints at a plan for the company to introduce subscriptions.

Since beta launching in May this year, OurPass claims to have done $500,000 in transaction value and hopes continuous growth will see it become the go-to platform for consumer checkout in Nigeria by 2023.

Per use of funds, Eze says OurPass will develop its technology and grow its team to up to 200 people before the end of next year.

Snyk snags another $530M as valuation rises to $8.4B

Snyk, the Boston-based late-stage startup that is trying to help developers deliver more secure code, announced another mega-round today. This one was for $530 million, with $300 million in new money and $230 million in secondary funding, the latter of which is to help employees and early investors cash in some of their stock options.

The long list of investors includes an interesting mix of public investors, VC firms and strategics. Sands Capital Ventures and Tiger Global led the round, with participation from new investors Baillie Gifford, Koch Industries, Lone Pine Capital, T. Rowe Price and Whale Rock Capital Management. Existing investors also came along for the ride, including Accel, Addition, Alkeon, Atlassian Ventures, BlackRock, Boldstart Ventures, Canaan Partners, Coatue, Franklin Templeton, Geodesic Capital, Salesforce Ventures and Temasek.

This round brings the total raised in funding to $775 million, excluding secondary rounds, according to the company. With secondary rounds, it’s up to $1.3 billion, according to Crunchbase data. The company has been raising funds at a rapid clip (note that the last three rounds include the Snyk money plus secondary rounds):

Snyk's last four funding rounds

While the company wouldn’t share specific revenue figures, it did say that ARR has grown 158% YoY; given the confidence of this list of investors and the valuation, it would suggest the company is making decent money.

Snyk CEO Peter McKay says that the additional money gives him flexibility to make some acquisitions if the right opportunity comes along, what companies often refer to as “inorganic” growth. “We do believe that a portion of this money will be for inorganic expansion. We’ve made three acquisitions at this point and all three have been very, very successful for us. So it’s definitely a muscle that we’ve been developing,” McKay told me.

The company started this year with 400 people and McKay says they expect to double that number by the end of this year. He says that when it comes to diversity, the work is never really done, but it’s something he is working hard at.

“We’ve been able to build a lot of good programs around the world to increase that diversity and our culture has always been inclusive by nature because we’re highly distributed.” He added, “I’m not by any means saying we’re even remotely close to where we want to be. So I want to make that clear. There’s a lot we still have to do,” he said.

McKay says that today’s investment gives him added flexibility to decide when to take the company public because whenever that happens it won’t have to be because they need another fundraising event. “This raise has allowed us to set up with strong, highly reputable public investors, and it gives us the financial resources to pick the timing. We are in control of when we do it and we will do it when it’s right,” he said.

Wisetack closes on $40M to bring ‘buy now, pay later’ to in-person services

Buy now, pay later is growing globally — with various companies expanding to, and in, different parts of the world, such as Africa, Latin America and Asia.

Here in the U.S., Affirm and Klarna are big players, and Square recently announced plans to acquire Afterpay, which also is eyeing growth here.

Traditional buy now, pay later (BNPL) gives consumers the opportunity to pay in installments at the point of sale, either online or, increasingly, in person as well. But even domestically, the ability to pay in installments is branching out beyond e-commerce and retail.

Wisetack is a startup that brings buy now, pay later to in-person services. And it just raised $45 million in a Series B funding round led by Insight Partners.

Existing backers Greylock Partners and Bain Capital Venture also participated in the financing, bringing the company’s total raised to $64 million since its 2018 inception. The latest round comes just six and a half months after Wisetack announced it had raised $19 million across its seed and Series A rounds, which were both led by Greylock.

In a nutshell, the San Francisco-based startup helps in-person businesses offer financing to consumers. Wisetack is not the first company to do this, but what makes it different, according to co-founder and CEO Bobby Tzekin, is that it actually embeds financing options into software platforms that businesses have already built out and are using in their operations.

Its focus is on service-based businesses, such as HVAC contractors or plumbers. For example, if your AC unit goes out and costs thousands to replace, you could have the option of paying for it in installments if the contractor has Wistack’s API embedded into its site.

So far, Wisetack has been able to grow rapidly by partnering with vertical SaaS businesses such as Housecall Pro and Jobber. Those companies offer consumer financing to their respective customer base, which include tens of thousands of home services professionals.

Wisetack clearly seems to be filling a gap. So far in 2021, it has grown its revenue and loan volume “over 10x” compared to 2020. And it works with thousands of merchants, according to Tzekin.

The executive left his job in 2018 to start Wisetack because he felt there was “clearly a massive need,” teaming up with Liz O’Donnell and Mykola Klymenko (who was co-founder and CTO at VaroMoney, the holding company of Varo Bank).

With its new capital, Wisetack plans to expand into other service-based verticals, such as auto repair, elective medical, dental and veterinary and legal services. It also plans to double its team of 40 over the next year.

To Tzekin, the opportunity is huge.

Most service businesses are SMBs, which have historically been harder to serve than large e-commerce players. Americans spend more than $400 billion a year on residential renovations and repairs alone, according to this Harvard report. And the United States automotive repair and maintenance services market is projected to reach $250 billion by 2026, up from $201 billion in 2020.

And while the average BNPL online transaction is a few hundred dollars, purchases made to service-based businesses average closer to $4,000 to $5,000, according to Tzekin.

The CEO believes that buy now, pay later can be more attractive than paying for such purchases with a credit card, for a few reasons. For one, consumers have the option of paying in installments for anywhere from three months to 60 months. 

“This often means it’s more affordable to buy the better piece of equipment since they can spread the costs over time,” he said. 

Also, just how much they will be paying over time will be made clear at the time of purchase, whereas when paying with a credit card, the amount could vary depending on interest rates and how long it takes to pay the money back, Tzekin added.

The company makes money by charging a processing fee to merchants, as well as charging interest to consumers — which can be anywhere from 0% to 29%, “depending on how good their credit is,” Tzekin said.  

“But credit cards charge compounded interest, whereas we charge simple interest,” he added.

Insight Partners Principal Rebecca Liu-Doyle describes Wisetack as “a standout in the industry.”

Wisetack has a differentiated platform for embedded BNPL that is purpose-built to address use cases that are both more complex and less well-served than e-commerce,” she wrote via email. 

Digital therapeutics startup Neuroglee raises $10M to help people with neurodegenerative conditions

Neuroglee Therapeutics, a startup developing digital therapeutics for people with neurodegenerative diseases, has raised a $10 million Series A led by Openspace Ventures and EDBI. The funding will be used to launch virtual neurology clinics and to support Neuroglee’s move to Boston. Other participants included Ramen Singh, the former chief executive officer of Mundipharma; Biofourmis co-founders Kuldeep Singh Rajput and Wendou Liu; and Eisai Co., the Japanese pharmaceutical that led Neuroglee’s last round last year.

In an email, founder and chief executive officer Aniket Singh Rajput told TechCrunch that the company is moving to Boston because the city “is one of the largest digital health hubs in the world. As a company devoted to developing our first line of solutions for treating mild cognitive impairment related to difficult-to-treat neurodegenerative conditions such as Alzheimer’s disease, we believe Boston will offer us the strategic support in order to do so.”

Neuroglee and the Mayo Clinic are currently working together on a new platform called Neuroglee Connect. Based on the Mayo Clinic’s 10-day in-person program HABIT (Health Action to Benefit Independence and Thinking) for people with mild cognitive impairment from possible neurodegenerative conditions, Neuroglee’s technology will enable HABIT to scale, making it available to patients and caregivers in their homes. Neuroglee Connect users will also have access to health navigators who are available 24 hours and clinical care teams for assessments and interventions.

Neuroglee’s product pipeline also includes digital therapeutics for Parkinson’s disease and strokes.

Since Neuroglee’s previous funding announcement in December 2020, Rajput said it has hit milestones like the successful product development of NG-001, its prescription digital therapy software for Alzheimer’s, and began work on its proof-of-concept study to earn NG-001 a Breakthrough Designation from the Federal Drug Administration.

Neuroglee’s adaptive learning tech uses machine learning and biomarkers related to cognitive function, mood and behavior to automatically personalize therapy plans for each patient, who access the software through a smartphone or tablet.

“For example, adjustments will be made to the number and type of tasks and games that are offered, based on the speed of the patient’s finger movements, time to complete games or tasks, and their facial expression identified through the device camera,” said Rajput. “The solution also incorporates reminiscence therapy, which uses images from the patient’s past to evoke positive memories and emotions, which have been shown to improve cognitive functioning.”

 

Fintech is transforming the world’s oldest asset class: Farmland

Artem Milinchuk
Contributor

Artem Milinchuk is the founder and CEO of FarmTogether, a fintech platform channeling funding into natural assets, starting with U.S. farmland.

Farmland as an asset class has proven itself to be a stable investment decade after decade. Farmland’s negative correlation with the Dow Jones Industrial Average sits at an eye-popping -43% for a three-year hold period, making it an excellent hedge against market volatility.

The asset has also been a steady appreciator since 1987, when institutional investors began incorporating farmland into their portfolios. Equally, investments into sustainably managed farmland have the potential to transform agriculture from one of the largest sources of greenhouse gas emissions to one of the largest carbon sinks.

While farmland investments can provide passive income and a hedge during just about any economic condition, direct investments into the asset have been largely inaccessible to date.

However, while farmland is among the oldest investment classes around, the average investor hasn’t had access to farmland the way that billionaires and institutional investors have.

Revolutions in fintech and a host of startups are changing this.

Why farmland?

COVID-19 affected the world in ways we couldn’t have predicted, and the markets were no exception. The S&P 500 plummeted in mid-March and shed 34% of its pre-COVID peak value. But unlike past crises, the index rebounded just a month later.

This doesn’t mean that financial markets have fully recovered, however. We’ve seen plenty of volatility since, both in the form of rallies and losses. This has caused many investors to move some of their portfolio out of equities.

This is where farmland entered the discussion.

A historically stable asset class

Wild stock market fluctuations existed well before COVID-19. The latest era of volatility began in 2018 and continued even as the economy grew prior to the pandemic. Given the unpredictability of the equities market, investors need to counterbalance what’s in store for stocks and funds.

Debt versus equity: When do non-traditional funding strategies make sense?

David Friend
Contributor

David Friend is a serial entrepreneur, six-time founder, and the current co-founder and CEO of cloud storage company, Wasabi Technologies.

The U.S. produces more new startups and unicorns each year than any other country in the world, but 90% of startups fail, with cash flow often being a major challenge.

Entrepreneurs trying to raise funding for their new businesses are faced with a maze of options, with most taking the common route of equity rounds. There’s clearly a lot of venture money to be raised — and most tech entrepreneurs happily take it in exchange for equity. This works for some, but too often founders find themselves diluting their equity to unrecoverable portions rather than considering other financing options that allow them to hold on to their company — options like debt capital.

Even if you’re growing quickly, not all founders want to set a valuation for their company. In that case, you can offer investors “convertible debt.”

Despite the VC flurries of 2020 creating an ecosystem of seemingly endless equity, it’s important for entrepreneurs and founders to understand that there is no one-size-fits-all model for raising capital. Debt capital, which refers to capital raised by taking out a loan, is an alternative route that entrepreneurs should consider.

Understanding the real cost of venture debt and when it makes more sense than the traditional equity route relies on an understanding of what you and your company hope to achieve.

Understanding your goals

We mainly see two kinds of startups today: Those that want to try something new, and the ones that focus on making things faster, cheaper or simpler. Facebook, Twitter and Instagram are good examples of the first kind — social media didn’t exist before the internet. Discount airlines, cell phones (not smartphones) and integrated circuits are good examples of the “faster, cheaper, simpler” variety, because they simply displaced familiar incumbents.

Many entrepreneurs are eager to be the next “try something new” success story, and I applaud them for feeling that way. Carving out your own market is a fast-track to entrepreneurial stardom if you’re successful. But unless your main goal is to be famous, it’s often impractical and distracting.

People tend to think that category creation is less risky than incumbent disruption. However, as long as you’re truly faster, cheaper and simpler, patience and strategy can propel you to where you want to be.

 

Just as there are different market approaches, there are a number of funding strategies that work best for your goals. Landing investments from leading VC firms has benefits and is a good avenue to opt for if you’re a young startup carving out a market and in need of validation and experience. These firms bring trusted advisers that are laser-focused on growth and have the resources and experience to navigate the murky waters of category creation.

TrueFort snares $30M Series B to expand zero trust application security solution

As companies try to navigate an ever-changing security landscape, it can be challenging to protect everything. Security startup TrueFort has built a zero trust solution focussing on protecting enterprise applications. Today, the company announced a $30 million Series B.

Shasta Ventures led today’s round with participation from new firms Canaan and Ericsson Ventures along with existing investors Evolution Equity Partners, Lytical Ventures and Emerald Development Managers. Under the terms of the agreement Nitin Chopra, managing director at Shasta Ventures will be joining the company board. Today’s investment brings the total raised to almost $48 million.

CEO and co-founder Sameer Malhotra says that TrueFort protects customers by analyzing at each application and figuring out what normal behavior looks like. Once it understands that, it will flag anything that falls outside of the norm. The company achieves this by gathering data from partners like CrowdStrike and from multiple points within the application and infrastructure.

“Once we get this telemetry, whether it’s networks, endpoints, servers or third party partners, we then help the customer build a picture of what those applications are doing and what’s normal behavior. We then help them baseline that, and monitor that in real time with response and real time controls to continue those applications through their normal life cycle,” he said.

Zero trust is a concept where as a matter of policy you assume that you cannot trust any individual or device until the entity proves it belongs on your systems. Malhotra says that customers are becoming more comfortable with the concept and in 2020 the company saw massive 650% YoY revenue growth with it up 120% YoY this year so far.

“We are seeing the demand, especially as zero trust is becoming a more familiar vernacular amongst the security community […]. Again, it’s having the visibility and understanding, and then being able to then reduce it to the limited number of acceptable relationships or executions,” he said. And he believes that it all comes down to understanding your applications and how they operate.

TrueFort co-founders Nazario Parsacala and Sameer Malhotra

TrueFort co-founders Nazario Parsacala and Sameer Malhotra

The company currently has 60 employees with hopes of reaching 85 or 90 by the end of the year. Malhotra says that as they build the employee base, they are driving to make it diverse at every level.

“We look at diversity across our whole management team, all the way from the board down to our different levels. We are quite aggressive in hiring diverse candidates, whether they’re women or LGBTQ or people of color. And we have focused programs where we work with different universities […] to bring on new employees from a diverse talent pool. We also work with different recruiters from that perspective, and our focus is always to look at a different palette and to make sure that we’re as diverse an organization as we can,” he said.

The company was founded in 2015 by Malhotra and his partner Nazario Parsacala, both of whom spent more than 20 years working at big financial services companies — Goldman Sachs and JP Morgan. They worked for a couple of years building the program, launching the first beta in 2017 before bringing the first generally available product to market the following year.

Currently customers can install the solution on prem or in the cloud of their choice, but the company has a SaaS solution in the works as well, that will be ready in the next couple of months.

Forerunner is software for NFIMBYs, or no flooding in my backyard

Mayors have the toughest job in the world, and leading a city is only getting harder. Even as populations swell in urban cores across the world, climate change is constraining the geographies where that growth can happen. Coastal communities which are popular with residents are also taking a gamble when it comes to rising sea levels. How do you tradeoff a need for growth with the requirement for protecting residents from disaster?

In most cases, the pendulum is fully tilted toward growth. Coastal towns continue to allow widespread sprawl and development, chasing ever more property taxes and residents even as sea levels get ever more uncomfortably high. It’s a recipe for disaster — and one that many cities have chosen to bake anyway.

Forerunner wants that pendulum to swing the other way. Its platform allows city planners and building managers to survey, investigate and enforce stricter building codes and land use standards with a focus on mitigating future flood damage. It’s particularly focused on American cities with heavy usage of the federal flood insurance program, and Forerunner helps cities maximize their adherence to that program’s byzantine rules.

The company pulls in data from FEMA and other sources to determine a property’s mandatory lowest floor height requirement, and whether the property conforms to that rule. It also tracks flood zone boundaries and helps with the administrative overhead of processing federal flood insurance documentation, such as creating and managing elevation certificates.

Co-founders JT White and Susanna Pho have been friends for years and worked at the MIT Media Lab before eventually coming together in early 2019 to build out this floodplain management product. “It cannot be underscored enough that a lot of communities just don’t follow [federal flood] regulations,” Pho said. “They will revert their ordinances from something more strict … since they can’t do a lot of day-to-day compliance.”

Coastal cities devastated by floods are protected by federal flood insurance, but that often creates a moral hazard: since damage is paid for, there isn’t much incentive to avoid it in the first place. The federal government is attempting to tighten those standards, and there is also a sense among a new generation of city planners and municipal leaders that the build-devastation-rebuild model of many cities needs to stop given climate change. After flooding, “we want to see communities rebuild to higher standards,” White said. “The sort of cycle of rebuilding and doing the same thing over and over again is infuriating to us.”

Transitioning to a new model isn’t easy of course. “There are a lot of hard decisions that these communities must make,” he said, but “our software makes it a bit easier to do these things.” So far, the company has gotten early traction with 33 communities currently using Forerunner according to the founders.

Although it has customer clusters in Louisiana and northern New Jersey, the company’s largest customer is Harris County, which includes much of the Houston, Texas metro area. The county could potentially save $5 million on their flood insurance premiums with better adherence to federal standards, according to White. “One of the benefits of our product is that we can help you protect and increase this immediate discount to every flood insurance policyholder in your community starting next year,” he said. Ultimately though, FEMA focuses on disincentives rather than incentives. “The biggest stick that FEMA has is that it can suspend communities from the flood insurance program,” he noted.

The company raised an early seed round in 2019, and has been focused on building up the platform’s capabilities and getting the sales flywheel spinning — which can be a tough order in the govtech space.

Even as demand intensifies for more housing and growth, climate change is simultaneously placing its own demands on cities. Mayors and city leaders are increasingly going to have to transition from the growth models of the past to the resilient models of the future.

Egyptian fintech MNT-Halan lands $120M from Apis Partners, DisrupTech and others

Over 70% of Egypt’s young and fast-growing population of over 100 million is financially underserved despite mobile penetration exceeding 90%.

Traditional banks often overlook this segment because of their spending power or financial status and fintechs have seized the opportunity to cater to their needs.

One such fintech is MNT-Halan, and today, the company which describes itself as “Egypt’s leading fintech ecosystem” is announcing that it has closed a $120 million investment.

The investors backing MNT-Halan include private equity firms Apis Growth Fund II, Development Partners International (DPI), and Lorax Capital Partners; VCs like Venture Partners, Endeavor Catalyst, and DisruptTech.

They join previous local investors like GB Capital, DPI, Algebra Ventures, Wamda, Egypt Ventures, Shaka VC, Nowaisi Capital, Unidelta, Battery Road Digital Holdings that have backed the company in the past. 

In 2017, Mounir Nakhla and Ahmed Mohsen started Halan as a ride-hailing and delivery app offering two and three-wheeler services to customers in Egypt. Since then, it has provided other features including wallets, bill payment services, e-commerce with buy now, pay later (BNPL), micro and consumer loans, all in a bid to become a super app.

Then in June this year, Netherlands-based MNT Investments BV entered a share swap agreement with the Egyptian super app to accelerate the progress of its payments and lending arm, especially in BNPL across Egypt and the MENA region. 

Before the merger, MNT acquired the shares of Raseedy, the first independent and interoperable digital wallet in Egypt licensed by its Central Bank to disburse, collect and transfer money digitally through mobile applications.

As MNT-Halan, it has also obtained the micro, consumer, and nano finance licenses to provide services to both businesses and consumers across Egypt.

This has enabled the company to build a fintech ecosystem that connects consumers, merchants, and micro-enterprises via a digital platform and payment solutions.   

As a business and consumer lender, MNT-Halan offers BNPL services, nano loans, microfinance, SME lending, payroll lending, and light-vehicle finance.

Its digital payments ecosystem provides services around loan disbursement and collection, peer-to-peer transfers, payroll disbursement, remittances, and bill payments. 

Then in mobility, MNT-Halan provides courier, delivery, and ride-hailing services.  

MNT-Halan claims to be Egypt’s largest and fastest-growing lender to the unbanked. Serving over 4 million customers in Egypt, of which 1 million are monthly active users, MNT-Halan has disbursed over $1.7 billion worth of loans to 1.8 million borrowers since inception. The company also claims to process $100 million monthly, growing 20x over the past five years. 

The investment, a mixture of private equity and venture capital money, will help the company improve its technology and product while scaling to customers within and outside Egypt. 

“We are at the forefront of the digital revolution sweeping across Egypt, bringing together the unbanked population with our technology. We are on track to bring financial inclusion to tens of millions of Egyptians. As a result, we will unleash this segment’s earnings potential and drive greater participation in the economy,” said CEO Nakhla.

One of its investors, Apis Growth Fund II, is a London-based private equity fund. It makes quasi-equity investments in the financial sector and related market infrastructure — payment gateways, switches, and payment platforms — in Africa and Asia.

MNT-Halan is its first landmark investment in Egypt but second on the continent after taking part in TymeBank’s $109 million investment in February this year. 

The co-founders and managing partners Matteo Stefanel and Udayan Goyal said this in a statement, “We are thrilled to be investing in MNT-Halan, which is our first investment in Egypt. Our belief is that they will be the leading player digitizing the unbanked and bringing financial services to millions of underserved customers in the country.

“We look forward to partnering with them to extend their impressive growth trajectory and believe Mounir Nakhla’s track record, combined with MNT-Halan’s tech team and operational expertise, provide the ideal opportunity to invest in Egypt’s fintech sector.” 

Prior to this news, Halan as an independent entity had raised $26.4 million, according to Crunchbase. This investment takes it to a combined total of $146.4 million, of which the latest is one of the largest raised in Africa this year and continues to prove the dominance of fintech on the continent.

PayPal acquires Japan’s Paidy for $2.7B to crack the buy-now, pay-later market in Asia  

PayPal Holdings, the U.S. fintech company, announced an acquisition of Paidy, a Japanese buy now, pay later (BNPL) service platform, for approximately $2.7 billion (300 billion yen), mostly in cash, to enhance its business in Japan.

The transaction completion including the regulatory approval is expected in the fourth quarter of 2021.

After the acquisition, the Japan-based company will continue to operate its existing business and maintain the brand while the leaders, Paidy’s president and CEO Riku Sugie and founder and executive chairman of Paidy Russel Cummer, keep their positions.

Japan is the third largest e-commerce market in the world, and so this is a significant move by PayPal to gain more market share both in the country and the region, specifically in the area of providing deferred payment services as an alternative to credit cards.

PayPal has long played nice with payment cards – users can upload details of their cards to PayPal and use it as a kind of digital wallet to manage how they pay for things online through it – but it got its start actually as a payment platform in itself, where people could pay into and out of PayPal accounts. Paidy is, in that sense, a strengthening of PayPal’s first-party rails, providing a way to ‘own’ that flow of money on its own infrastructure, not involving the card networks.

Paidy is basically a two-sided payments service, acting as a middleman between consumers and merchants in Japan. Using machine learning it determines the creditworthiness of a consumer related to a particular purchase, and then it underwrites those transactions in seconds, guaranteeing payments to merchants. Consumers then make deferred payment to Paidy for those goods.

Paidy’s platform, which offers a monthly payment installment service branded ‘3-Pay’, enables shoppers to make purchases online and then pay for them each month in a consolidated bill at a convenience store or via bank transfer.

“Paidy pioneered buy now, pay later solutions tailored to the Japanese market and quickly grew to become the leading service, developing a sizable two-sided platform of consumers and merchants,” said Peter Kenevan, vice president, head of Japan at Paypal.

Paidy has more than 6 million registered users, and the plan is to integrate PayPal and other digital and QR wallets with Paidy Link to connect further online and offline merchants.

In April 2021, the Japan-based company launched Paidy Link, allowing users to link digital wallets with their Payidy account. PayPal was the first digital wallet partner to integrate with Paidy Link.

“PayPal was a founding partner for Paidy Link and we look forward to looking together to create even more value,” Sugie said in a statement.

“Japan has been a vibrant environment for our growth to date and we’re honored to have our team’s hard work and potential recognized by a global leader. Together with Paypal, we will be able to further achieve our mission of taking the hassle out of shopping,” Cummer said.

Nigeria’s Prospa gets $3.8M pre-seed to offer small businesses banking and software services

In Nigeria, there are more than 40 million micro-businesses underserved in some form or another regarding banking services. Although some of these businesses have registered bank accounts, gaps exist in how banks use the data available to serve the needs of each business.

With banks, presenting a series of transactions as statements is all these businesses require. They care less about providing these businesses with insights and growth opportunities around their customers and products.

A fintech startup, Prospa wants to change that and has begun to tap into this market. In March, the company was one of the 10 African startups participating in Y Combinator’s winter batch. A few months past graduation, the startup, combining both worlds of banking and business management tools for micro and small businesses, has closed a $3.8 million pre-seed round.

Prospa was founded by Frederik Obasi, Chioma Ugo and Rodney Jackson-Cole. As a serial entrepreneur running businesses in tech and media, Obasi experienced how tough running operations and banking his business simultaneously was in Nigeria.

Banks only concerned themselves with providing some financial services so people like Obasi had to look for software or personnel to cater to other operations of the businesses.

For someone who runs a large business with a considerate influx of cash, it is easy to assign staff or use software to designate tasks. On the other hand, delegating tasks with personnel or software is not cheap for smaller businesses, hence why most struggle.

Sensing an opportunity, Obasi and his team launched Prospa under the premise that the company would cheaply solve the needs of these small business owners in banking and software.

“When I left my last business, I wanted to do something really big and something that I knew the problem inside out. That’s why I started Prospa,” Obasi told TechCrunch over a call. 

Prospa

Image Credits: Prospa

The founders built the product between June and September 2019 and went live in October. Since then, the company acquired customers in stealth even when they got into YC. Obasi explains that he wanted Prospa to have organic traction void of the growth driven by hype and media noise.

“We like to think a really long-term game. We really wanted to really test the hypotheses, build an actual business with revenue and understand what we were doing. Then the COVID period came and we started seeing enough traction,” he added.

When the company began to get some buzz, the typical description people had about Prospa was “a neobank for small businesses.” But CEO Obasi is quick to dispel that notion. Alongside providing banking services, Prospa offers invoicing tools, inventory management, employee and vendor management, an e-commerce store, and payroll features.

“Banking is just a little part of what we do. We know we’re put into the neobank category, but we see our product as 10% banking and 90% software. So the experience is very much different from what you’d get from a neobank and the use case for Prospa users is quite different,” he added.

Prospa focuses on freelancers and entrepreneurs, acting as the “operating system” for their businesses.

Registered businesses on the platform get access to an account number and other features Prospa provides. For unregistered businesses, Prospa takes them through a process of formalizing their business and providing bank accounts. However, in the larger scheme of things, this segment is more of an inroad into an upsell.

Talking on traction, Obasi says the company has tens of thousands of businesses and is growing 35% month-on-month. And from a non-banking perspective, Prospa has managed over 150,000 product catalogs while small businesses have sent out 360,000 invoices on the platform. 

Then, regarding pricing, it depends on the business’ turnover. For instance, a business with a turnover of ₦100,000 (~$200) is not expected to pay Prospa any subscription fee. But businesses with turnovers exceeding ₦100,000 pay fees between ₦3,000 (~$6) and ₦5,000 (~$10) monthly.

Prospa

Image Credits: Prospa

This past year, African VC has seen incredible numbers from all corners of the continent at all stages of investment. Prospa’s pre-seed investment, for instance, is the largest round of its kind in Nigeria and sub-Saharan Africa at the moment. In Africa, only Egyptian fintech Telda has raised a larger round.

Obasi believes the company’s understanding of the market and what it wants to achieve was the main reason it could command such a price which, according to him, was almost four times oversubscribed

The investors in the round include Global Founders Capital and Liquid 2 Ventures. Founders of global fintechs like Mercury’s Immad Akhund, Karim Atiyeh of Ramp, and executives from Teachable, Square, Facebook and Nubank also participated in the round.

Seeing the likes of Akhund and Atiyeh on Prospa’s cap table might suggest to some that Prospa was backed because the company is building a replica of those businesses in Nigeria. However, Obasi says while there are similarities, Prospa is not building a product for startups.

“There’s not a massive startup ecosystem in the U.S. where you can basically grow a billion-dollar company just serving YC companies. We don’t have that here. We’re really building for the backbone of the economy, which is small and micro-businesses. Speaking to and being able to build relationships with investors, one of the things clear is that we’re not an American copycat,” he said when asked if Prospa could be likened with Mercury.

Prospa plans to use its new capital to double down and expand with acquisition strategies to get more customers. In addition to that, the company plans to hire more talent, especially in product and engineering.

Indonesia-focused Intudo Ventures closes $115M third fund

Intudo Ventures, the “Indonesia-only” investment firm, announced today it has closed its third fund, totaling $115 million. Called Intudo Ventures Fund III, it was raised in less than three months and oversubscribed.

Fund III’s limited partners include Black Kite Investments, the family office of Singaporean businessman Koh Bon Hwee; Wasson Enterprises, the family office of former Walgreens Boots Alliance chief executive officer Greg Wasson; and PIDC, the investment arm of Taiwan-based retail conglomerate Uni-President Enterprises Corp. Other LPs include more than 30 Indonesian families and their conglomerates; over 20 leading global funds and managing partners; and more than 10 founders of tech unicorns.

Intudo founding partners Patrick Yip and Eddy Chan launched the firm in June 2017 as the first Indonesia-only venture capital firm, with a debut fund of $10 million. At first, many people were dubious that a country-specific fund focused on early-stage Indonesian companies would take off, especially since Yip and Chan wanted to build a small portfolio and work closely with startups.

Then in 2019, Intudo closed its $50 million second fund with LPs including Founders Fund, which Chan said helped validate its mission. Portfolio companies from its first two funds include Pintu, TaniHub Group and Gredu.

At the beginning, “when we said we were going to raise $10 million, we got laughed out of the room by many managers, but four years into it, we’re running roughly $200 million dollars,” he told TechCrunch. “It shows that for the right markets, hyperlocal is the way to go.”

 

For its third fund, Intudo intends to invest in about 12 to 14 startups, in sectors like agriculture, B2B and enterprise, education, finance and insurance, healthcare and logistics. Initial check sizes will range from $1 million to $10 million. Leading early-stage and Series A rounds will continue to be Intudo’s core focus, but it also plans to invest in Series B and C rounds for companies from its first two funds.

Unlike many funds that have a handful of anchor investors, all of Intudo’s limited partners are capped at 10% of the total fund size so it can maintain its independent investment thesis and ensure all LPs are treated equally.

“I think 10% is a nice number, where it signals to the founder that we are doing what’s best for their company and not for one special interest group,” said Chan.

The firm will look for companies with competitive moats, like strong intellectual property or deep tech. It also looks for companies that operate in heavily-regulated sectors that are difficult for competitors to enter.

Chan pointed to crypto-exchange Pintu as a good example of Intudo’s investment thesis.

“Everyone was like, you invested in this because it’s trendy, but you have to understand that we met the founder when Bitcoin had dropped down to $6,000. When we gave him the term sheet, six months later in March 2019, Bitcoin was at $3,000,” he said. “The moral of the story is we knew the founder was legit and we were able to pick up all the best talent because you can’t go to a lot of major unicorns to work on crypto.”

Many of Intudo’s portfolio founders are pulkam kampung, or Indonesians who have studied and worked overseas, but returned to launch companies, and it runs a program called Pulkam S.E.A. Turtle Fellowship to mentor aspiring founders. One-third of the deals from Intudo’s first two funds were sourced from universities and the tech community in the United States.

Intudo works closely with founders after signing checks. For example, all of its companies have made a commercial deal sourced through the firm’s network before receiving an investment. Its country-specific approach is also an advantage during the pandemic, because Intudo can continue to hold in-person meetings with founders on an almost weekly basis.

“The founder community has obviously gone through a tough time this year and last year due to COVID,” said Yip. “A lot of these founders needed to make course adjustments and corrections to their business plans. I think our role as an in-market, involved investor has been even more enhanced. A lot of the companies that have gone under, they did not have an in-country partner from the get-go.”

He added, “I think our involved approach and having a concentrated portfolio is something that is appreciated by the founder community as well, so that’s definitely something we intend to rinse and repeat going into Fund III.”

07

5 factors that can make or break a startup’s growth journey

Brian Rothenberg
Contributor

Brian Rothenberg is a partner at Defy, a two-time former founder and growth executive.

The “health” of a startup’s growth can be a strong predictor of how large and valuable it can become. Our generation’s most valuable startups have all sustained a high rate of user/revenue growth over an extended period of time. As such, founders, employees and investors are all trying to figure out if their startup can achieve sustainable growth to create a large and enduring business over time.

Simply looking at top-line growth tells you relatively little. Two startups that are currently growing users or revenue 300% every year can each have different long-term prospects. It’s almost like looking at two people of the same age, height and weight, and projecting the same quality of life and longevity for both — there are many more factors that can help you make better predictions. Startups are similar, and it’s important to dig deeper into the health of a startup’s early growth and work to build the right foundation from an early stage.

Paid marketing can be a useful tool in your toolkit to accelerate an already humming flywheel. Just don’t let it be the only one.

Prior to becoming a VC at Defy, I founded two companies and was Eventbrite’s VP of growth for over six years from startup through IPO. Working across all stages from founding through to public company and advising many other startups along the way, I’ve landed on five critical factors for healthy and sustained growth that can be the difference between a startup failing, getting to a modest exit or building a valuable and enduring billion-dollar company.

Healthy engagement and retention are key

At its core, any successful product or service delivers more value to the user/customer than it costs to use (money or time). To see if your product is delivering true value, ask if it is achieving strong user engagement and customer retention. My friend and growth guru Casey Winters captures this well: “Product-market fit is retention that allows for sustained growth.”

Consumer startups can evaluate this via through cohort-based retention analysis of how frequently customers use the service, and how long they are retained for. SaaS businesses should be talking with customers often to gauge their happiness while also looking at logo retention as well as gross and net revenue retention — ideally, the business should show early signs of being a net-negative churn business, wherein revenue from existing customers actually grows over time, even after accounting for churned customers.

Many people incorrectly think “startup growth = customer acquisition.” In reality, retention is the most fundamental aspect underlying sustainable growth.

Customer obsession creates “pull” from the market

Customer obsession, plus organic pull from the market, are indicators of early product-market fit and signals of future growth potential.

Here are a couple ways to measure this:

See if a healthy percentage of the business is growing without paid spend, generally through word of mouth or some other form of virality. If your business is seeing more than 50% organic growth at a fast rate (200% to 300%+ year over year), you’re solving people’s needs well enough that they’re now sharing with others and creating a positive viral effect.

AI as a service to solve your business problems? Guess again

Ralf Haller
Contributor

Ralf Haller is the executive vice president of sales and marketing at NNAISENSE.

SaaS, PaaS – and now AIaaS: Entrepreneurial, forward-thinking companies will attempt to provide customers of all types with artificial intelligence-powered plug-and-play solutions for myriad business problems.

Industries of all types are embracing off-the-shelf AI solutions. According to industry experts, global AI software revenue — most of it online artificial intelligence as a service software (AIaaS) — is set to grow by an astounding annual rate of 34.9%, with the market reaching over $100 billion by 2025. It sounds like a great idea, but there is a caveat — “one-size-fits-all” syndrome.

Companies seeking to use AI as a differentiating technology in order to gain business advantages — and not merely doing it because that’s what everyone else is doing — require planning and strategy, and that almost always means a customized solution.

In the words of Sepp Hochreiter (inventor of LSTM, one of the world’s most famous and successful AI algorithms), “the ideal combination for the best time to market and lowest risk for your AI projects is to slowly build a team and use external proven experts as well. No one can hire the best talent quickly, and even worse, you cannot even judge the quality during hiring but will only find out years later.”

That’s a far cry from what most online off-the-shelf AI services offer today. The artificial intelligence technology offered by AIaaS comes in two flavors — and the predominant one is a very basic AI system that claims to provide a “one-size-fits-all” solution for all businesses. Modules offered by AI service providers are meant to be applied, as-is, to anything from organizing a stockroom to optimizing a customer database to preventing anomalies in production of a multitude of products.

There are several companies that claim to provide AIaaS for automated industrial production. Most of the successful data presented by these providers is based on individual case studies, with problems involving limited data sets and limited, generic objectives. But generic AI solutions are going to produce generic results.

For example, the process to train algorithms to detect wear and tear would be different for factories that produce different products; after all, a shoe is not a smartphone is not a bicycle. Thus, for “real” AI work — where intelligent modules actually managed and changed production in response to environmental and other factors — the companies developed customized solutions for their clients.

Many customers who were “burned” by bad experience with AIaaS will be more hesitant to try it again, feeling it is a waste of time. And use cases that did require heavier AI processing did not yield the results expected — or promised. Some have even accused the cloud companies of deliberately misleading customers — giving them the impression that off-the-shelf AI is a viable solution, when they know very well that it isn’t. And if a technology doesn’t work enough times, chances are that those who could potentially benefit from real AI solutions will give up before they even start.

The objective is to standardize a solution that performs well almost immediately and does not require extensive know-how. AIaaS’ success so far has been in enabling researchers to run complex experiments without requiring the services of an entire IT team to figure out how to manage the necessary infrastructure.

In the future, AIaaS will hopefully enable individuals who are not AI experts to utilize the system to get the desired results. That said, online automated AI services even at their current levels can greatly benefit industrial production — if it is done right.

AI properly done could provide great benefits for industry. Instead of giving up on AI, companies should do a deep dive on the AI services they are thinking of utilizing. Does the solution provide for customization? What kind of support does the service provide? How is the algorithm trained to handle data specific to your use case? These are the questions that companies need to ask when shopping around for AI services. Providers that can furnish substantial answers — and back up their claims with real data on success rates — are the ones companies should work with.

Like all new developments that enhance business activity, AI applications require a high level of expertise. The engineers who work for the big cloud companies indeed have that expertise — which means that they could be providing much more value for customers by helping them develop customized solutions. Whether that can be done “as a service” needs to be examined — but the system in place right now is not the answer.

Extra Crunch roundup: Options pool rules, voice tech hurdles, keeping employees engaged

“In today’s cash-rich environment, options are more valuable than cash,” says Allen Miller, a principal at Oak HC/FT. “In turn, managing your option pool may be the most effective action you can take to ensure you can recruit and retain talent.”

In an article squarely aimed at early-stage founders, Miller shares best practices for protecting your option pool, lists the mistakes many founders make and offers multiple tips for course-correcting “if you made mistakes early on.”

As we’re just returning from the Labor Day holiday, today’s newsletter is quite brief. We have much more planned for this week, so thanks very much for reading.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist


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To commercialize, voice tech must first solve its ‘cocktail party problem’

Image Credits: Karnet / Getty Images

Voice and speech recognition is expected to be a $26.8 billion global market by 2025, but there’s still a long way to go before voice can be fully commercialized.

Developers are deploying natural language processing and conversational AI to overcome current limitations, but “solving these problems requires voice tech to meet the human standard for voice and match the complexities of the human auditory system.”

How engaged are your employees?

Image Credits: katleho Seisa (opens in a new window) / Getty Images

According to a recent survey, more than 70% of workers are actively hunting for a new job or are giving the matter serious consideration.

In a startup environment, employee development takes a back seat to priorities like scaling growth. As a result, few managers have any experience or interest in helping employees acquire new skills or advance their careers.

Don’t wait to be blindsided: Put an action plan in place to assess employee engagement. Remember, seven out of the next 10 people you see on a video call might be polishing their resumes.

Wright tests its 2-megawatt electric engines for passenger planes

Just like the automotive industry, aerospace has its sights set on going electric — but flying with battery-powered engines is a tougher proposition than rolling. Wright is among the startups looking to change the math and make electrified flight possible at scales beyond small aircraft — and its 2-megawatt engine could power the first generation of large-scale electric passenger planes.

Electric cars have proven to be a huge success, but they have an advantage over planes in that they don’t need to produce enough lift to keep their own mass in the air. Electric planes have been held back by this fundamental conundrum, that the weight of the batteries needed to fly any distance with passengers aboard means the plane is too heavy to fly in the first place.

In order to escape this conundrum, the main thing to improve is efficiency: how much thrust can be produced per watt of power. Since reducing the mass of batteries is a long, slow process, it’s better to innovate in other ways: materials, airframe, and of course the engine, which in traditional jets is a huge, immensely heavy and complex internal combustion one.

Electric engines are generally lighter, simpler, and more reliable than fuel-powered ones, but in order to achieve flight you need to reach a certain level of efficiency. After all, if a jet burned a thousand gallons of fuel per second, the plane couldn’t hold the amount needed to take off. So it falls to companies like Wright and H3x to build electric engines that can produce more thrust from the same amount of stored energy.

While H3x is focused on small aircraft that will probably be taking flight sooner, Wright founder and CEO Jeff Engler explained that if you want to take on aerospace’s carbon footprint, you really have to start looking at commercial passenger jets — and Wright is planning to make one. Fortunately, despite the company’s name, they don’t need to build it entirely from scratch.

“We’re not reinventing the concept of the wing, or the fuselage, or anything like that. What changes is what propels the aircraft forward,” said Engler. He likened it to electric vehicles in that much of the car doesn’t change when you go electric, mainly the parts that have operated the same way in principle for a century. All the same, integrating a new propulsion system into a plane isn’t trivial.

Wright’s engine is a 2 megawatt motor that produces the equivalent of 2,700 horsepower, at an efficiency of around 10 kilowatts per kilogram. “It’s the most powerful motor designed for the electric aerospace industry by a factor of 2, and it’s substantially lighter than anything out there,” said Engler.

The lightness comes from a ground-up redesign using a permanent magnet approach with “an aggressive thermal strategy,” he explained. A higher voltage than is normally employed for aerospace purposes and an insulation system to match enable an engine that hits the power and efficiency levels required to put a large plane in flight.

CG render of a plane using Wright's engines

Image Credits: Wright

Wright is making sure its engines can be used by retrofitted aircraft, but it’s also working on a plane of its own with established airframe makers. This first craft would be a hybrid electric, combining the lightweight, efficient propulsion stack with the range of a liquid fuel engine. Relying on hydrogen complicates things but it makes for a much faster transition to electric flight and a huge reduction in emissions and fuel use.

Several of Wright’s motors would be attached to each wing of the proposed aircraft, providing at least two benefits. First, redundancy. Planes with two huge engines are designed to be capable of flying even if one fails. If you have six or eight engines, one failing isn’t nearly so catastrophic, and as a consequence the plane doesn’t need to carry twice as much engine as you need. Second is the stability and noise reduction that comes from having multiple engines that can be adjusted individually or in concert to reduce vibration and counteract turbulence.

Right now the motor is in lab testing at sea level, and once it passes those tests (some time next year is the plan) it will be run in an altitude simulation chamber and then up at 40,000 feet for real. This is a long term project, but an entire industry doesn’t change overnight.

Engler was emphatic about the enthusiasm and support the company has received from the likes of NASA and the military, both of which have provided considerable cash, material and expertise. When I brought up the idea that the company’s engine might end up in a new bombing drone, he said he was sensitive to that possibility, but that what he’s seen (and is aiming for) is much more in line with the defense department’s endless cargo and personnel flights. The military is a huge polluter, it turns out, and they want to change that — and cut down on how much money they spend on fuel every year as well.

“Think of how things changed when we went from propellers to jets,” said Engler. “It redefined how an airplane operates. This new propulsion tech allows for reshaping the entire industry.”

Performance marketing agency MuteSix bets on content and data to boost DTC e-commerce

Warby Parker filing to IPO last week was one more sign that direct-to-consumer (DTC) is an extremely powerful e-commerce trend. But LA-based performance marketing agency MuteSix didn’t wait that long to build its business around scaling DTC brands.

Created in 2014 and acquired by Dentsu in 2019, MuteSix was recommended to TechCrunch by Rhoda Ullmann, VP Consumer at Sense, a Boston-based startup building a home energy monitor. “They demonstrate best-in-class expertise with Facebook and Google paid ad platforms. They also have a very smart and efficient approach to creative development that was critical to helping us scale,” she wrote. (If you have growth marketing agencies or freelancers to recommend, please fill out our survey!)

Besides Sense, MuteSix’s former and current clients include companies such as Adidas, Petco, Ring and Theragun, to whom it provides a full range of marketing services, including top-notch direct response videos. But regardless of whether you can afford this, we think you’ll learn interesting lessons from our conversation with their CRO, Greg Gillman. The key takeaway? In today’s highly competitive ad environment, both content and data are kings.

Editor’s note: The interview below has been edited for length and clarity.

What can you tell us about MuteSix as an agency?

Greg Gillman

Image Credits: MuteSix

Greg Gillman: We’ve been around for about nine years. We started out as a Facebook ad agency — as opposed to a lot of agencies that start out by saying they do everything, we decided to focus on what we were really good at. At the time, it was doing Facebook media buying for e-commerce companies. Primarily here in LA, which is kind of the hub of these companies, but also all over. And then bit by bit, we grew the organization.

At this point, we’re a little over 400 people, and we manage upward of $500 million in spend on Facebook and Google, including Instagram and YouTube. What we’ve grown into is a one-stop shop for DTC e-commerce companies: We manage all the channels that a DTC brand needs. And we’re a performance agency; everything we do is based on results. People come to us to drive revenue into their e-commerce businesses.

Why do you think that performance marketing is the right fit for DTC?

DTC entrepreneurs are more focused on immediate impact, because if they’re not selling product, there’s no large brand propping them up. So I think that doing DTC marketing requires you to be more performance focused. For agencies that work with large brands, usually it’s more about impression buying versus performance buying. They can say: I did a reach campaign today to hit 10 million eyeballs, and whatever happens happens, because at the end of the day, you just told us to do 10 million impressions. It’s different than working with a group like us that’s trying to optimize every small piece of the funnel, and being accountable for the entire funnel to drive as much sales or revenue.

What type of clients do you work with?

The majority of the companies we work with are digitally native DTC companies. We’ve mostly stayed in that lane, because we’re really good at it. That being said, we work with companies of all sizes — startups, companies that are already established, and very large companies that need to rework both their creative and their media buying strategy.

I oversee sales, marketing and partnerships, and my role is really trying to figure out which brands make most sense to partner with MuteSix. We’re looking for high-growth brands that we can scale, and we’ve learned through the years that what works well are demonstrable products that have cool user value props.

We’ve worked with lots of startups at different points in the funnel, starting from the ground up and working with them through various rounds of funding, all the way through acquisitions, including two by unicorns. But these days, ground up is tougher. I like them to have some proof of concept — putting through $10,000-$15,000 per month on Facebook or $5,000-10,000 on Google usually shows me that there’s some life to it. But I don’t want to limit us if it’s a cool idea. I talk to a lot of people who come back once they’ve proven it out a little bit.


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What kind of clients are definitely not a good fit?

It won’t be a fit if there’s no real unique value prop for the product. If it’s just another run-of-the-mill company, a consultant can charge them a lower amount of money and set up Facebook ads, but what we are looking for are high-growth businesses.

The compensation for our campaign managers is actually tied to the performance of the campaigns, so if I bring a bunch of campaigns that we can’t scale, we’re gonna have a lot of unhappy media buyers who ask: “Greg, why would we take on this brand?” It’s a business model that has helped us attract top talent, but we need to make sure that we’re bringing brands that we think we can scale.

And it’s easier than ever to start a company, but it’s tougher now to scale it and take it past the $2 million-$3 million run rate. So I always revert back to asking founders: What are five reasons why people want to buy your product? What are the five reasons that they don’t? If the entrepreneur has trouble answering this, it’s not going to work. If they can’t tell somebody why their business is good, then we’re not going to be good at selling it.

How is MuteSix different from other agencies?

I’d say the main difference is that we have a 70-person in-house video creative team; and what we’re really good at doing is shooting and coming up with performance content. Not just content that looks and feels great, but video that is reverse-engineered to sell product.

Another key component is that we have a whole data science team that is also integrated with our media buying team, and that helps companies navigate things like attribution and signal loss due to the iOS 14 update. Right now, that means focusing on looking at the whole picture rather than by channel and working on mix-modeling attribution.

What are some of the things your data team focuses on?

One of the biggest things that brands struggle with is figuring out attribution, and how you continue to spend money even though you may have lost some signal into the platform. If Facebook skews too heavily, and Google is on last click, then sometimes it looks like things are never working. To help companies make informed business decisions, we are building statistical models that show information at higher-than-the-platform level.

We are also building better segments of customer profiles that help the clients understand who their core audience is, but also helps us build predictive audiences for finding new people.

Another big thing we’re trying to solve is incrementality. We work with large brands that have a strong organic following on social media; and their question is: “Hey, Greg, why should I spend more money if I would have acquired those users anyway?” So we’ve done incrementality testing with brands that spend a lot in other channels than Facebook and Google. We helped them build out different ways to look at the data so that we continue to spend in those channels and they actually know the incremental lift that they’re getting.

There’s one other piece that I think is super important and usually overlooked: first-party data. We work with brands to try and acquire as much of that first-party data as possible, segment it and use it, because that’s what they’d be left with if Facebook shut off tomorrow.

How do you prepare and adapt for changes in the marketing ecosystem?

Because we work with so many brands, we have a lot of senior leadership on each channel level. We routinely meet across departments and share insights. The data science team also builds pretty robust reporting. We try to stay ahead of our brands and to be forward-thinking about anything that is ultimately going to impact the agency. We’re constantly trying to hack our way through things like the types of content that work and things that we know will help us scale.

That’s how we have always approached it. Every major shift in our business was done to answer the needs of the brands that we were working with. For instance, there’s a data side to our business because it’s more important than ever to use that. Facebook used to be a platform where you could throw anything at the wall, and you would get a 4x or 5x return. No one’s asking about data when you’re literally printing money out of Facebook, right? It only happens when the margins get tight. But then Facebook became a more crowded platform, and the same happened with Google: more advertisers, higher CPM and a more competitive environment. We needed to be smarter about what we were doing, so we built out our data team.

Now there’s two levers that we can pull: the data side and the creative side of the business. Again, we are a performance marketing agency, focusing on all the levers. Because platforms like Facebook are only going to be more competitive, they’re only going to get more expensive, and we are only going to lose more traffic. So the more agile agencies have to think much farther outside of what we are doing on these platforms; because we’re going to make up the incremental revenue on things like SMS, influencer marketing and organic content, to continue to drive money into the top of the funnel.

Why is your content arm so important as a lever?

We have an integrated solution where our media buyers are paired directly with our video editors and producers to allow us to be agile and quick; because as everyone knows, content is king. What we try to do is optimize around things like what we call the thumbs-up rate on Facebook — three-second video views. If I held someone for that long in their newsfeed, I can potentially get them into our flow. We do the same on YouTube, and we do things like this on programmatic, because the name of the game is to get people into the funnel and work them through it. And we’re using both our data science team and our creative team to build out and optimize on the front end around these quick metrics to get things moving.

In my opinion, there’s no close second to an SMB agency that has a content arm like we do. Leveraging our content team to build performance content is one of the biggest levers that we have. Three and a half years ago, Facebook was telling us: “If you don’t build video content, and if you don’t prioritize video in the newsfeed, it’s not going to work.” At the time, we leaned in very hard — and the pain of growing a creative team of 70 people is real, especially in LA. But it’s allowed us to scale our agency.

Virtual meeting platform Vowel raises $13.5M, aims to cure meeting fatigue

Meetings are an inevitable part of the work day, but as workplaces became more distributed over the past 18 months, Vowel CEO Andy Berman says we are steadily moving toward “death by meeting.”

His virtual meeting platform is the latest to receive venture capital funding — $13.5 million — with the goal of making meetings more useful before, during and after.

Vowel is launching a meeting operating system with tools like real-time transcription; integrated agendas, notes and action items; meeting analytics; and searchable, on-demand recordings of meetings. The company has a freemium business model and will also be rolling out a business plan this fall for $16 per user per month. Extra features will include advanced integrations, security and admin controls.

The Series A was led by David Hornik of Lobby Capital, who was joined by existing investors Amity Ventures and Box Group and a group of individual investors, including Calendly CEO Tope Awotona, Intercom co-founder Des Traynor, Slack VP Ethan Eismann, former Yammer executive Viviana Faga, former InVision president David Fraga and Okta co-founder Frederic Kerrest.

Prior to starting Vowel, Berman was one of the founders of baby monitor company Nanit. The company had teams spread out around the world, and communication was tough as a result. In 2018, the company went looking for a tool that would work for synchronous and asynchronous meetings, but there were still a lot of time zones to manage, he said.

Taking a cue from Nanit’s own baby monitors that were streaming video over 17 hours a day, the idea for Vowel was born, and the company began to focus on the hypothesis that distributed work would be prevalent.

“People initially thought we were crazy, but then the pandemic hit, and everyone was learning how to work remotely,” Berman told TechCrunch. “As we now go back to hybrid work, we see this as an opportunity.”

In 2017, Harvard Business Review reported that executives spent 23 hours in meetings each week. Berman now estimates that the average worker spends half of their time each week in meetings.

Vowel is out to bring Slack, Figma and GitHub components to meetings by recording audio and video that can be paused at any time. Users can add notes and see where those notes fall within a real-time transcription that enables people who arrive late or could not make the meeting to catch up easily. After meetings are over, they can be shared, and Vowel has a search function so that users can go back and see where a particular person or topic was discussed.

The new funding will enable the company to grow its team in product, design and engineering. Vowel plans to hire up to 30 new people over the next year. The company recently closed its beta test and has amassed a 10,000-person waitlist. The public launch will happen in the fall, Berman said.

Workplace productivity and office communication tools are not new concepts, but as Berman explained, became increasingly important when homes became offices over the past 18 months.

Competitors took different approaches to solving these problems: focusing on video conferencing or audio or meeting management with plugins. Berman says an area where many have not succeeded yet is integrating meetings into the typical workflow. That’s where Vowel comes in with its “meeting OS,” he added.

“Our goal is to make meetings more inclusive and worthwhile, which includes the prep, the meeting and the follow-up,” Berman said. “We see the future will be about knowledge management, so the difference between what we are doing is ensuring you can catch up quickly and keep that knowledge base. A Garner report said that 75% of workplace meetings will be recorded by 2025, and that is a trend we are reinventing from the ground up.”

David Hornick, founding partner at Lobby Capital, said he became acquainted with Vowel from its existing investor Amity Ventures. Hornick, who sits on the GitLab board, said GitLab was one of the largest distributed companies in the tech space, prior to the pandemic, and saw first-hand the challenge of making distributed teams functionable.

When Hornick heard about Vowell, he said he “jumped quickly” on the opportunity. His firm typically invests in platform businesses that have the capacity to transform business spaces. Many are pure software, like Splunk or GitLab, while others are akin to Bill.com, which transformed how small businesses manage financial operations, he added.

All of those combine into a company, like Vowel, especially given the company’s vision for a meeting OS to transform a meeting space that hadn’t moved forward in decades, he said.

“This was quickly obvious to me because my day is meetings — an eight-Zoom day is a normal day — I just wish I could remember everything,” Hornick said. “Speaking with early customers using the product, when I asked them what they would do if this ever went away, the first thing they said was ‘cry,’ and, because there was no alternative, would return to Zoom or other tools, but it would be a big setback.”

DigitalOcean enhances serverless capabilities with Nimbella acquisition

As developers look for ways to simplify how they create software, serverless solutions, which enable them to write code without worrying about the underlying infrastructure required to run their applications, is becoming increasingly popular. DigitalOcean announced today that it is enhancing its existing offering in this area with the acquisition of serverless startup Nimbella. The companies did not share the terms of the deal.

With Nimbella, the company is getting a platform for building serverless applications that is built on the open source container orchestration platform, Kubernetes and Apache OpenWhisk, which is itself an open source serverless development platform.

DigitalOcean CEO Yancey Spruill, who took over two years ago, refers to Nimbella’s capabilities as Function as a Service with the goal being to simplify serverless development in an open source context for its target customers.”Serverless kinds of capabilities are taking a whole level of the infrastructure burden away from developers and businesses and we absorb that. We’ll allow our customers to have more configurability around the tools, which just removes burdens for them and allows them to go faster,” he said.

In practical terms, Nimbella CEO Anshu Agarwal says that means they are providing a specific set of tools to build sophisticated serverless applications and connect to other DigitalOcean services. “The capabilities that we will be adding to DigitalOcean portfolio are a fast solution, a function as a service solution that also integrates with the underlying DigitalOcean services [like] managed databases, storage and other services that make it make it easier for a developer to develop full applications, not just addressing events, but doing things which are completely stateless,” Agarwal explained.

Spruill said that this wasn’t the company’s first foray into serverless. That began last year when it offered its initial serverless tooling, but it wanted to build on its current offering and Nimbella fit the bill.

DigitalOcean is a cloud Infrastructure as a Service and Platform as a Service provider, aiming at individual developers, startups and SMBs. While DigitalOcean’s $318 million 2020 revenue was a fraction of the $129 billion cloud market, it is proof that there is still money to be made even with a small slice of that market.

The companies did not discuss the terms of the deal, the number of employees involved or even the title that Agarwal would have when the deal closed, but the plan is to fully integrate Nimbella into the DigitalOcean portfolio and eventually make it a DigitalOcean-branded product some time in the first half of next year.