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Steve Case and Clara Sieg on how the COVID-19 crisis differs from the dot-com bust

Steve Case and Clara Sieg of Revolution recently spoke on TechCrunch’s new series, Extra Crunch Live. Throughout the hour-long chat, we touched on numerous subjects, including how diverse founders can take advantage during this downturn and how remote work may lead to growth outside Silicon Valley. The pair have a unique vantage point, with Steve Case, co-founder and former CEO of AOL turned VC, and Clara Sieg, a Stanford-educated VC heading up Revolution’s Silicon Valley office.

Together, Case and Sieg laid out how the current crisis is different from the dot-com bust of the late nineties. Because of the differences, their outlook is bullish on the tech sector’s ability to pull through.

And for everyone who couldn’t join us live, the full video replay is embedded below. (You can get access here if you need it.)

Case said that during the run-up to the dot-com bust, it was a different environment.

“When we got started at AOL, which was back in 1985, the Internet didn’t exist yet,” Case said. “I think 3% of people were online or online an hour a week. And it took us a decade to get going. By the year 2000, which is sort of the peak of AOL’s success, we had about half of all the U.S. internet traffic, and the market value soared. That’s when suddenly, when any company with a dot-com name was getting funded. Many were going public without even having much in the way of revenues. That’s not we’re dealing with now.”

Venture partner Sieg agreed, pointing to the number of funds currently available in the venture capital asset class. Unlike twenty years ago when valuations were based on unsubstantiated future growth, the current crisis happened during a period of steady expansion. Because of this, funds and startups are in a better position to make it to the other side of this pandemic, she said.

Sieg pointed to one of Revolution Venture’s portfolio companies, Mint House, which aims to build a better temporary housing experience for business travelers. The company raised $15 million in May 2019, and according to Sieg, it focused on being capital-efficient from the start instead of chasing growth for its own sake. She said the company went from almost 90% occupancy to zero overnight and yet now, after a slight pivot, it’s back to a 60-65% occupancy rate by moving quickly to providing housing to healthcare workers.

The company’s strong balance sheet gave it room to pivot, she said.

And yet there are challenges. Sieg pointed out that for the first time in Revolution’s history, the firm’s funds are investing without meeting founder teams in person. It’s a longer process than the old way, she said, though noted that it levels the playing field for founders outside of the traditional circle. Investors have more time on their hands now, so she encourages founders to be persistent and keep reaching out for virtual meetings.

“I think it is important to take advantage of this time where you have people sitting around with more availability on their calendars and more willingness to engage,” Sieg said. “The nice thing about removing some of the in-person components is there’s a stronger focus on market opportunity, product and company, and the real metrics that [founders] can show. Removing some of that person-to-person noise and just focusing on the business means that a lot of these biases are going to be overcome.”

The pair said they believe some companies will have a strong tailwind coming out of this crisis. Case and Sieg pointed to trends that are rapidly accelerating: e-commerce, telehealth and direct-to-consumer companies. In this new environment, Case said location will matter more than ever. While he points out there are many smart people in Silicon Valley, there’s a reason why, for example, Monsanto is in St. Louis. “Some of the smartest people around healthtech are in Minneapolis where UnitedHealth is, or Rochester, Minnesota where Mayo is, or with MD Anderson in Texas or in Ohio with Cleveland Clinic or Johns Hopkins in Baltimore.”

“There are also specific categories that resonate now more than ever,” Sieg said. “We’re investors in a company called Bright Cellars that ships wine to your house. Obviously, people are staying at home, and they’re drinking a lot more. And [Bright Cellars] has been positively impacted by [stay-at-home orders] from a revenue perspective. There’s a company like Bloomscape, which is in Detroit, Michigan, and they’ve had their challenges with keeping their supply chain up and running, but they managed to do so. People are finding a lot of comfort in gardening and taking care of plants because it is something that can be done at home and feel like you’re engaged with something that’s alive, and you see the progression when you’re stuck at home.”

Steve Case is looking at founders who are managing today, but also imagining for the future. One example is Clear, he said, which fast-tracked the development of a flight pass for healthcare workers. And now, when people start flying again, the company will return to its strong core business while having additional momentum around this new business that provides passes to hospitals and arenas. This wouldn’t have happened if it was not for this crisis, Case said.

“I think [the COVID-19 crisis] is one of those shake-the-snowglobe moments where things are being reassessed,” Case said, “and one of the areas I think it’s going to accelerate is what I’ve called the ‘third wave of the internet.’”

Case explained he wrote about this new phase a few years ago in his book, aptly titled “The Third Wave: An Entrepreneur’s Vision of the Future.” According to Case’s thesis, the first wave was when AOL and other providers were introducing and onboarding users to the Internet. The second wave was when apps and software could be created using existing infrastructure. And now, according to this thought, the internet is meeting the real world with new solutions. The current crisis is accelerating the development of telehealth, smart cities, and industries in regulated sectors.

“Perseverance is going to matter more,” Case said. “The tough problems don’t lend themselves to overnight successes. It’s going to be a slog, and kind of like AOL of a 10-year in the making overnight success.”

The dot-com bust upended a lot of startups, and the COVID-19 crisis will do the same though with different results.

“The third wave of the Internet is when the Internet meets the real world, Steve Case said. “It’s things like health care, food, smart cities, and many other areas that haven’t changed much in the first and second waves that are going to change a lot in the third wave. We believe it’s going to be a different playbook.”


Igloo raises $8.2M to bring insurance to more people in Southeast Asia

Singapore-based Igloo, formerly known as Axinan, has raised $8.2 million as the insurance-tech startup looks to broaden its foothold in half a dozen Southeast Asian markets and Australia.

InVent, a corporate venture capital arm of telecommunications firm Intouch Holdings, led Igloo’s extended Series A round, the startup told TechCrunch. Existing investors Openspace Ventures, a venture capital fund that invests in Southeast Asia, and Linear Capital, a Shanghai-based early-stage venture capital firm focusing on tech-driven startups, participated in this round, which makes four-year-old Igloo’s to-date raise to $16 million. It raised about $1 million in its Seed financing round.

Igloo — founded by Wei Zhu, who previously served as Chief Technology Officer at Grab — works with e-commerce and travel firms such as Lazada, RedDoorz, and Shopee in Southeast Asia to offer their customers insurance products that provide protection on electronics, and coverage on accidents and travel.

The startup, which also operates in Vietnam, Philippines, Thailand, Singapore, Indonesia, and Malaysia, said more than 15 million users have benefitted from its insurance products to date, and in the last one year it has processed more than 50 million transactions.

Igloo, which rebranded from Axinan this month, said insurance products are proving especially useful to — and popular among — people during the coronavirus outbreak.

Raunak Mehta, Chief Commercial Officer at Igloo, told TechCrunch that the startup has seen a surge in transactions and customer acquisitions in the last 45 days. “While some travel related business have seen a dip, the larger e-commerce business continues to see a surge,” he added.

“With COVID-19 impacting every facet of personal life and business, digitisation can help the world adjust to the new normal. This is especially apparent in insurance, where we can tap on digital channels for distribution and also for creating awareness,” said Zhu.

“We see that digital insurance is on the rise in Southeast Asia, and we believe that Igloo, with our digital-first approach and expansion of our product portfolio into personal health, accident and other related products can help fill those gaps and address consumers’ needs for personal well-being,” he added.

He said the digital insurance penetration remains low in Southeast Asia, and Igloo sees massive opportunity in the space. According to one estimate (PDF), Southeast Asia’s digital insurance market is currently valued at $2 billion and is expected to grow to $8 billion by 2025.

The startup, which competes with a handful of startups including Singapore Life and Saphron, will use the fresh capital to expand its business development and engineering teams and broaden its presence in the half-dozen markets. It is already engaging with telecom operators, banks, non-banking financial firms, and travel agencies, it said.

6 investment trends that could emerge from the COVID-19 pandemic

Rocio Wu
Contributor

Rocio Wu is a venture partner at F-Prime Capital who focuses on early-stage investments in software/applied AI, fintech and frontier tech investments.

While some U.S. investors might have taken comfort from China’s rebound, we still find ourselves in the early innings of this period of uncertainty.

Some epidemiologists have estimated that COVID-19 cases will peak in April, but PitchBook reports that dealmaking was down -26% in March, compared to February’s weekly average. The decline is likely to continue in coming weeks — many of the deals that closed last month were initiated before the pandemic, and there is a lag between when deals are made and when they are announced.

However, there’s still hope. A recent report concluded that because valuations are lower and there’s less competition for deals, “the best-performing vintages tend to be those that invest at the nadir of a downturn and into the early stage of recovery.” There are countless examples from the 2008 recession, including many highly valued VC-backed businesses such as WhatsApp, Venmo, Groupon, Uber, Slack and Square. Other early-stage VCs seem to have arrived at a similar conclusion.

Also, early-stage investing seems more resilient. During the last recession, angel and seed activity increased 34% as interest in the stage boomed during a period of prolonged growth.

Furthermore, there is still capital to be deployed in categories that interested investors before the pandemic, which may set the new order in a post-COVID-19 world. According to data provider Preqin Ltd., VC dry powder rose for a seventh consecutive year to roughly $276 billion in 2019, and another $21 billion were raised last quarter. And looking at the deals on the early-stage side that were made year to date, especially in March, the vertical categories that garnered the most funding were enterprise SaaS, fintech, life sciences, healthcare IT, edtech and cybersecurity.

Image Credits: PitchBook

That said, if VCs have the capital to deploy and are able to overcome the obstacle of “having never met in person,” here are six investment trends that could emerge when the pandemic is over.

1. Future of work: promoting intimacy and trust

It’s ‘bullshit’ that VCs are open for business right now (but that could change in a month)

Earlier today, to get a sense of what’s happening in the land of venture capital, the law firm Fenwick & West hosted a virtual roundtable discussion with New York investors Hadley Harris, a founding general partner with Eniac Ventures; Brad Svrluga, a co-founder and general partner of Primary Ventures; and Ellie Wheeler, a partner with Greylock.

Each investor is experiencing the coronavirus-driven lockdown in unique ways, unsurprisingly. Their professional experiences are very much in sync, however, and founders should know the bottom line is that they aren’t making brand-new bets at this very moment.

On the personal front, Wheeler is expecting her first child. Harris is enjoying lunch with his wife every day. Svrluga said that he hasn’t had so many consecutive meals with his kids in more than a decade. (He described this as a treat.)

Professionally, things have been more of a struggle. First, all have been swamped in recent weeks, trying to assess which of their startups are the most at risk, which are worth salvaging and which may be encountering unexpected opportunity — and how to address each of these scenarios.

They are so busy, in fact, that none is writing checks right now to founders who might be trying to reach them for the first time. Indeed, Harris takes issue with investors who’ve said throughout this crisis that they are still very open to pitches. “I’ve seen a lot of VCs talking about being open for business, and I’ve been pretty outspoken on Twitter that I think that’s largely bullshit and sends the wrong message to entrepreneurs.

“We’re completely swamped right now in terms of bandwidth” because of the work required by existing portfolio companies. Bandwidth, he added, “is our biggest constraint, not money.”

What happens when bandwidth is no longer such an issue? It’s worth noting that none thinks that meeting founders exclusively remotely is natural or normal or conducive to deal-making — not at their firms, in any case.

Wheeler noted that while “some accelerators and seed funds that are prolific have been doing this in some way, shape or form for a bit,” for “a lot of firms,” it’s just awkward to contemplate funding someone they have never met in person.

“The first part of the diligence process is the same, that’s not hard,” said Wheeler. “It’s meeting the team, visiting [the startup’s workspace], meeting our team. How do you do that [online]?” she asked. “How do you mimic what you pick up from spending time together [both] casually and formally? I don’t think people have figured that out,” she said, adding, “The longer this goes on, we’ll have to.”

As for what to pitch them anyway, each is far less interested in sectors that aren’t highly relevant to this new world. Harris said, for example, that now is not the time to float your new idea for a brick-and-mortar business. Wheeler separately observed that many people have discovered in recent weeks that “distributed teams and remote work are actually more viable and sustainable than people thought they were,” suggesting that related software is of continued interest to Greylock.

Svrluga said Primary Ventures is paying attention to software that enables more seamless remote work, too.  Telecommuting “has been a culture-positive event for the 18 people at my firm,” he said.

Naturally, the three were asked — by Fenwick attorney Evan Bienstock, who moderated the discussion — about downsizing, which each had noted was a nearly inescapable part of lengthening a startup’s runway right now. (“It sucks,” said Svrluga. “People are losing their jobs. But to continue to run teams with the same organizational structure as 60 days ago, [which was] the most favorable environment for building industries, you can’t do it.”)

Their uniform advice for management teams that have to cut is to cut deeply to prevent from having to do it a second time.

Though no one wants to part ways with the people who they’ve brought aboard, “no CEO has ever told me, ‘Dammit, we cut too far,’ ” said Svrluga, who has been through two downturns in his career. In contrast, “at least 30%” of the CEOs he has known admitted to not going far enough to insulate their business while also keeping its culture intact.

The “second cut hurts way more,” added Wheeler. “It’s the second [layoff] that really throws people.”

If you’re wondering what’s next, the VCs all said that they’ll be receptive to new ideas after working through layoffs and burn rates and projected runways, along with the new stimulus package that they’re trying to find a way to make work for their startups.

As for how soon that might be, Wheeler and Svrluga suggested the world might look less upside down in a month. They proposed that four or so more weeks should also give founders more needed time to adjust some of their expectations.

Harris seemed to agree. “It will probably be a gradual thing . . . I’m not sure what next week holds, but feel free to ping me in a month and I’ll let [founders] know if I think it’s opening up.”

‘A perfect storm for first time managers,’ say VCs with their own shops

Until very recently, it had begun to seem like anyone with a thick enough checkbook and some key contacts in the startup world could not only fund companies as an angel investor but even put himself or herself in business as a fund manager.

It helped that the world of venture fundamentally changed and opened up as information about its inner workings flowed more freely. It didn’t hurt, either, that many billions of dollars poured into Silicon Valley from outfits and individuals around the globe who sought out stakes in fast-growing, privately held companies — and who needed help in securing those positions.

Of course, it’s never really been as easy or straightforward as it looks from the outside. While the last decade has seen many new fund managers pick up traction, much of the capital flooding into the industry has accrued to a small number of more established players that have grown exponentially in terms of assets under management. In fact, talk with anyone who has raised a first-time fund and you’re likely to hear that the fundraising process is neither glamorous nor lucrative and that it’s paved with very short phone conversations. And that’s in a bull market.

What happens in what’s suddenly among the worst economic environments the world has seen? First and foremost, managers who’ve struck out on their own suggest putting any plans on the back burner. “I would love to be positive, and I’m an optimist, but I would have to say that now is probably one of the toughest times” to get a fund off the ground, says Aydin Senkut, who founded the firm Felicis Ventures in 2006 and just closed its seventh fund.

“It’s a perfect storm for first-time managers,” adds Charles Hudson, who launched his own venture shop, Precursor Ventures, in 2015.

Hitting pause doesn’t mean giving up, suggests Eva Ho, cofounder of the three-year-old, seed-stage L.A.-based outfit Fika Ventures, which last year closed its second fund with $76 million. She says not to get “too dismayed” by the challenges.

Still, it’s good to understand what a first-time manager is up against right now, and what can be learned more broadly about how to proceed when the time is right.

Know it’s hard, even in the best times

As a starting point, it’s good to recognize that it’s far harder to assemble a first fund than anyone who hasn’t done it might imagine.

Hudson knew he wanted to leave his last job as a general partner with SoftTech VC when the firm — since renamed Uncork Capital — amassed enough capital that it no longer made sense for it to issue very small checks to nascent startups. “I remember feeling like, Gosh, I’ve reached a point where the business model for our fund is getting in the way of me investing in the kind of companies that naturally speak to me,” which is largely pre-product startups.

Hudson suggests he miscalculated when it came to approaching investors with his initial idea to create a single GP fund that largely backs ideas that are too early for other VCs. “We had a pretty big LP based [at SoftTech] but what I didn’t realize is the LP base that’s interested in someone who is on fund three or four is very different than the LP base that’s interested in backing a brand new manager.”

Hudson says he spent a “bunch of time talking to fund of funds, university endowments — people who were just not right for me until someone pulled me aside and just said, ‘Hey, you’re talking to the wrong people. You need to find some family offices. You need to find some friends of Charles. You need to find people who are going to back you because they think this is a good idea and who aren’t quite so orthodox in terms of what they want to see in terms partner composition and all that.’”

Collectively, it took “300 to 400 LP conversations” and two years to close his first fund with $15 million. (It’s now raising its third pre-seed fund).

Ho says it took less time for Fika to close its first fund but that she and her partners talked with 600 people in order to close their $41 million debut effort, adding that she felt like a “used car salesman” by the end of the process.

Part of the challenge was her network, she says. “I wasn’t connected to a lot of high-net-worth individuals or endowments or foundations. That was a whole network that was new to me, and they didn’t know who the heck I was, so there’s a lot of proving to do.” A proof-of-concept fund instilled confidence in some of these investors, though Ho notes you have to be able to live off its economics, which can be miserly.

She also says that as someone who’d worked at Google and helped found the location data company Factual, she underestimated the work involved in running a small fund. “I thought, ‘Well, I’ve started these companies and run these big teams. How how different could it be?” But “learning the motions and learning what it’s really like to run the funds and to administer a fund and all responsibilities and liabilities that come with it . . . it made me really stop and think, ‘Do I want to do this for 20 to 30 years, and if so, what’s the team I want to do it with?’”

Investors will offer you funky deals; avoid these if you can

First-time managers often look to close on a big anchor investor as a positive indicator to other backers, and some LPs will take advantage of their real or perceived desperation to lock something down. Yet seizing certain opportunities can actually send the wrong signal, depending on the scenario.

In Hudson’s case, an LP offered him two options: either a typical LP agreement wherein the outfit would write a small check, or an option wherein it would make a “significant investment that would have been 40% of our first fund,” says Hudson.

Unsurprisingly, the latter offer came with a lot of strings. Namely, the LP said it wanted to have a “deeper relationship” with Hudson, which he took to mean it wanted a share of Precursor’s profits beyond what it would receive as a typical investor in the fund.

“It was very hard to say no to that deal, because I didn’t get close to raising the amount of money that I would have gotten if I’d said yes for another year,” says Hudson. He still thinks it was the right move, however. “I was just like, how do I have a conversation with any other LP about this in the future if I’ve already made the decision to give this away?”

Fika similarly received an offer that would have made up 25 percent of the outfit’s debut fund, but the investor wanted a piece of the management company. It was “really hard to turn down because we had nothing else,” recalls Ho. But she says that other funds Fika was talking with made the decision simpler. “They were like, ‘If you sign on to those terms, we’re out.” The team decided that taking a shortcut that could damage them longer term wasn’t worth it.

Your LPs have questions, but you should question LPs, too

More so than most first-time managers, Senkut started off with certain financial advantages, having been the first product manager at Google and enjoying the fruits of its IPO before leaving the outfit in 2005 along with many other Googleaires, as they were dubbed at the time.

It allowed him to start putting money to work immediately. Still, as he tells it, it was “not a friendly time a decade ago” to raise outside capital, with most solo general partners spinning out of other venture funds —  not search engines. As an outsider, to crack into the venture industry, he largely tried to shadow angel investor Ron Conway, working checks into some of the same deals that Conway was backing.

“If you want to get into the movie industry, you need to be in hit movies,” says Senkut. “If you want to get into the investing industry, you need to be in hits. And the best way to get into hits is to say, ‘Okay. Who has an extraordinary number of hits, who’s likely getting the best deal flow,’ because the more successful you are, the better companies you’re going to see, the better the companies that find you.”

Senkut has developed an enviable track record over time, including stakes in Credit Karma, which was just gobbled up by Intuit, and Plaid, sold in January to Visa. Those kinds of exits may give him more confidence than managers earlier in their careers might muster. Still, Senkut also says it’s very important for anyone raising a fund to not just answer LPs’ questions but to also ask the right questions of them.

He says, for example, that with Felicis’s newest fund, the team asked many managers outright about how many assets they have under management, how much of those assets are dedicated to venture and private equity, and how much of their allotment to each was already taken.

Felicis did this so it doesn’t find itself in a position of making a capital call that an investor can’t meet, especially given that in recent years, many institutional investors have been writing out checks to VCs at a faster pace than ever been before and have, in many cases, too much of their capital in the venture industry at this point.

In fact, Felicis added new managers who “had room” while cutting back some existing LPs “that we respected . .. because if you ask the right questions, it becomes clear whether they’re already 20% over-allocated [to the asset class] and there’s no possible way [they are] even going to be able to invest if they want to.”

It’s smart thinking and, when the market eventually eases up again, and new funds can again capture the attention of investors, certainly something to keep in mind.

Investors tell Indian startups to ‘prepare for the worst’ as Covid-19 uncertainty continues

Just three months after capping what was the best year for Indian startups, having raised a record $14.5 billion in 2019, they are beginning to struggle to raise new capital as prominent investors urge them to “prepare for the worst”, cut spending and warn that it could be challenging to secure additional money for the next few months.

In an open letter to startup founders in India, ten global and local private equity and venture capitalist firms including Accel, Lightspeed, Sequoia Capital, and Matrix Partners cautioned that the current changes to the macro environment could make it difficult for a startup to close their next fundraising deal.

The firms, which included Kalaari Capital, SAIF Partners, and Nexus Venture Partners — some of the prominent names in India to back early-stage startups — asked founders to be prepared to not see their startups’ jump in the coming rounds and have a 12-18 month runway with what they raise.

“Assumptions from bull market financings or even from a few weeks ago do not apply. Many investors will move away from thinking about ‘growth at all costs’ to ‘reasonable growth with a path to profitability.’ Adjust your business plan and messaging accordingly,” they added.

Signs are beginning to emerge that investors are losing appetite to invest in the current scenario.

Indian startups participated in 79 deals to raise $496 million in March, down from $2.86 billion that they raised across 104 deals in February and $1.24 billion they raised from 93 deals in January this year, research firm Tracxn told TechCrunch. In March last year, Indian startups had raised $2.1 billion across 153 deals, the firm said.

New Delhi ordered a complete nation-wide lockdown for its 1.3 billion people for three weeks earlier this month in a bid to curtail the spread of COVID-19.

The lockdown, as you can imagine, has severely disrupted businesses of many startups, several founders told TechCrunch.

Vivekananda Hallekere, co-founder and chief executive of mobility firm Bounce, said he is prepared for a 90-day slowdown in the business.

Founder of a Bangalore-based startup, which was in advanced stages to raise more than $100 million, said investors have called off the deal for now. He requested anonymity.

Food delivery firm Zomato, which raised $150 million in January, said it would secure an additional $450 million by the end of the month. Two months later, that money is yet to arrive.

Many startups are already beginning to cut salaries of their employees and let go of some people to survive an environment that aforementioned VC firms have described as “uncharted territory.”

Travel and hotel booking service Ixigo said it had cut the pay of its top management team by 60% and rest of the employees by up to 30%. MakeMyTrip, the giant in this category, also cut salaries of its top management team.

Beauty products and cosmetics retailer Nykaa on Tuesday suspended operations and informed its partners that it would not be able to pay their dues on time.

Investors cautioned startup founders to not take a “wait and watch” approach and assume that there will be a delay in their “receivables,” customers would likely ask for price cuts for services, and contracts would not close at the last minute.

“Through the lockdown most businesses could see revenues going down to almost zero and even post that the recovery curve may be a ‘U’ shaped one vs a ‘V’ shaped one,” they said.

The Station: Bird and Lime layoffs, pivots in a COVID-19 era and a $2.2 trillion deal

Hello folks, welcome back (or hi for the first time) to The Station, a weekly newsletter dedicated to the all the ways people and packages move around this world. I’m your host, Kirsten Korosec, senior transportation reporter at TechCrunch.

I also have started to publish a shorter version of the newsletter on TechCrunch . That’s what you’re reading now. For the whole enchilada — which comes out every Saturday — you can subscribe to the newsletter by heading over here, and clicking “The Station.” It’s free!

Before I get into the thick of things, how is everyone doing? This isn’t a rhetorical question; I’m being earnest. I want to hear from you (note my email below). Maybe you’re a startup founder, a safety driver at an autonomous vehicle developer, a venture capitalist, engineer or gig economy worker. I’m interested in how you are doing, what you’re doing to cope and how you’re getting around in your respective cities.

Please reach out and email me at kirsten.korosec@techcrunch.com to share thoughts, opinions or tips or send a direct message to @kirstenkorosec.

Micromobbin’

the station scooter1a

It was a rough week for micromobility amid the COVID-19 pandemic. Bird laid off about 30% of its employees due to the uncertainty caused by the coronavirus.

In a memo obtained by TechCrunch, Bird CEO Travis VanderZanden said:

The unprecedented COVID-19 crisis has forced our leadership team and the board of directors to make many extremely difficult and painful decisions relating to some of your teammates. As you know, we’ve had to pause many markets around the world and drastically cut spending. Due to the financial and operational impact of the ongoing COVID-19 crisis, we are saying goodbye to about 30% of our team.

The fallout from COVID-19 isn’t limited to Bird. Lime is also reportedly considering laying off up to 70 people in the San Francisco Bay Area.

Meanwhile, Wheels deployed e-bikes with self-cleaning handlebars and brake levers to help reduce the risk of spreading the virus. NanoSeptic’s technology, which is powered by light, uses mineral nano-crystals to create an oxidation reaction that is stronger than bleach, according to the company’s website. NanoSeptic then implements that technology into skins and mats to turn anything from a mousepad to door handles to handlebars into self-cleaning surfaces.

The upshot to all of this: COVID-19 is turning shared mobility on its head. That means lay offs will continue. It also means companies like Wheels will try to innovate or pivot in hopes of staying alive.

While some companies pulled scooters off city streets, others changed how they marketed services. Some turned efforts to gig economy workers delivering food. Others, like shared electric moped service Revel, are focusing on healthcare workers.

Revel is now letting healthcare workers in New York rent its mopeds for free. To qualify, they just need to upload their employee ID. For now, the free rides for healthcare workers is limited to Brooklyn, Queens and a new service area from upper Manhattan down to 65th street. Revel expanded the area to include hospitals in one of the epicenters of the disease.

Revel is still renting its mopeds to the rest of us out there, although they encourage people to only use them for essential trips. As you might guess, ridership is down significantly. The company says it has stepped up efforts of disinfecting and cleaning the mopeds and helmets. Revel also operates in Austin, New York City, Oakland, and Washington. It has suspended service in Miami per local regulations.

Megan Rose Dickey (with a cameo from Kirsten Korosec)

Deal of the week

money the station

Typically, I would highlight a large funding round for a startup in the “deal of the week” section. This week, I have broadened my definition.

On Friday, the House of Representatives passed a historic stimulus package known as the Coronavirus Aid, Relief, and Economic Security or “CARES” act. President Donald Trump signed it hours later. The CARES act contains an unprecedented $2.2 trillion in total financial relief for businesses, public institutions and individuals hit hard by the COVID-19 pandemic.

TechCrunch has just started what will be a multi-day dive into the 880-page document. And in the coming weeks, I will highlight anything related or relevant to the transportation industry or startups here.

I’ll focus today on three items: airlines, public transit and small business loans.

U.S. airlines are receiving $58 billion. It breaks down to about $25 billion in loans for commercial carriers, $25 billion in payroll grants to cover the 750,000 employees who work in the industry.  Cargo carriers will receive $4 billion in loans and $4 billion in grants. These loans come with some strings attached. Airlines will have to agree not to lay off workers through the end of September. The package forbids stock buybacks and issuing dividends to shareholders for a year after paying off one of the loans.

Public transit has been allocated $24.9 billion. The CARES Act provides almost three times the FY 2020 appropriations for this category, according to the American Public Transportation Association. The funds are distributed through a formula that puts $13.79 billion to urban, $2 billion to rural, $7.51 billion towards state of good repair and $1.71 billion for high-density state transit. APTA notes that these funds are for operating expenses to prevent, prepare for, and respond to COVID-19 beginning on January 20, 2020.

Amtrak received an additional $1 billion in grants, that directs $492 million of those funds towards the northeast corridor. The remaining goes to the national network.

Small business loans are a critical piece of the bill, and an area where many startups may be focused. There is a lot to unpack here, but in basic terms the act provides $350 billion in loans that will be administered by the Small Business Administration to businesses with 500 or fewer employees. These loans are meant to cover an eligible borrower’s payroll, rent, utilities expenses and mortgage interest for up to eight weeks. If the borrower maintains its workforce, some of the loan may be forgiven.

Venture-backed startups seeking relief may run into problems qualifying. It all comes down to how employees are counted. Normally, SBA looks at a company’s affiliates to determine if they qualify. So, a startup owned by a private equity firm is considered affiliated with the other companies in that firm’s portfolio, which could push employment numbers far beyond 500. That rule also seems to apply to venture-backed startups, in which more than 50% of voting stock is held by the VC.

The guidance on this is still spotty. But Fenwick & West, a Silicon Valley law firm, said in recent explainer that the rule has the “potential to be problematic for startups because the SBA affiliation rules are highly complex and could cause lenders to group together several otherwise unaffiliated portfolio companies of a single venture capital firm in determining whether a borrower has no more than 500 employees.”

One final note: The SBA has waived these affiliation rules for borrowers in the food services and food supply chain industry. It’s unclear what that might mean for those food automation startups or companies building autonomous vehicles for food delivery.

More deal$

COVID-19 has taken over, but deals are still happening. Here’s a rundown of some of partnerships, acquisitions and fundraising round that got our attention.

  • Lilium, the Munich-based startup that is designing and building vertical take-off and landing (VTOL) aircraft and aspires to run in its own taxi fleet, has raised $240 million in a funding round led by Tencent. This is being couched as an inside round with only existing investors, a list that included participation from previous backers such as Atomico, Freigeist and LGT. The valuation is not being disclosed. But sources tell us that it’s between $750 million and $1 billion.
  • Wunder Mobility acquired Australia-based car rental technology provider KEAZ. (Financial terms weren’t disclosed, but as part of the deal KEAZ founder and CTO Tim Bos is joining Wunder Mobility) KEAZ developed a mobile app and back-end management tool that lets rental agencies, car dealerships, and corporations provide shared access to vehicles.
  • Cazoo, a startup that buys used cars and then sells them online and delivers to them your door, raised $116 million funding. The round was led by DMG Ventures with General Catalyst, CNP (Groupe Frère), Mubadala Capital, Octopus Ventures, Eight Roads Ventures and Stride.VC also participating.
  • Helm.ai came out of stealth with an announcement that it has raised $13 million in a seed round that includes investment from A.Capital Ventures, Amplo, Binnacle Partners, Sound Ventures, Fontinalis Partners and SV Angel. Helm.ai says it developed software for autonomous vehicles that can skip traditional steps of simulation, on-road testing and annotated data set — all tools that are used to train and improve the so-called “brain” of the self-driving vehicle.
  • RoadSync, a digital payment platform for the transportation industry, raised a $5.7 million in a Series A led by Base10 Partners with participation from repeat investor Hyde Park Venture Partners and Companyon Ventures. The company developed cloud-based software that lets businesses invoice and accept payments from truck drivers, carriers and brokers. Their platform is in use at over 400 locations nationwide with over 50,000 unique transactions monthly, according to RoadSync.
  • Self-driving truck startup TuSimple is partnering with automotive supplier ZF to develop and produce autonomous vehicle technology, such as sensors, on a commercial scale. The partnership, slated to begin in April, will cover China, Europe and North America.

A final word

Remember, the weekly newsletter features even more mobility news and insights. I’ll leave ya’ll with this one chart from Inrix. The company has launched a U.S. traffic synopsis that it plans to publish every Monday. The chart shows traffic from the week of March 14 to March 20. The upshot: COVID-19 reduced traffic by 30% nationwide.

inrix traffic drop from covid

Garry Tan and Alexis Ohanian on how to survive these crazy days (and what to learn from them)

Garry Tan and Alexis Ohanian founded Initialized Capital roughly nine years ago and they’ve closed four funds since, including most recently in late 2018.

That $225 million vehicle is roughly twice the size of their previous fund, but because of the coronavirus, the firm, and its portfolio companies — some of which include Opendoor, Instacart and Coinbase — could be facing a tougher road in 2020. Certainly, that’s true of nearly ever other venture firm and startup right now.

To get a sense of where the team is currently, what it’s telling its founders, whether it thinks the abrupt downturn might change founders’ behavior, as well as whether either thinks big tech should be broken up, we talked with the two last night about these issues and more. It was a fun conversation that you can check out here, beginning around the 23 minute mark. In the meantime, you can find highlights from our conversation right here. Among the many things we covered:

We first talked about how much runway startups need right now that the U.S. is largely closed for business.

Tan offered that because returning to normalcy could “well be six to nine months,” partly because the U.S. isn’t informally containing the virus and there’s not yet a vaccine for it. To “make sure you have the cash to last to the other side,” he said, founders need to think in terms of 18 months. “It’s a lot,” said Tan, “but that’s sort of what’s necessary, and that’s what we’ve been advising our portfolio companies.

The duo also talked about  how to actually squeeze 18 months of runway out of startup that hasn’t freshly raised a round.

Ohanian said to “renegotiate everything,” from office space to venture debt agreements. He also noted there are “obvious things that you get cut early, around like non-essential marketing,” saying, “I’m as bummed as the next person to not be able to go to Cannes Lions this year, but I think we all agree like these are very reasonable things to be cutting at times like this.”

Because Ohanian is fairly vocal on Twitter about U.S. efforts to contain the coronavirus and to help healthcare workers, we spent some time on this, too. 

Ohanian said that, “Like a lot of Americans, I’m pretty frustrated by the situation right now. I mean, I live in Florida, which I think is going to see some really staggering numbers [of sickened residents] here in the next couple of weeks [because of its] elderly population and . . .a governor that’s that’s taking too long to do the things we need to do to keep them safe.”

He added that he remains inspire by the “ingenuity and the resilience” of its citizens, including founders who’ve begun adapting to these new situations, including the Initialized portfolio companies Flexport, the logistics startup, and Ro, the tele-health startup that originally focused on men’s wellness.

Through a new initiative announced earlier this week, Flexport is “literally raising millions of dollars in donations to bring medical supplies to the Bay Area and to those healthcare workers,” noted Ohanian.

Ro is meanwhile offering a free Covid-19 assessment to anyone who wants to take it and if he or she is deemed at enough risk, Ro will connect that individual with a physician or RN. That medical professional can’t administer an FDA-approved test, Ohanian acknowledged, but it’s better than nothing, he suggested. “This is not a salve. This is not a magic wand at all. What hopefully this can do is give people more information quicker about the decisions they should be making about their own safety and the safety of people they might come in contact with.”

Naturally, we had to ask how a founder lands a check from Initialized, and whether the firm needs to see a product or momentum first.

On this front, Tan was clear that “no traction is fine,” explaining that the firm funded Around, a two-year-old, Redwood City, Ca.-based videoconferencing startup that this month announced $5.2 million in seed funding, with “a demo that kind of honestly barely worked” but whose approach to solving a particular problem really resonated with the team.

Tan also pointed to Instacart, the grocery delivery company that’s “doing insanely well right now,” as housebound Americans steer clear of grocery stores.

“When I met [founder and CEO Apoorva Mehta,” said Tan, “it was the early days of the iPhone app platform” and “everyone else was pitching that idea” at the same time. But where most ‘demoware’ is “jerky” or “not properly threaded,” Mehta’s “scrolled really smoothly and the images were properly threaded and I could see that he was a craftsman,” says Tan. As important to him, “Apoorva is not a person who accepts ‘no.’ He takes a no and turns it into a yes.” (Both Tan and Ohanian emphasized here that good salesmanship, meaning solid storytelling, can accomplish a lot.)

As for what’s happening day to day, we asked both if they’re spending time in board meetings, poring over financials and trying to figure out how keep the startups in their portfolio going during this downturn. They suggested they’d already done this before Covid-19 took hold in the U.S.

Said Tan, “Not to put other VCs on blast, but often they don’t actually keep track of the runway of their companies quite so closely. For us, we have quarterly reviews, [so] the day all this stuff happened, we immediately knew who we needed to spend time with. We’d started talking about this in February. I wore my first N95 mask to our retreat in Cabo San Lucas [early last month] and and people at the airport thought I was a little bit nuts, but it was already in our mind that [the virus] might come over here. So when we did our last portfolio review in February, we were already mindful of anyone who has short runway [because we wanted] to make sure we had that conversation.”

Added Tan, “There are some boards that I’m on where I was telling them this was going to happen, and they just didn’t believe me. But for a few teams, they were able to put the right things into place and start their fundraise a little bit earlier.”

Before we let them go, we asked if they had thoughts about the tech giants — on which we’re suddenly more reliant on ever  — being broken up, and whether they should be.

Ohanian, who famously cofounded the social media giant Reddit, declined to say much on this front, other than that Initialized has backed “companies that thrive in part because they’re giving everyone else a chance to compete with Amazon. So I don’t know if that doesn’t tell you something, I don’t know what else would.”

For his part, Tan said he “probably” doesn’t want the government to intervene with big tech, but he’s concerned about their rise (and rise).  Said Tan, “What I want is our startups to be successful, and when they become successful, that they arm thousands of small businesses, medium-size businesses, and the retailers that could not possibly to hire an engineer to actually survive. . . because otherwise, Amazon’s going to run the table. 

We also asked if they worry big tech companies are more hesitant to shop, given the regulatory scrutiny they have been under. 

Tan suggested that Initialized hasn’t counted on M&A activity for its exits for some time.  “What’s weird about startups [[is that back] in 2008 when we came up, M&A was a much bigger part of what people talked about. These days, everything we fund, we want to fund it for the IPO.”

The reality, he continued is that none of the tech giants are acquisitive because they “sort of don’t know what to do with the cash. [There’s] definitely a Peter Thiel-ism that I totally believe, which is that Google is sitting on a cash hoard, and when you sit on a cash hoard, it means, ‘I don’t know what else to do. There are not projects that have a positive net IRR that I can put that money into. I could not hire people to go work on a thing that could make more money.’

Said Tan, “If anything, these companies have sort of become giant babysitting places for very, very smart tech people.”

Not last, we talked about their hopes for what comes next.

Ohanian is choosing to remain optimistic on a lot of fronts right now, he suggested, and that’s unsurprisingly true of his work. As he told us, “One of the fortunate parts about doing early-stage investing is also that this [frightening moment] is a time when founders are going to come solving real problems. I actually expect the next two years to be opportunities for some really great and hopefully impactful companies to get formed. “In the wake of all this,  [founders] can not just solve really important business leads; they can also do some good in the process.”

Before we parted ways, we also talked about founders and whether some had blown it by not taking their companies public while the window was still open.

Both Tan and Ohanian seemed to defend founders who’ve chosen to stay private longer in recent years while ceding that staying private isn’t good for employees or investors or the founders themselves. Indeed, “a lot of it comes back to governance,” said Ohanian, with both he and Tan expressing equal parts dismay over activist investors and the perpetual shareholder rights that founders have been demanding to protect themselves from said activist investors. (Ohanian called such voting rights an “ugly hack.”)

Both sang the praises of Long Term Stock Exchange — the stock exchange created by entrepreneur Eric Ries — and what it hopes to accomplish, which is to make it safer to go public without worrying about activist investors by rewarding longer-term shareholders who believe in a company.

Worth noting: LTSE, as it’s known, is an Initialized portfolio company.

Photo: Tim Daw for Initialized Capital

Former Slack exec April Underwood has joined Obvious Ventures as a venture partner

April Underwood, who until early last year was Slack’s chief product officer, has joined Obvious Ventures as a venture partner, she announced on Twitter today.

Underwood said that as part of the firm’s team, she will “invest in great companies seeking to solve the big problems facing humanity: our climate, human health and wellness, and how we work.” Of Obvious’s focus on “backing company with world positive impact,” she said its mission “couldn’t possibly feel more needed than it does in this particular moment.”

For Underwood, the role is one of several that she is currently juggling. She founded a startup advisory outfit called Wise Owl last year. She is also a cofounder of #Angels, an organization that focuses on investing in female founders and to which Underwood remains very committed, she said today, tweeting that her focus on “getting more women on the cap tables of successful startups will continue unabated.”

Underwood is now among a growing number of  #Angels cofounders — powerful women at Twitter who introduced the initiative in 2015 — to be investing on pretty much a full-time basis.

In addition to Underwood, who spent nearly five years as a director of product at Twitter before joining Slack, #Angels was founded by Jana Messerschmidt, who is now a partner with Lightspeed Venture Partners; Jessica Verrilli, who is now a general partner with GV; and Katie Stanton Jacobs, who recently closed her own first venture fund with $25 million in capital commitments under the brand Moxie Ventures.

Another #Angels founder Vijaya Gadde, was and remains the General Counsel at Twitter. Meanwhile, Chloe Sladden, a former VP of Media at Twitter, last year cofounded a seed-stage startup making collaborative parenting tools called Honeycomb Labs.

Underwood, who also sits on the board of Zillow, was in charge of much of Slack’s strategy and product decisions during her nearly four years with the company.

Underwood is now one of three venture partners who are working with Obvious Ventures .

The others include serial entrepreneur, investor and advisor Julie Hanna, and Di-Ann Eisnor, who was previously the Director of Urban Systems at Google’s Area 120.

Obvious Ventures — cofounded very notably by Twitter cofounder Ev Williams —  closed its third fund with roughly $270 million in capital commitments earlier this year.

Did African startups raise $496M, $1B or $2B in 2019?

Five years ago, it was hard to come by any numbers for annual VC investment in Africa. These days the challenge is choosing which number to follow.

That’s the case for three venture funding studies for Africa that turned up varied results.

The numbers and variance

Investment stats released by media outlet Disrupt Africa, data-base WeeTracker and Africa focused fund Partech have left some people scratching their heads.

From high to low, Partech pegged total 2019 VC for African startups at $2 billion, compared to WeeTracker’s $1.3 billion estimate and Disrupt Africa’s $496 million.

That’s a fairly substantial spread of $1.5 billion between the assessments. The variance filtered down to country VC valuations, though it was a little less sharp.

Africa VC markets 2019Partech and WeeTracker shared the same top-three countries for 2019 VC investment in Africa — Nigeria, Kenya, and Egypt — but with hundred-million dollar differences.

Disrupt Africa came up with a different lead market for startup investment on the continent — Kenya — though its $149 million estimate for the East African country was some $500 million lower than Partech and WeeTracker’s VC leader, Nigeria.

So what accounts for the big deviations? TechCrunch spoke to each organization (and reviewed the reports) and found the contrasting stats derive from different methodologies — namely defining what constitutes a startup and an African startup.

Partech’s larger overall VC valuation for the continent comes from broader parameters for companies and quantifying investment.

“We do not limit the definition of startups by age of the incorporation or size of funds raised,” Partech General Partner Tidjane Deme told TechCrunch.

This led the fund, for example, to include Visa’s $200 million investment in Nigerian financial-services company Interswitch . The corporate round was certainly tech-related, though few would classify Interswitch — which launched in 2002, acquires companies, and has a venture fund — as a startup.

Partech’s higher annual VC value for Africa’s startups could also connect to tallying confidential investment data.

“We…collect and analyze undisclosed deals, accessing more detailed information thanks to our relationships within the ecosystem,” the fund’s report disclosed.

WeeTracker’s methodology also included data on undisclosed startup investments and opened up the count to funding sources beyond VC.

“Debt/loans, grants/awards/prizes/non-equity assistance, crowdfunding, [and] ICOs are included,” WeeTracker clarified in a methodology note.

Disrupt Africa used a more conservative approach across companies and investment. “We are a bit more narrow on what we consider a startup to be,” the site’s co-founder Tom Jackson told TechCrunch.

“In the clearest scenario, an African startup would be headquartered in Africa, founded by an African, and have Africa as its primary market,” Disrupt Africa’s report stated  — though Jackson noted all these factors don’t always align.

“Disrupt Africa tackles this issue on a case-by-case basis,” he said.

Partech was more liberal in its definition of an African startup, including investment for tech-companies that count Africa as their primary market, but not insisting they be incorporated or operate HQs on the continent.

Andela FoundersThat opened up inclusion of large 2019 rounds to Africa focused, New York headquartered tech-talent accelerator Andela and investment to Opera’s verticals, such as OPay in Nigeria.

In addition to following a more conservative definition of African startup, Disrupt Africa’s report was more particular to early-stage ventures. The site’s report primarily counted investment for companies founded within the last five year and excluded “spin-offs of corporates or any other large entity…that [has]…developed past the point of being a startup.”

Commonalities across reports

For all the differences on annual VC counts for Africa, there were some common threads across WeeTracker, Partech, and Disrupt Africa’s investment reports.

The first was the rise of Nigeria — which has Africa’s largest population and economy — as the top destination for startup VC investment on the continent.

The second was the prominence of fintech as the most funded startup sector across Africa, gaining 54% of all VC in Partech’s report and $678 million of the $1.3 billion to startups in WeeTracker’s study.

VC inequality

An unfortunate commonality in each report was the preponderance of startup investment going to English speaking Africa. No francophone country made it into the the top five in any of the three reports. Only Senegal registered on Partech’s country-list, with a small $16 million in VC in 2019.

The Dakar Angel Network launched last year to bridge the resource gap for startups in French-speaking African countries.

Final sum

There may not be a right or wrong stat for annual investment to African startups, just three reports with different methodologies that capture unique snapshots.

Partech and WeeTracker offer a broader view of multiple types of financial support going to tech companies operating in Africa. Disrupt Africa’s assessment is more specific to a standard definition of VC going to startups originating and operating in Africa.

Three reports with varying numbers on the continent’s startup investment is a definite upgrade to what was available not so long ago: little to no formal data on VC in Africa.

Tuesday Capital teams up with design powerhouse Frog to grab startups’ attention — and keep it

In a day and age when everyone seems to have their own seed-stage venture fund, it’s hard to stand out. But Tuesday Capital, the San Francisco-based outfit formerly known as CrunchFund, thinks it has found a way. Today, the firm announced a new partner in Frog, the renowned design firm whose past clients include the headset maker Oculus, among countless others.

The partnership dates back nearly four years. It was then that Tuesday’s cofounder and managing partner Pat Gallagher was introduced to FrogVentures, the design firm’s investment incubator.

P.J. Gunsagar, the CEO of one of Tuesday’s portfolio companies, KidAptive, had hired Frog to help this company–an online adaptive learning program for children — design a portal that parents could use to see how their children were progressing. Wowed with what they came up — Gunsager believes it helped KidAptive land its Series B round — he suggested that Gallager meet with Ethan Imboden, a former designer and the Frog division’s head.

It was apparently a match. In fact, soon after the two connected, Tuesday rebranded from CrunchFund. “They helped us with our own branding and to navigate around a lot of confusion” tied to the venture firm’s earliest connection to both TechCrunch and Crunchbase. (All three companies were cofounded by entrepreneur and investor Michael Arrington, who has since moved on to form Arrington XRP Capital.)

Says Gallagher, “We were incredibly impressed with the quality of the marketing folks and the technologists and the branding folks,” whose suggestion tied to the belief that Tuesday is the most productive day of the week.

Before long, Gallagher and Imboden were sharing their networks and their deal flow. Now, out of that organic collaboration, the new partnership has been more formally imagined.

How it will work exactly: early-stage ventures will be eligible to receive investment from Tuesday Capital to engage Frog, giving the startups the option of covering the cost of their design projects with equity. Ostensibly, by making it easier for partners to access Frog’s services — which include brand, product, go-to-market strategies, digital product and connected hardware design — they’ll get to market faster and be stronger when they get there.

To cement the deal, Tuesday purchased a share of FrogVentures’s venture portfolio — it now owns stakes formerly owned by Frog in eight companies — and Frog committed to become one of the largest limited partners in Tuesday’s current (fourth) fund so that it continues to get upside from those companies and future Tuesday startups with which it consults. Imboden is also now a venture partner with Tuesday, sitting in all all of the firm’s partner calls and “integrating himself into our workflow,” says Gallagher. “When we talk about new investments, he’s now part of those conversations.”

Considering Frog’s past client list, that could prove a powerful perspective for Tuesday to have around the table.

Of course, Tuesday still has to battle its way to get the attention of top founders who are getting pulled in all directions by investors, both new and old. But the firm, typically writes initial checks of between $250,000 and $500,000, suddenly has a a lot more to offer. “We’ve always tried to be additive to investor syndicates. We help with PR and media and content services.” Now, it can provide access to Frog, too.

It could certainly tip more deals in its direction. “If you need access to design services, if you need to talk with an industrial designer for a couple of hours, if you want an all-day seminar [alongside other portfolio companies]” Frog, with its vested interest in Tuesday, will be there, he says.

Photo, courtesy of Frog.

Nigeria is becoming Africa’s unofficial tech capital

Africa has one of the world’s fastest growing tech markets and Nigeria is becoming its unofficial capital.

While the West African nation is commonly associated with negative cliches around corruption and terrorism — which persist as serious problems, and influenced the Trump administration’s recent restrictions on Nigerian immigration to the U.S.

Even so, there’s more to the country than Boko Haram or fictitious princes with inheritances.

Nigeria has become a magnet for VC, a hotbed for startup formation and a strategic entry point for Silicon Valley. As a frontier market, there is certainly a volatility to the country’s political and economic trajectory. The nation teeters back and forth between its stereotypical basket-case status and getting its act together to become Africa’s unrivaled superpower.

The upside of that pendulum is why — despite its problems — so much American, Chinese and African tech capital is gravitating to Nigeria.

Demographics

“Whatever you think of Africa, you can’t ignore the numbers,” Africa’s richest man Aliko Dangote told me in 2015, noting that demographics are creating an imperative for global businesses to enter the continent.

Kleiner Perkins has already blown through much of the $600 million it raised last year

Kleiner Perkins, one of the most storied franchises in venture capital, has already invested much of the $600 million it raised last year and is now going back out to the market to raise its 19th fund, according to multiple sources.

The firm, which underwent a significant restructuring over the last two years, went on an investment tear over the course of 2019 as new partners went out to build up a new portfolio for the firm — almost of a whole cloth.

A spokesperson for KPCB declined to comment on the firm’s fundraising plans citing SEC regulations.

The quick turnaround for KPCB is indicative of a broader industry trend, which has investors pulling the trigger on term sheets for new startups in days rather than weeks.

Speaking onstage at the Upfront Summit, an event at the Rose Bowl in Pasadena, Calif. organized by the Los Angeles-based venture firm Upfront Ventures as a showcase for technology and investment talent in Southern California, venture investor Josh Kopelman spoke to the heightened pace of dealmaking at his own firm.

The founder of First Round Ventures said that the average time from first contact with a startup to drawing up a term sheet has collapsed from 90 days in 2004 to 9 days today.

Josh Kopelman of First Round Capital: we can look at every company we’ve ever funded, and learned that the time from first email/contact to term sheet has shrunk from 90 days in 2004 to just 9 today.

— Dan Primack (@danprimack) January 29, 2020

 

“This could also be due to changes in the competitive landscape … and there may be changes with First Round Capital itself,” says one investor. “It may have been once upon a time that they were looking at really early raw stuff… But, today, First Round is not really in the first round anymore. Companies are raising some angel money or Y Combinator money.”

At KPCB, the once-troubled firm has been buoyed by recent exits in companies like Beyond Meat, a deal spearheaded by the firm’s former partner Amol Deshpande (who now serves as the chief executive of Farmers Business Network) and Slack.

And its new partners are clearly angling to make names for themselves.

“KP used to be a small team doing hands-on company building. We’re moving away from being this institution with multiple products and really just focusing on early-stage venture capital,” Kleiner Perkins  partner Ilya Fushman said when the firm announced its last fund.

Kleiner Perkins partner Ilya Fushman

“We went out to market to LPs. We got a lot of interest. We were significantly oversubscribed,” Fushman said of the firm’s raise at the time.

In some ways, it’s likely the kind of rejuvenation that John Doerr was hoping for when he approached Social + Capital’s Chamath Palihapitiya about “acquiring” that upstart firm back in 2015.

At the time, as Fortune reported, Palihapitiya and the other Social + Capital partners, Ted Maidenberg and Mamoon Hamid would have become partners in the venture firm under the terms of the proposed deal.

Instead, Social + Capital walked away, the firm eventually imploded and Hamid joined Kleiner Perkins two years later.

The new Kleiner Perkins is a much more streamlined operation. Gone are the sidecar and thematic funds that were a hallmark of earlier strategies and gone too are the superstars brought in by Mary Meeker to manage Kleiner Perkins’ growth equity investments. Meeker absconded with much of that late stage investment team to form Bond — and subsequently raised hundreds of millions of dollars herself.

Those strategies have been replaced by a clutch of young investors and seasoned Kleiner veterans including Ted Schlein who has long been an expert in enterprise software and security.

“Maybe at this point they think they can raise based on the whole story about Mamoon taking over and a few years from now they won’t be able to raise on that story and will have to raise on the results,” says one investor with knowledge of the industry. “Mamoon is a pretty legit, good investor. But the legacy of the firm is going to be tough to overcome.”

All of these changes are not necessarily sitting well with limited partners.

“LPs are not really happy about what’s going on,” says one investor with knowledge of the venture space. “Everybody thinks valuations are too high since 2011 and people are thinking there’s going to be a recession. LPs think funds are coming back to market too fast and they’re being greedy and there’s not enough vintage diversification but LPs … feel almost obligated that they have to do these things… Investing in Sequoia is like that saying that you don’t get fired for buying IBM .”

LA tech industry mourns Kobe Bryant

The Los Angeles startup community is joining the rest of the world in mourning the death of NBA superstar, entrepreneur and investor Kobe Bryant who was killed in a helicopter crash in Calabasas, Calif., shortly before 10 a.m. on Sunday.

Reports indicate that Bryant, his 13-year-old daughter Gianna Maria-Onore Bryant, and seven other passengers were on board a helicopter traveling to Bryant’s basketball training facility Mamba Academy. There were no survivors.

The 41 year-old NBA All-Star, Olympic medalist, Oscar winner and father of four was most famous for his achievements on the basketball court, but had established himself as an entrepreneur and investor whose reach extended far beyond the Los Angeles area that he called home.

“Kobe was loved in Los Angeles,” wrote Mark Suster, managing partner of the Los Angeles-based venture capital firm Upfront Ventures, in a private message to TechCrunch. “He not only played at the peak of his sport but everything he did was quality from film, to books to philanthropy. It’s truly a sad day in LA.”

Bryant launched his venture career with partner and serial entrepreneur Jeff Stibel back in 2013, according to Crunchbase. The pair made a mix of early- and late-stage investments in Los Angeles-based companies like LegalZoom, Scopely, Art of Sport, The Honest Company, RingDNA, FocusMotion, DyshApp and Represent.

Last year, the investment firm expanded with a $1.7 billion investment vehicle that was launched in partnership with the private equity fund, Permira, according to a report in USA Today.

“We are mourning this terrible loss and still searching for the words,” wrote Mattias Metternich, co-founder of Bryant’s grooming startup, Art of Sport, in an email. “As a founding partner to [Art of Sport] he was woven into the very fabric of our company and its vision and DNA. As a mentor we drew on his wisdom, passion and drive everyday… In the short term our thoughts and hearts are with him, Gianna and his surviving family.”

Jessica Alba, the co-founder of The Honest Company, took to Twitter earlier in the day to share her own reaction to the news. And Scopely’s official Twitter account shared a reaction, as well.

An all-time legend, and our friend and supporter. Our thoughts are with all of the families affected by the tragic accident today. You will be missed, @kobebryant. pic.twitter.com/FzhNl5ndau

Scopely (@scopely) January 26, 2020

During his time with the Los Angeles Lakers, the MVP and 18-time All-Star set records and helped architect runs to five national championships. Together with Shaquille O’Neal, Bryant helped make the Lakers the dominant team in the NBA in the early 2000s.

“Kobe was the rare combination of God-given talent on-and-off the court with a competitive athlete mindset that was unrivaled to the point it was called the ‘mamba mentality’. Whatever he put his focus turned into excellence, whether it was an NBA championship, an Oscar, entering the VC game or — most importantly — fatherhood,” wrote Upfront Ventures general partner Kobie Fuller. “This loss is shocking and puts into perspective how precious our moments on this earth really are. My heart goes out to the Bryant family during this incredibly difficult time.”

While Bryant’s sports career was storied, and his post-sports career in media and investing successful, his legacy is complicated by a sexual assault allegation in 2003, which was later settled and for which Bryant apologized, but did not admit guilt.

Catalyst Fund gets $15M from JP Morgan, UK Aid to back 30 EM fintech startups

The Catalyst Fund has gained $15 million in new support from JP Morgan and UK Aid and will back 30 fintech startups in Africa, Asia, and Latin America over the next three years.

The Boston based accelerator provides mentorship and non-equity funding to early-stage tech ventures focused on driving financial inclusion in emerging and frontier markets.

That means connecting people who may not have access to basic financial services — like a bank account, credit or lending options — to those products.

Catalyst Fund will choose an annual cohort of 10 fintech startups in five designated countries: Kenya, Nigeria, South Africa, India and Mexico. Those selected will gain grant-funds and go through a six-month accelerator program. The details of that and how to apply are found here.

“We’re offering grants of up to $100,000 to early-stage companies, plus venture building support…and really…putting these companies on a path to product market fit,” Catalyst Fund Director Maelis Carraro told TechCrunch.

Program participants gain exposure to the fund’s investor networks and investor advisory committee, that include Accion and 500 Startups. With the $15 million Catalyst Fund will also make some additions to its network of global partners that support the accelerator program. Names will be forthcoming, but Carraro, was able to disclose that India’s Yes Bank and University of Cambridge are among them.

Catalyst fund has already accelerated 25 startups through its program. Companies, such as African payments venture ChipperCash and SokoWatch — an East African B2B e-commerce startup for informal retailers — have gone on to raise seven-figure rounds and expand to new markets.

Those are kinds of business moves Catalyst Fund aims to spur with its program. The accelerator was founded in 2016, backed by JP Morgan and the Bill & Melinda Gates Foundation.

Catalyst Fund is now supported and managed by Rockefeller Philanthropy Advisors and global tech consulting firm BFA.

African fintech startups have dominated the accelerator’s companies, comprising 56% of the portfolio into 2019.

That trend continued with Catalyst Fund’s most recent cohort, where five of six fintech ventures — Pesakit, Kwara, Cowrywise, Meerkat and Spoon — are African and one, agtech credit startup Farmart, operates in India.

The draw to Africa is because the continent demonstrates some of the greatest need for Catalyst Fund’s financial inclusion mission.

By several estimates, Africa is home to the largest share of the world’s unbanked population and has a sizable number of underbanked consumers and SMEs.

Roughly 66% of Sub-Saharan Africa’s 1 billion people don’t have a bank account, according to World Bank data.

Collectively, these numbers have led to the bulk of Africa’s VC funding going to thousands of fintech startups attempting to scale payment solutions on the continent.

Digital finance in Africa has also caught the attention of notable outside names. Twitter/Square CEO Jack Dorsey recently took an interest in Africa’s cryptocurrency potential and Wall Street giant Goldman Sachs has invested in fintech startups on the continent.

This lends to the question of JP Morgan’s interests vis-a-vis Catalyst Fund and Africa’s financial sector.

For now, JP Morgan doesn’t have plans to invest directly in Africa startups and is taking a long-view in its support of the accelerator, according to Colleen Briggs — JP Morgan’s Head of Community Innovation

“We find financial health and financial inclusion is a…cornerstone for inclusive growth…For us if you care about a stable economy, you have to start with financial inclusion,” said Briggs, who also oversees the Catalyst Fund.

This take aligns with JP Morgan’s 2019 announcement of a $125 million, philanthropic, five-year global commitment to improve financial health in the U.S. and globally.

More recently, JP Morgan Chase posted some of the strongest financial results on Wall Street, with Q4 profits of $2.9 billion. It’ll be worth following if the company shifts its income-generating prowess to business and venture funding activities in Catalyst Fund markets such as Nigeria, India and Mexico.

Deep tech VCs on what they view as some of the most impactful young startups right now

During this week’s Democratic debate, there was a lot of talk, unsurprisingly, about ensuring the future of this country’s children and grandchildren. Climate change was of particular interest to billionaire Tom Steyer, who said repeatedly that addressing it would be his top priority were he elected U.S. president.

As it happens, earlier the same day, we’d spent time on the phone with two venture capitalists who think of almost nothing else every day. The reason: they both invest in so-called deep tech, and they meet routinely with startups whose central focus is on making the world habitable for generations of people to come — as well as trying to produce outsize financial returns, of course.

The two VCs with whom we talked know each other well. Siraj Khaliq is a partner at the global venture firm Atomico, where he tries to find world-changing startups that are enabled by machine learning, AI, and computer vision. He has strong experience in the area, having cofounded The Climate Corporation back in 2006, a company that helps farmers optimize crop yield and that was acquired by Monsanto in 2013 for roughly $1 billion.

Seth Bannon is meanwhile a founding partner of Fifty Years, a nearly five-year-old, San Francisco-based seed-stage fund whose stated ambition is backing founders who want to solve the world’s biggest problems. The investors’ interests overlap so much that Khaliq is also one of Fifty Years’s investors.

From both, we wanted to know which companies or trends are capturing their imagination and, in some cases, their investment dollars. Following are excerpts from our extended conversation earlier this week. (We thought it was interesting; hopefully you will, too.)

TC: Seth, how would you describe what you’re looking to fund at your firm?

SB: There’s a Winston Churchill essay [penned nearly 100 years ago] called “Fifty Years Hence” that describes what we do. He predicts genomic engineering, synthetic biology, growing meat without animals, nuclear power, satellite telephony.  Churchill also notes that because tech changes so quickly that it’s important that technologists take a principled approach to their work. [Inspired by him] we’re backing founders who can make a ton of money while doing good and focusing on health, disease, the climate crisis . . .

TC: What does that mean exactly? Are you investing in software?

SB: We’re not so enthusiastic about pure software because it’s been so abstracted away that it’s become a commodity. High school students can now build an app, which is great, but it also means that competitive pressures are very high. There are a thousand funds focused on software seed investing. Fortunately, you can now launch a synthetic biology startup with seed funding, and that wasn’t possible 10 years ago. There are a lot of infrastructural advancements happening that makes [deep tech investing even with smaller checks] interesting.

TC: Siraj, you also invest exclusively on frontier, or deep tech, at Atomico . What’s your approach to funding startups?

SK: We do Series A [deals] onward and don’t do seed stage. We primarily focus on Europe. But there’s lot of common thinking between us and Seth. As a fund, we’re looking for big problems that change the world, sometimes at companies that won’t necessarily be big in five years but if you look out 10 years could be necessary for humanity. So we’re trying to anticipate all of these big trends and focus on three or four theses a year and talk as much as we can with academics and other experts to understand what’s going on. Founders then know we have an informed view.

Last year, we focused on synthetic biology, which is a becoming so broad a category that it’s time to start subdividing it. We were also doing AI-based drug discovery and quantum computing and we started to spend some time on energy as well. We also [continued an earlier focus on ] the future of manufacturing and industry. We see a number of trends that make [the latter] attractive, especially in Europe where manufacturing hasn’t yet been digitized.

TC: Seth, you mentioned synthetic biology infrastructure. Can you elaborate on what you’re seeing that’s interesting on this front?

SB: You’ve maybe heard of directed evolution, technology that allows biologists to use the power of evolution to get microbes or other biological machines to do what they want them to do that would have been impossible before. [Editor’s note: here, Bannon talked a bit about Frances Arnold, the Nobel Prize-winning chemist who was awarded the prize in 2018 for developing the technique.]

So we’re excited to back [related] startups. One, Solugen, enzymatically makes industrial chemicals [by combining genetically modified enzymes with organic compounds, like plant sugars]. Hydrogen peroxide is a $6 billion dollar industry, and it’s currently made through a petroleum-based process in seven-football-field-long production plants that sometimes explode and kill people.

TC: Is this then akin to Zymergen, which develops molecules in order to create unique specialty materials?

SB: Zymergen mainly works as a kind of consultant to help companies engineer strains that they want. Solugen is a vertically integrated chemicals company, so it [creates its formulations], then sells directly into industry.

TC: How does this relate to new architectures?

SB: The way to think about it is that there’s a bunch of application-level companies, but as synthetic biology companies start to take off, there’s a bunch of emerging infrastructure layer companies. One of these is Ansa Biotechnologies, which has a fully enzymatic process or writing DNA. Like Twist, which went public, they make DNA using a chemical process [to sell to clients in the biotechnology industry. [Editor’s note: More on the competition in this emerging space here.]

Also, if you look at plant-based alternatives to meat, they’re more sustainable but also far more expensive than traditional beef. Why is that? Well plant-based chicken is more expensive because the processing infrastructure being used is more than 10 years behind real chicken processing, where you’ll see robot arms that cut up chicken so efficiently that it looks like a Tesla factory.

[Alternative meat] companies are basically using these extruders built in the ’70s because the industry has been so small, and that’s because there’s been a lot of skepticism from the investment community in these companies. Or there was. The performance of Beyond Meat’s IPO ended it. Now there’s a rush of founders and dollars into that space, and whenever you have a space where the core infrastructure has been neglected, there’s opportunity. A former mechanical engineer with Boeing has started a company, Rebellyous Foods, to basically build the AWS for the plant-based food industry, for example. She’s using [the machines she’s building] to sell plant-based chicken nuggets, [but that’s the longer-term plan].

TC: Siraj, you say last year you started to spend time on energy. What’s interesting to you as it relates to energy?

SK: There’s been some improvement in how we capture emissions, but [carbon emissions] are still very deleterious to our health and the planet’s health, and there are a few areas to think about [to address the problem]. Helping people measure and control their consumption is one approach, but also we think about how to produce new energy, which is a shift we [meaning mankind] need to undertake. The challenge [in making that shift] is often [capital expenditures]. It’s hard for venture investors to back companies that are [building nuclear reactors], which makes government grants the best choice for early innovation oftentimes. There is one company, Seaborg, that has figured out a clever reactor. It’s not a portfolio company but it’s [compelling].

SB: We also really like what Seaborg is doing. These [fourth generation] nuclear companies have a whole host of approaches that allow for smaller, safer reactors that you wouldn’t mind having in your backyard. But Siraj put his finger on it: as an early-stage deep tech investor, we have to consider the capital plan of a company, and if it needs to raise billions of dollars, early investors will get really diluted, so early-stage venture just isn’t the best fit.

TC: There are other areas you like, though, because costs have fallen so much.

SB: Yes. Satellite telephony used to be one of those areas. Some of the satellites in space right now cost $350 million [to launch] and took three to four years to build, which would be really hard for any early-stage investor to fund. But now, a new generation of companies is building satellites for one-tenth of the cost in months, not years. That’s a game changer. They can iterate faster. They can build a better product. They don’t have to raise equity to build and launch either; they can raise from a debt financier [from whom they can] borrow money and pay it back over time. That model isn’t available to a company like Uber or Lyft, because those companies can’t say, ‘X is going to cost us Y dollars and it will pay back Z over time.’

TC: What of concerns that all these cheap satellites are going to clog up the sky pretty quickly?

SB: It’s a real concern. Most [of today’s satellites] are low earth satellites, and the closer to the earth they are, the brighter they are; they reflect the sun more, the more satellites we’re seeing instead of stars. I do think it’s incumbent on all of these companies to think about how they are contributing to the future of humanity. But [when you can transmit more information from satellites], the stability of governments improves, too, so maybe the developed world needs to sacrifice a bit. I think that’s a reasonable tradeoff. If on the other hand, we’re putting up satellites to help people buy more crap . . .

TC: It’s like the argument for self-driving cars in a way. Life becomes more efficient, but they’ll require far more energy generation, for example. There are always second-order consequences.

SK: But think of how many how many people are killed in driving accidents, versus terrorist attacks. Humans have many great qualities, but being able to drive a lethal machine consistently isn’t one of them. So when we take that into perspective, it’s really important that we build autonomous vehicles.

You [voice] a legitimate concern, and often when there are step changes, there are discontinuities along the way that lead to side effects that aren’t great. That comes down to several things. First, infrastructure will have to keep up. We’ll also have to create regulations that don’t lead to the worst outcomes. One our investments, Lilium in Munich, has built an entirely electric air taxi service that’s built on vertical takeoff. It’s nimble. It’s quiet enough to operate in city environments.

On roads, cars are constrained by 2D terrain and buildings, but [in the air] if you can do dynamic air traffic control, it opens up far much efficient transport. If you can get from downtown London to Heathrow [airport] in five minutes versus 50 minutes in a Tesla? That’s far more energy efficient.

Trucks VC general partner Reilly Brennan is coming to TC Sessions: Mobility

The future of transportation industry is bursting at the seams with startups aiming to bring everything from flying cars and autonomous vehicles to delivery bots and even more efficient freight to roads.

One investor who is right at the center of this is Reilly Brennan, founding general partner of Trucks VC, a seed-stage venture capital fund for entrepreneurs changing the future of transportation.

TechCrunch is excited to announce that Brennan will join us on stage for TC Sessions: Mobility.

In case you missed last year’s event, TC Sessions: Mobility is a one-day conference that brings together the best and brightest engineers, investors, founders and technologists to talk about transportation and what is coming on the horizon. The event will be held May 14, 2020 in the California Theater in San Jose, Calif.

Brennan is known as much for his popular FoT newsletter as his investments, which include May Mobility, Nauto, nuTonomy, Joby Aviation, Skip and Roadster.

Stay tuned to see who we’ll announce next.

And … $250 Early-Bird tickets are now on sale — save $100 on tickets before prices go up on April 9; book today.

Students, you can grab your tickets for just $50 here.

Indian tech startups raised a record $14.5B in 2019

Indian tech startups have never had it so good.

Local tech startups in the nation raised $14.5 billion in 2019, beating their previous best of $10.5 billion last year, according to research firm Tracxn .

Tech startups in India this year participated in 1,185 financing rounds — 459 of those were Series A or later rounds — from 817 investors.

Early stage startups — those participating in angel or pre-Series A financing round — raised $6.9 billion this year, easily surpassing last year’s $3.3 billion figure, according to a report by venture debt firm InnoVen Capital.

According to InnoVen’s report, early stage startups that have typically struggled to attract investors saw a 22% year-over-year increase in the number of financing deals they took part in this year. Cumulatively, at $2.6 million, their valuation also increased by 15% from last year.

Also in 2019, 128 startups in India got acquired, four got publicly listed, and nine became unicorns. This year, Indian tech startups also attracted a record number of international investors, according to Tracxn.

This year’s fundraise further moves the nation’s burgeoning startup space on a path of steady growth.

Since 2016, when tech startups accumulated just $4.3 billion — down from $7.9 billion the year before — flow of capital has increased significantly in the ecosystem. In 2017, Indian startups raised $10.4 billion, per Tracxn.

“The decade has seen an impressive 25x growth from a tiny $550 million in 2010 to $14.5 billion in 2019 in terms of the total funding raised by the startups,” said Tracxn.

What’s equally promising about Indian startups is the challenges they are beginning to tackle today, said Dev Khare, a partner at VC fund Lightspeed Venture Partners, in a recent interview to TechCrunch.

In 2014 and 2015, startups were largely focused on building e-commerce solutions and replicating ideas that worked in Western markets. But today, they are tackling a wide-range of categories and opportunities and building some solutions that have not been attempted in any other market, he said.

Tracxn’s analysis found that lodging startups raised about $1.7 billion this year — thanks to Oyo alone bagging $1.5 billion, followed by logistics startups such as Elastic Run, Delhivery, and Ecom Express that secured $641 million.

176 horizontal marketplaces, more than 150 education learning apps, over 160 fintech startups, over 120 trucking marketplaces, 82 ride-hailing services, 42 insurance platforms, 33 used car listing providers, and 13 startups that are helping businesses and individuals access working capital secured funding this year. Fintech startups alone raised $3.2 billion this year, more than startups operating in any other category, Tracxn told TechCrunch.

The investors

Sequoia Capital, with more than 50 investments — or co-investments — was the most active venture capital fund for Indian tech startups this year. (Rajan Anandan, former executive in charge of Google’s business in India and Southeast Asia, joined Sequoia Capital India as a managing director in April.) Accel, Tiger Global Management, Blume Ventures, and Chiratae Ventures were the other top four VCs.

Steadview Capital, with nine investments in startups including ride-hailing service Ola, education app Unacademy, and fintech startup BharatPe, led the way among private equity funds. General Atlantic, which invested in NoBroker and recently turned profitable edtech startup Byju’s, invested in four startups. FMO, Sabre Partners India, and CDC Group each invested in three startups.

Venture Catalysts, with over 40 investments including in HomeCapital and Blowhorn, was the top accelerator or incubator in India this year. Y Combinator, with over 25 investments, Sequoia Capital’s Surge, Axilor Ventures, and Techstars were also very active this year.

Indian tech startups also attracted a number of direct investments from top corporates and banks this year. Goldman Sachs, which earlier this month invested in fintech startup ZestMoney, overall made eight investments this year. Among others, Facebook made its first investment in an Indian startup — social-commerce firm Meesho and Twitter led a $100 million financing round in local social networking app ShareChat.

Meet Europe’s top VCs at Disrupt Berlin

Silicon Valley’s top venture capital firms, from Sequoia to Benchmark to Accel, are investing more and more dollars overseas, as more globally-minded unicorns crop up across Europe.

As Forbes recently noted, U.S. VCS are “bonkers for European startups,” with “more money … flowing into European tech than ever.” Seems like a great time to sit down with U.S. and European investors to get a better sense of what’s happening here. Conveniently, we’re gathering top venture capitalists at our annual European conference, TechCrunch Disrupt Berlin, next week.

For starters, we’ll have Forward Partners managing partner Nic Brisbourne, Target Global partner Malin Holmberg and DocSend founder Russ Heddleston together to provide exclusive fundraising advice to entrepreneurs. They’ll sit down with me for 45 minutes to shed light on the biggest challenges founders face while raising VC, how to perfectly crap your pitch and how to know if an investor is interested in your upstart.

Sequoia’s Andrew Reed, who’s worked on the firm’s investments in Bird, Figma, Front, Loom, Rappi, UiPath and more, will join us, too. From Index Ventures, a noted U.S. and U.K. investor, we’ll welcome principal Hannah Seal. From Atomico, a European venture capital firm, partner Sophia Bendz, partner Siraj Khaliq, partner Hiro Tamura and partner Niall Wass will all be in attendance. And from SoftBank, we’ll hear from SoftBank Vision Fund investment director Carolina Brochado and SoftBank Investment Advisors partner David Thevenon.

Roxanne Varza will give an update on Station F, the world’s biggest startup campus based in Paris. Varza first unveiled Station F at TechCrunch Disrupt back in December 2016; naturally, we’re excited to see what she has to stay this time.

As for others making the trip to Berlin from the U.S., we’ve got Joyance Partners investment partner Holly Jacobus and Accomplice partner Ash Egan on deck. The rest of the line-up includes some of Europe’s top VCs, including Accel partner Andrei Brasoveanu, Blossom Capital partner Louise Dahlborn Samet, Balderon Capital partner Suranga Chandratillake and principal Colin Hanna, Luminous Ventures founding partner Isabel Fox, Amadeus Capital Partners partner Volker Hirsch, Point Nine Capital partner Christoph Janz, dynamics.vs partner Tanja Kufner, Northzone partner Paul Murphy, Ada Ventures founding partner Matt Penneycard and Dawn Capital partner Evgenia Plotnikova.

Read the entire Disrupt Berlin agenda here. Tickets to the show are still available!

Meet Europe’s top VCs at Disrupt Berlin

Silicon Valley’s top venture capital firms, from Sequoia to Benchmark to Accel, are investing more and more dollars overseas, as more globally-minded unicorns crop up across Europe.

As Forbes recently noted, U.S. VCS are “bonkers for European startups,” with “more money … flowing into European tech than ever.” Seems like a great time to sit down with U.S. and European investors to get a better sense of what’s happening here. Conveniently, we’re gathering top venture capitalists at our annual European conference, TechCrunch Disrupt Berlin, next week.

For starters, we’ll have Forward Partners managing partner Nic Brisbourne, Target Global partner Malin Holmberg and DocSend founder Russ Heddleston together to provide exclusive fundraising advice to entrepreneurs. They’ll sit down with me for 45 minutes to shed light on the biggest challenges founders face while raising VC, how to perfectly crap your pitch and how to know if an investor is interested in your upstart.

Sequoia’s Andrew Reed, who’s worked on the firm’s investments in Bird, Figma, Front, Loom, Rappi, UiPath and more, will join us, too. From Index Ventures, a noted U.S. and U.K. investor, we’ll welcome principal Hannah Seal. From Atomico, a European venture capital firm, partner Sophia Bendz, partner Siraj Khaliq, partner Hiro Tamura and partner Niall Wass will all be in attendance. And from SoftBank, we’ll hear from SoftBank Vision Fund investment director Carolina Brochado and SoftBank Investment Advisors partner David Thevenon.

Roxanne Varza will give an update on Station F, the world’s biggest startup campus based in Paris. Varza first unveiled Station F at TechCrunch Disrupt back in December 2016; naturally, we’re excited to see what she has to stay this time.

As for others making the trip to Berlin from the U.S., we’ve got Joyance Partners investment partner Holly Jacobus and Accomplice partner Ash Egan on deck. The rest of the line-up includes some of Europe’s top VCs, including Accel partner Andrei Brasoveanu, Blossom Capital partner Louise Dahlborn Samet, Balderon Capital partner Suranga Chandratillake and principal Colin Hanna, Luminous Ventures founding partner Isabel Fox, Amadeus Capital Partners partner Volker Hirsch, Point Nine Capital partner Christoph Janz, dynamics.vs partner Tanja Kufner, Northzone partner Paul Murphy, Ada Ventures founding partner Matt Penneycard and Dawn Capital partner Evgenia Plotnikova.

Read the entire Disrupt Berlin agenda here. Tickets to the show are still available!

Meet Europe’s top VCs at Disrupt Berlin

Silicon Valley’s top venture capital firms, from Sequoia to Benchmark to Accel, are investing more and more dollars overseas, as more globally-minded unicorns crop up across Europe.

As Forbes recently noted, U.S. VCS are “bonkers for European startups,” with “more money … flowing into European tech than ever.” Seems like a great time to sit down with U.S. and European investors to get a better sense of what’s happening here. Conveniently, we’re gathering top venture capitalists at our annual European conference, TechCrunch Disrupt Berlin, next week.

For starters, we’ll have Forward Partners managing partner Nic Brisbourne, Target Global partner Malin Holmberg and DocSend founder Russ Heddleston together to provide exclusive fundraising advice to entrepreneurs. They’ll sit down with me for 45 minutes to shed light on the biggest challenges founders face while raising VC, how to perfectly crap your pitch and how to know if an investor is interested in your upstart.

Sequoia’s Andrew Reed, who’s worked on the firm’s investments in Bird, Figma, Front, Loom, Rappi, UiPath and more, will join us, too. From Index Ventures, a noted U.S. and U.K. investor, we’ll welcome principal Hannah Seal. From Atomico, a European venture capital firm, partner Sophia Bendz, partner Siraj Khaliq, partner Hiro Tamura and partner Niall Wass will all be in attendance. And from SoftBank, we’ll hear from SoftBank Vision Fund investment director Carolina Brochado and SoftBank Investment Advisors partner David Thevenon.

Roxanne Varza will give an update on Station F, the world’s biggest startup campus based in Paris. Varza first unveiled Station F at TechCrunch Disrupt back in December 2016; naturally, we’re excited to see what she has to stay this time.

As for others making the trip to Berlin from the U.S., we’ve got Joyance Partners investment partner Holly Jacobus and Accomplice partner Ash Egan on deck. The rest of the line-up includes some of Europe’s top VCs, including Accel partner Andrei Brasoveanu, Blossom Capital partner Louise Dahlborn Samet, Balderon Capital partner Suranga Chandratillake and principal Colin Hanna, Luminous Ventures founding partner Isabel Fox, Amadeus Capital Partners partner Volker Hirsch, Point Nine Capital partner Christoph Janz, dynamics.vs partner Tanja Kufner, Northzone partner Paul Murphy, Ada Ventures founding partner Matt Penneycard and Dawn Capital partner Evgenia Plotnikova.

Read the entire Disrupt Berlin agenda here. Tickets to the show are still available!

Don Valentine, who founded Sequoia Capital, has died at age 87

Sequoia Capital founder Don Valentine passed way at his home in Woodside, Ca., today at age 87 of natural causes.

Sequoia posted a tribute to Valentine shortly afterward, calling him “one of a generation of leaders who forged Silicon Valley.”

A native of New York, Valentine majored in chemistry at Fordham University before joining Raytheon in South California, then moving north to the Bay Area to work at Fairchild Semiconductor, where over the years, Valentine began investing his own small checks into technology companies that he was meeting. According to Sequoia Capital, he soon attracted the attention of an early mutual fund group, Capital Group, which staked Valentine, allowing him to form a $3 million venture fund in 1974. Among his first bets from that pool of capital: Atari and Apple. He later led the firm into numerous other high-flyers, including Cisco Systems.

Valentine continue to lead Sequoia until handing over the reins well before retirement age to Doug Leone and Michael Moritz, though he continued attending partner meetings for another 10 years. The partners have said they were happy for his continued advice and guidance — not that they always agreed with him.

In 2017, in keeping with the firm’s focus on succession and ensuring smooth transitions, partner Roelof Botha was made U.S. head of the firm working under Leone, who oversees the firm’s global operations with Neil Shen, the founder and managing partner of Sequoia Capital China. (Moritz stepped away for health reasons in 2012, though he has continued to remain actively involved in the firm.)

Leone issued a statement this afternoon about Valentine’s passing, writing: “We are deeply saddened to share that Don Valentine passed away on October 25, 2019. Don’s life is woven into the fabric of Silicon Valley. He shaped Sequoia and left his imprint not just on those of us who had the privilege to work with him or the many philanthropic institutions that invested with Sequoia, but also on the founders and leaders of some of the most significant technology companies of the later part of the twentieth century. Our thoughts are with Don’s wife, Rachel, with his family, and with all those inspired by his pioneering vision and indelible impact.”

Valentine chose the name Sequoia because it “conveyed the longevity and strength of the tallest of redwoods,” according to the firm’s tribute today to Valentine. The partners note, too, the “humility of someone who refrained from putting his own name on our business.”

Valentine is survived by his wife; three children; and seven grandchildren, according to Sequoia.

Valentine joined TechCrunch at a Disrupt event back in 2013. He appeared along with another pioneer of the venture industry, Kleiner Perkins Caufield & Byers cofounder Tom Perkins . Perkins passed away in June 2016 at age 84.

SmileDirectClub’s former CEO is back with a new dental startup called Tend

A growing number of newer dental brands has been attracting money from venture investors who are still kicking themselves for missing runaway hits. Most notable among these breakout companies is newly public SmileDirectClub, which sells teeth-straightening products directly to consumers and is beloved by analysts even though its shares have slipped since its September IPO.

Among the many teeth-related startups to more recently attract private funding is Swift Health Systems, a five-year-old company that makes invisible braces under the brand INBRACE and just raised $45 million from VCs; Henry the Dentist, a two-year-old, mobile dental clinic that raised $10 million earlier this year; and Quip, a five-year-old maker of electric toothbrushes and oral care products that has garnered roughly $62 million from investors.

Still, a new company called Tend is especially notable, and not because it just raised $36 million in seed and Series A funding — which it did, led by Redpoint Ventures.

First and foremost, Tend sees an opportunity to reinvent the dentist’s office. How? Through tech-heavy dental “studios” that “prioritize” your comfort by featuring sleek waiting areas that it promises you’ll almost never need to use and by offering “Netflix in your chair” that you will enjoy while wearing the latest and greatest Bose headphones. (Tend says it will get your favorite show queued up before you arrive for your appointment, which you will breezily book online, and whose prices you can learn in advance, so you don’t suffer sticker shock later. )

A Fast Company reporter who visited the startup’s newly opened flagship space in Manhattan’s Flatiron neighborhood was even offered a selection of only the finest toothpastes, including that of Marvis, an Italian brand that comes in such distinct flavors as Amarelli licorice, cinnamon, ginger and jasmine — not to mention “classic strong,” “whitening,” and “aquatic.”

It all sounds faintly ridiculous, but also fairly nice, especially contrasted with traditional dentist offices, which tend to be both highly antiseptic and astonishingly vague about pricing.

There’s also a kind of precedent for what it’s doing. Specifically, improving on the patient experience has worked out well for One Medical, a venture-backed, tech-driven chain of 70 clinics that has become one of the largest independent groups in the U.S. (It’s also reportedly prepping an IPO.)

Little wonder that one individual participant in Tend’s new funding is Tom Lee, the physician who created One Medical in 2007 and led it as CEO until 2017. Others individual investors include Neil Blumenthal and Dave Gilboa of Warby Parker; Zach Weinberg of Flatiron Health; and Bradley Tusk of Tusk Ventures.

Meanwhile, Tend’s cofounder and CEO is also no slouch, seemingly. Doug Hudson was the CEO of SmileDirectClub for three-and-a-half years, beginning in 2013. Before that, he founded two medical care companies that were acquired: Hearing Planet and Simplex Healthcare.

Whether that pedigree is enough to get the company going will take some time to know but certainly, it’s chasing after a huge market that can very plainly be made better.  In the U.S. alone, the dental market is now a $137 billion market, according to the research group IBIS World, and as Hudson notes in a new Medium post about his latest startup, dentistry has a Net Promoter Score of 1, which is just two points higher than dreaded cable companies.

Consumers “don’t accept this level of service in any other aspect of our lives. Not when shopping for glasses. Not when exercising at home with a stationary bike,” he writes, and it’s true. If Tend can improve the experience even a little bit and its prices are competitive, we’d guess it has a shot.

Want to crush competitors? Forget SoftBank, Blackstone suggests; it can write $500 million checks, too

Back in January, Blackstone — the investment firm whose assets under management surpassed a jaw-dropping half a trillion dollars earlier this year — quietly began piecing together a new, growth equity platform called Blackstone Growth, or BXG. Step one was hiring away Jon Korngold from General Atlantic, where he’d spent the previous 18 years, including as a managing director and a member of its management committee.

Step two has been for Korngold, who is responsible for running the new program, to build a team, which he has been doing throughout the year, bringing in “people who speak the language of Blackstone,” he says, including from TCV, Andreessen Horowitz, Carlyle, Vista Private Equity, NEA, and SoftBank .

Apparently, the group is now ready for business. It has already closed on two deals from existing pools of capital with Blackstone, including acquiring outright the mobile ad company Vungle. According to Korngold, two more term sheets “are being signed imminently.”

We talked with him last week for more information about what the group is shopping for, what size checks it is willing to write, and which firms it views as its biggest rivals for deals (and more). Our chat has been edited for length and clarity.

TC: You’ve been hiring throughout the year people who have large-scale growth equity backgrounds. Are many of them women?

JK: Blackstone is one of the most diverse organizations [in terms of] gender or ethnicity. In general, it’s a huge priority for the firm and within our group of 20 people, 40 percent are female, a number we hope to get to 50 percent. Hiring is still in process, but it’s a really healthy culture.

TC: How many people does Blackstone employ altogether?

JK: There are 2,600 altogether across 24 offices.

TC: Is your group investing a discreet pool of capital?

JK: At some point, we’ll have a dedicated pool of capital, but as a firm, we’ve been investing in growth equity for some time [so have relied on other funds within Blackstone to date].

TC: There’s no shortage of growth equity in the world right now. What is Blackstone building that’s so different?

JK: The sheer scale of the operation is different. We have nearly 100 operating professionals — employees of Blackstone — who were hired because they are functional experts — from pricing experts to process engineering experts to human capital and procurement and digital marketing experts — and who can advise our companies.

Also, Blackstone can holistically assist a company through [our] growth equity and real estate and procurement and debt [groups] and other related infrastructure support, enabling companies to fight way above their weight class.  We have 600,000 people across our portfolio, and that provides an interesting opportunity for our companies to cross pollinate [and to cross-sell to] one another.

Unlike most growth equity firms, we also have a significant number of data scientists who do three things: identify proprietary signals across asset classes to help instruct where we should be hunting; help our companies monetize their data; and help us in our diligence. They’ll access raw data feeds and almost see the matrix, if you will.

TC: How many data scientists are we talking about?

JK: A couple dozen [across Blackstone].

TC: Blackstone must be competing against fast-growing tech companies for data scientists. How do you convince them that work for an investing giant is the better gig?

JK: If you’re an intellectually curious individual, there are so many signals [coming through Blackstone] that it’s almost a proxy for the world. It’s like manna from heaven. It’s not like they’re doing a single-threaded approach. The nature of the challenges across our companies is so vast and so varying that whether you’re looking at a fast-growing retailer or a cell phone tower in another country,  the nature of the tasks is always changing.

TC: SoftBank seems to have shaken things up a bit when it came on to the scene, given the size checks it is writing. Your boss, Steven Schwarzman, who recently talked with us about this bigger new push into growth equity, made sure to note that there are few organizations that can write $500 million checks.

JK: [Laughs.] Everyone in Silicon Valley wants to talk about SoftBank. We celebrate a lot of what SoftBank has done. They’ve validated the thesis that there’s an opportunity for growth equity on a scale that hasn’t traditionally been available.

It’s similar to the way we’re set up. SoftBank was never meant to compete with the venture community; they’re competing with the capital markets, and as private companies look to stay private longer market, SoftBank wants to support their development.

TC: And . . .

JK: I think the reality is that a lot of businesses have unproven business models and unit economics, and they’re garnering massive amounts of capital from different constituents. It’s less about who is staying private longer but are they sustainable over the long run, whether public or private. I think a lot of companies right now now that have unproven business models have been flooded by cash at too small a scale where they aren’t ready to handle it, and it masks weaknesses.

TC: Where is that most acute, in your view?

JK: I see that at the smaller growth equity phase — the $25 million to $150 million [per firm per check] range — where most growth equity resides because you have every VC firm there now. Many of the growth funds that have moved downstream. You also have crossover funds like DST and Coatue and Tiger, along with corporate venture capital. That huge flood of capital has created these massive valuations and it has  compressed the due diligence involved.

If you look at Lyft and Uber — and Snap was in this category — the market is starting to speak. Public market shareholders are willing to give you the benefit of the doubt for a while but not indefinitely. You can’t feed the machine for growth’s sake.

TC: So what type of deals are you searching out?

JK: We won’t step into a situation where unit economics aren’t proven from day one. You won’t see us in a company that’s selling $1 for 80 cents and hoping someday that works. We’re Inherently more binary in profile. We’re capital-preservation minded while looking for asymmetric upside, and that’s where we have a disproportionate advantage. You’ll see us do deals where we can put our thumb on the scale, because of our real estate holdings or buyout assets or because portfolio for help with procurement costs or insurance or R&D or a company’s go-to-market strategy.

TC: What have you done that proves all these bells and whistles make a difference? 

JK: We have a couple of signed deals, including [the mobile ad company] Vungle [for a reported $750 million-ish], though we’re more often looking for growth-equity minority ownership positions. [Think] companies that are looking for a partner and not an owner. We’ll do growth buyouts but the vast majority will be significant minority positions.

We have a couple of other deals that will be signed imminently that we can’t discuss just yet.

TC: Are you hoping to take these companies public? Flip them to another private equity firm? Relatedly, do you have any thoughts about the public market and whether more companies should be going out?

JK: We’ll only look to an IPO if there’s a reason for it. Oftentimes, companies shouldn’t be public; sometimes, they should be, including if they need an acquisition currency or [to better establish their] branding. But the idea of, let’s rush to the door [is not our style].

TC: Who are your most direct competitors? Not Vista Private Equity, since it seems to prefer buying companies whole.

JK: Vista is going exclusively for control buyouts, massive turnarounds. It descends upon a company and says, ‘This is the playbook you will follow.’ It also uses a lot of leverage, where the vast majority or our [deals] are un-levered. We don’t use much debt. Vista and Silver Lake are much more competitors with each other.

TC: KKR then? Carlyle? 

KR: They’re also multi-asset managers, but as it relates to growth equity, we’ve really found ourselves in slightly more rarefied air. Blackstone has demonstrated that it can use its scale to create an operational advantage, and virtually no other company — or few — can contemplate checks like we can.

TC: What do you want for these checks, other than a minority position? How involved are you and what size stake, exactly, are you aiming to buy?

JK: We want to have a relevant voice, so we want to be in the boardroom, but there is no target range. It can be 10 or 20 or 30 percent. It can be 80 percent. Ideally you want to be the main outside pool of capital along with management team.

Fieldwire just raised $33.5 million more to give PlanGrid and its new owner Autodesk a run for their money

Fieldwire, which makes task management software for construction teams that helps organize everyone involved in a project so things don’t fall through the figurative (or literal) cracks, has raised $33.5 million in Series C funding led by Menlo Ventures, with participation from Brick & Mortar Ventures, Hilti Group, and Formation 8.

It isn’t a huge amount of money. Still, the traction Fieldwire is enjoying might give the folks at Autodesk some pause, given the growing threat it presents to PlanGrid — a rival that Autodesk acquired last year for $875 million.

Already, six-year-old Fieldwire has 65 employees, with 45 of them in San Francisco and the rest in Phoenix, plus a smaller outpost in France. And founder and CEO Yves Frinault says the company expects to have closer to 150 employees by next summer.

Fieldwire is also “cash profitable,” he says, “meaning our bank account goes up every month, even though we started going fast.” To underscore his point, he notes that when we last talked with him in 2015, the company’s platform was hosting 35,000 projects; it has since hosted half a million altogether, with more than 2,000 unique paying customers on the platform. Many of them pack a punch, too, like Clark Construction Group, a 113-year-old, Maryland-based construction firm that reported more than $5 billion in revenue last year and that began using Fieldwire across all of its projects this past summer. (Clark employs 4,200 people.)

Because Fieldwire grows from the bottom up, meaning it targets teams who then use it for projects that are then run by numerous enterprises that work on various projects with other teams that can then also adopt the software, it has spread particularly quickly throughout North America, which counts for 70 percent of its volume. Fieldwire is also making inroads in Europe, where 15 percent of its revenue is coming and, to a lesser but growing extent, Australia.

Altogether, its software is localized in 13 languages.

It employs a freemium model. Small teams with five members or less can use a significant portion of the product for free. But more users requires more storage typically, and that’s where Fieldwire starts charging — typically between $30 and $50 per user per month, though bigger companies tend to pay the company by the year or based on the scope of a particular project versus on a per-license basis.

Fieldwire’s two main types of customers are general contractors and subcontractors. GCs will usually use the company’s software as a way to track quality and progress. Subcontractors tend to use the software internally to run their own crews.

As for what’s on its roadmap, Fieldwire — which already enables users to look at floor plans in real time, message with one another, track punch lists, schedule jobs and file reports —  suggests it’s zeroing in on 3D architectural drawings, which puts it in more direct competition with PlanGrid.

PlanGrid also makes construction productivity software, and fueled by parent company Autodesk, it also now offers users the ability to access building information modeling data, in either 2D or 3D. Fieldwire doesn’t seem terribly daunted by this. Instead, Frinault calls it a “product challenge to make a 3D product model consumable, so we’re working on it right now.”

With its newest round of funding, Fieldwire has now raised $40.4 million altogether.

How to get people to open your emails

Julian Shapiro
Contributor

Julian Shapiro is the founder of BellCurve.com, a growth marketing agency that trains you to become a marketing professional. He also writes at Julian.com.

We’ve aggregated the world’s best growth marketers into one community. Twice a month, we ask them to share their most effective growth tactics, and we compile them into this Growth Report.

This is how you’re going stay up-to-date on growth marketing tactics — with advice you can’t get elsewhere.

Our community consists of 600 startup founders paired with VP’s of growth from later-stage companies. We have 300 YC founders plus senior marketers from companies including Medium, Docker, Invision, Intuit, Pinterest, Discord, Webflow, Lambda School, Perfect Keto, Typeform, Modern Fertility, Segment, Udemy, Puma, Cameo, and Ritual .

You can participate in our community by joining Demand Curve’s marketing webinars, Slack group, or marketing training program. See past growth reports here and here.

Without further ado, onto the advice.


How can you send email campaigns that get opened by 100% of your mailing list?

Based on insights from Nick Selman, Fletcher Richman of Halp, and Wes Wagner.

  • First, a few obvious pieces of advice for avoiding low open rates:
    • Avoid spam filters by avoiding keywords commonly used in spam emails.
    • Consider using email subjects (1) that are clearly descriptive and (2) look like they were written by a friend. Then A/B your top choices.
    • Include the recipient’s name in your email body. This signals to spam filters that you do in fact know the recipient.
  • Now, for the real advice: Let’s say 60% of your audience opens your mailing, how can you get the remaining 40% to open and read it too?
    • First, wait 2 weeks to give everyone a chance to open the initial email.
    • Next, export a list of those who haven’t opened. Mailchimp lets you do this.
    • Important note: The reason many recipients don’t open your email is because it was sent to Spam, it was buried in Promotions, or it was insta-deleted because it looked like spam (but wasn’t). The goal here is to resuscitate these people. You have two options for doing so:
    • (1) Duplicate the initial email then selectively re-send it to non-openers. This time, use a new subject (try a new hook) and downgrade the email to plain text: remove images and link tracking. De-enriching the email in this way can help bypass spam filters and the Promotions tab.
    • (2) Alternatively, export your list of non-openers to a third-party email tool like Mailshake (or Mixmax).
      • First, connect Mailshake to a new Gmail account on your company domain.
      • Next, configure Mailshake to automatically dole out small batches of emails on a daily schedule. Let it churn through non-openers slowly so that Gmail doesn’t flag your account as a spammer.
      • Emails sent through Mailshake are more likely to get opened than emails sent through Mailchimp. Why? Mailshake sends emails through your Gmail account, and Gmail-to-Gmail emails have a greater chance of bypassing Spam and Promotions folders, particularly if the sender doesn’t have a history of its emails being marked as spam.

Good Capital launches to close the funding gap for early-stage Indian startups

Rohan Malhotra and Arjun Malhotra left their jobs in London and Silicon Valley to explore opportunities in India in late 2013. A year later, the brothers launched Investopad to connect with local startup founders and product managers and built a community to exchange insight. Somewhere in the journey, they wrote early checks to social-commerce startup Meesho, which now counts Facebook as an investor, Autonomic, which got acquired by Ford, and HyperTrack, among others. Now the duo is ready to be full-time VCs.

On Monday, they announced Good Capital, a VC fund that would invest in early-stage startups. Through Good Capital’s maiden fund of $25 million, the brothers plan to invest in about half a dozen startups in a year and provide between $100,000 to $2 million in their Seed and Series A financing rounds, they told TechCrunch in an interview last week.

“Through Investopad, we helped startup founders raise money, provided guidance, and helped them find customers. We did a ton of events, and learned about the market,” said Arjun, who worked at Capricorn Investment Group and also acted in 2014 blockbuster Bollywood title “Highway.”

Investopad’s first fund portfolio stands at a gross IRR of 138.3% and nine of its 12 investments have realised returns, with every dollar invested already returned, the brothers said.

Good Capital will focus on investing in startups that are building solutions that address users who have come online in India for the first time in the last two years, they said.

“We don’t have laser-focus on a particular sector,” said Rohan, who previously worked as a sports agent in the talent management business. “Our primary focus is to help startups that are taking a bottom-up approach.”

One example of such startup is Meesho, a social-commerce startup that has amassed over 2 million users who are engaging with the platform to sell products across India.

In a statement, Vidit Aatrey, cofounder and CEO of Meesho, said, “Rohan and Arjun were our earliest investors. They have a phenomenal global network of entrepreneurs, operators and investors. They helped us early on with introductions to such people; who brought not only capital but, more importantly, valuable operational inputs which helped us learn quickly and find product-market fit faster. While we’ve grown from 2 people to over 1,000+ at Meesho, they remain close confidants!”

The VC fund has completed its first close of $12 million from Symphony International Holdings, a host of European family offices, and a number of other Silicon Valley entrepreneurs.

Sundeep Madra, CEO of Ford X, and Yogen Dalal, Partner Emeritus at the Mayfield Fund and founder of Glooko, and Dinesh Moorjani, Managing Director of Comcast Ventures and founder of Hatch Labs and Tinder, will serve as advisors to Good Capital.

“Rohan and Arjun have a unique ability to identify trends and bring together founders and investors to go after the unique problems that India needs to have solved. They operate with a sense of urgency and innovation which is a major key at the seed-stage.” said Madra, who has invested in companies such as Uber and Zenefits.

The fund has also set up an investment committee whose members are Sanjay Kapoor, former CEO of Airtel and now a senior advisor at BCG, Rahul Khanna, formerly a managing partner at Cannan Partners and now founder of Trifecta Capital, and Kashyap Deorah, a serial entrepreneur who is currently building HyperTrack.

Good Capital has also already made two investments: SimSim, a video-based e-commerce platform that is trying to replicate the experience consumers have in offline stores, and Spatial, a cross-reality platform that allows people to collaborate through augmented reality. Garrett Camp, a founder of Uber and Expa, and Samsung Next have also invested in Spatial.

The VC fund is also interested in funding business-to-business startups, though they say these startups would ideally be building solutions for overseas markets. “There we are generally targeting makers, developers and designers, rather than solving problems for heavy-duty sales businesses.”

The arrival of Good Capital should help the Indian startup community, which today has to rely on a handful of VC funds that invest in early stage startups. “Conventionally, funds have targeted the top of the pyramid by exploring visible opportunities and replicated US companies and models,” said Moorjani in a statement.

“In contrast, Good Capital’s first principles thinking applied to India’s larger economy, which is coming online at scale with a supporting ecosystem for the first time, has been refreshing to see. The team is beyond talented.,” he added.

Even as Indian tech startups raised a record $10.5 billion in 2018, early-stage startups saw a decline in the number of deals they participated in and the amount of capital they received.

Early-stage startups participated in 304 deals in 2018 and raised $916 million in funds last year, down from $988 million they raised from 380 rounds in 2017 and $1.096 billion they raised from 430 deals the year before, research firm Venture Intelligence told TechCrunch.

As for Investopad, the brothers said they have hired a number of people who will now continue its operation.

ThredUp, whose second-hand goods will start appearing at Macy’s and JCPenney, just raised a bundle

ThredUp, the 10-year-old fashion resale marketplace, has a lot of big news to boast about lately. For starters, the company just closed on $100 million in fresh funding from an investor syndicate that includes Park West Asset Management, Irving Investors and earlier backers Goldman Sachs Investment Partners, Upfront Ventures, Highland Capital Partners and Redpoint Ventures.

The round brings ThredUP’s total capital raised to more than $300 million, including a previously undisclosed $75 million investment that it sewed up last year.

A potentially even bigger deal for the company is a new resale platform that both Macy’s and JCPenney are beginning to test out, wherein ThedUp will be sending the stores clothing that they will process through their own point-of-sale systems, while trying to up-sell customers on jewelry, shoes, and other accessories.

It says a lot that traditional retailers are coming to see gently used items as a potential revenue stream for themselves, and little wonder given the size of the resale market, estimated to be a $24 billion market currently and projected to become a $51 billion market by 2023.

We talked yesterday with ThredUp founder and CEO James Reinhart to learn more about its tie-up with the two brands and to find out what else the startup is stitching together.

TC: You’ve partnered with Macy’s and JCPenney. Did they approach you or is ThredUp out there pitching traditional retailers?

JR: I think [the two companies] have been thinking about resale for some time. They’re trying to figure out how to best serve their customers. Meanwhile, we’ve been thinking about how we power resale for a broader set of partners, and there was a meeting of the minds six months ago

We’re positioned now where we can do this really effectively in-store, so we’re starting with a pilot program in 30 to 40 stores, but we could scale to 300 or 400 stores if we wanted.

TC: How is this going to work, exactly, with these partners?

JR: We have the [software and logistics] architecture and the selection to put together carefully curated selections of clothing for particular stores, including the right assortment of brands and sizes, depending on where a Macy’s is located, for example. Macy’s then wraps a high-quality experience around [those goods]. Maybe it’s a dress, but they wrap a handbag and scarves and jewelry around the dress purchase. We feel [certain] that future consumers will buy new and used at the same time.

TC: Who is your demographic, and please don’t say everyone.

JR: It is everyone. It’s not a satisfying answer, but we sell 30,000 brands. We serve lots of luxury customers with brands like Louis Vuitton, but we also sell Old Navy. What unites customers across all brands is they want to find brands that they couldn’t have afforded new; they’re trading up to brands that, full price, would have been too much, so Old Navy shoppers are [buying] Gap [whose shopper are buying] J. Crew and Theory and all the way up. Consistently, what we hear is [our marketplace] allows customers to swap out their wardrobes at higher rates than would be possible otherwise, and it feels to them like they’re doing it in a more [environmentally] responsible way.

TC: What percentage of your shoppers are also consigning goods?

JR: We don’t track that closely, but it’s typically about a third.

TC: Do you think your customers are buying higher-end goods with a mind toward selling them, to defray their overall cost? I know that’s the thinking of CEO Julie Wainwright at [rival] The RealReal. It’s all supposed to be a kind of virtuous circle of shopping.

JR:  We like to talk about buying the handbag, then selling it, but plenty of people will also buy a second-hand Banana Republic sweater because it’s a value [and because] fashion is the second-most polluting industry on the planet.

TC: How far are you going to combat that pollution? I’m just curious if you’re in any way try to bolster the sale of hemp, versus maybe nylon, clothes for example.

JR: We aren’t driving material selection. Our thesis is: we want to stay out of the fashion business and instead ensure there’s a responsible way for people to buy second hand.

TC: For people who haven’t used ThredUp, walk through the economics. How much of each sale does someone keep?

JR: On ThredUp, it isn’t a uniform payment; it depends instead on the brand. On the luxury end, we pay [sellers] more than anyone else — we pay up to 80 percent when we resell it. If it’s Gap or Banana Republic, you get maybe 10 or 15 or 20 percent based on the original price of the item.

TC: How would you describe your standards? What goes into the reject pile?

JR: We have high standards. Items have to be in like-new or gently used condition, and we reject more than half of what people send us. But I think there’s probably more leeway for the Theory’s and J.Crew’s of the world than if you’re buying a Chanel dress.

TC: Unlike some of your rivals, you don’t sell to men. Why not?

JR: Men’s is a small market in secondhand. Men wear the same four colors — blue, black, gray and brown — so it’s not a big resale market. We do sell kids’ clothing, and that’s a big part of our market.

TC: When Macy’s now sells a dress from ThredUp, how much will you see from that transaction?

JR: We can’t share the details of the economics.

TC: How many people are now working for ThredUp?

JR: We have less than 200 in our corporate office in San Francisco, and 50 in Kiev, and then across four distribution centers — in Phoenix; Mechanicsburg [Pa.]; Atlanta; and Chicago — we have another 1,200 employees.

TC: You’ve now raised a lot of money in the last year. How will it be used?

JR: On our resale platform [used by retailers like Macy’s] and on building our tech and operations and building new distribution centers to process more clothing. We can’t get people to stop sending us stuff. [Laughs.]

TC: Before you go, what’s the most under-appreciated aspect of your business?

JR: The logistics behind the scenes. I think for every great e-commerce business, there are incredible logistics [challenges to overcome] behind the scenes. People don’t appreciate how hard that piece is, alongside the data. We’re going to process our 100 millionth item by the end of this year. That’s a lot of data.

Fresh out of Y Combinator, Tandem lands millions from Andreessen Horowitz

Tandem, one of the most sought after companies to graduate from Y Combinator’s summer batch, will emerge from the accelerator program with a supersized seed round and an uncharacteristically high valuation.

The months-old business, which is developing communication software for remote teams after pivoting from crypto, is raising a $7.5 million seed financing at a valuation north of $30 million, sources tell TechCrunch. Airbnb investor Andreessen Horowitz is leading the round.

Tandem and a16z declined to comment for this story. The round has yet to close, which means the deal size is subject to change. Y Combinator startups raise capital using SAFE agreements, or simple agreements for future equity, which allow investors to buy shares in a future priced round at a previously agreed-upon valuation.

We’re told several top venture capital firms were vying for a stake in Tandem. One firm even gifted the founders a tandem bike, sources tell TechCrunch, resorting to amusing measures to sway the Tandem team. But it was a16z — which has an established interest in the growing future of work sector, evidenced by its recent investment in the popular email app Superhuman — that ultimately won the coveted lead investor spot.

Tandem provides a virtual office for remote teams, complete with video-chatting and messaging capabilities, as well as integrations with top enterprise tools including Notion, GitHub and Trello. The service launched one month ago and has signed contracts with Airbnb, Dropbox and others. The company claims to be growing 50% week-over-week.

“Every company is a remote company,” Tandem chief executive officer Rajiv Ayyangar said during his pitch to investors on day two of Y Combinator Demo Days this week. “You have salespeople in the field, [companies with] multiple offices, people working from home. Tandem isn’t just building the future of remote work, it’s building the future of work.”

Ayyangar was previously a data scientist at Yahoo before joining Yakit, a startup seeking to simplify ecommerce delivery, as the director of product. Co-founders Bernat Fortet Unanue and Tim Su are also Yahoo alums.

We’re told Tandem’s fundraise was nearly complete before it pitched to investors Tuesday afternoon. Startups that participate in YC are often flooded with offers from VCs throughout the three-month program. Firms are hungry for the batch’s Airbnb, Dropbox or Stripe — graduates of the program — and will pay premiums on startup equity for their chance to invest in a future ‘unicorn.’

As a result, the median seed deal for U.S. startups in 2018 was roughly $2 million — a record high — with typical pre-money valuations hovering north of $10 million. Tandem’s seed financing represents both a trend of swelling seed deals and valuations, as well as a tendency for VCs to dole out more cash to fresh-from-YC companies amid heightened competition amongst their peers.

The previous YC batch, which wrapped up in March, included ZeroDown, Overview.AI and Catch, a trio of companies that pocketed venture capital ahead of demo day. ZeroDown, a financing solution for real estate purchases in the Bay Area, raised upwards of $10 million at a $75 million valuation before demo day, sources told TechCrunch at the time (months after demo day, Zero Down announced a whopping $30 million financing). ZeroDown was an outlier, of course, as the company’s founders had previously co-founded the billion-dollar HR software company Zenefits.

As for the summer batch, we’re told Actiondesk, Taskade and Tandem are amongst the startups to garner the most hype from investors. Some even forwent the demo day pitch altogether. BraveCare, which is creating urgent care clinics intended just for kids, raised $4.1 million ahead of demo day, we’re told. The company opted not to pitch to additional investors this week.

You can read about all the company’s that pitched during demo day one here and demo day two here.

RedDoorz raises $70M to expand its budget hotel network in Southeast Asia

Singapore-based budget hotel booking startup RedDoorz is tiny in comparison to fast-growing giant Oyo. But it is holding its ground and winning the trust of an ever growing number of investors.

On Monday, the four-year-old startup announced it has raised $70 million in Series C financing round, less than five months after it closed its $45 million Series B. The new round, which is ongoing, was led by Asia Partners and saw participation from new investors Rakuten Capital and Mirae Asset-Naver Asia Growth Fund.

The startup, which has raised $140 million to date, has been seeing “tremendous interest from investors, so it is decided to do a back-to-back rounds,” said Amit Saberwal, founder and CEO of RedDoorz, in an interview with TechCrunch.

Regardless, the new funds will help RedDoorz fight SoftBank-backed Oyo, which is already aggressively expanding to new markets. Oyo currently operates in more than 80 nations.

Saberwal isn’t necessarily threatened by Oyo, on the contrary, he sees Oyo’s success as a testament that there is room for more players to be in the space. He is confident that RedDoorz is “on the right track to create the next tech unicorn in Southeast Asia,” and trade in public exchange in the next two to three years.

RedDoorz operates a marketplace of “two-star, three-star and below” budget hotels, selling access to rooms to people. Currently it has 1,400 hotels on its network, said Saberwal. By the end of the year, the startup aims to grow this number to 2,000.

The startup operates in 80 cities across Indonesia, Singapore, the Philippines and Vietnam, and plans to use the new capital to expand its network in its existing markets, said Saberwal. At least for the next one year, RedDoorz has no plans to expand beyond the four markets where it currently operates, he said.

“Anything in the accommodation is our playground. We have all kinds of properties. We have three-star hotels, some hostels, so we will continue to go deeper and wider moving forward,” Saberwal, a former top executive at India’s travel giant MakeMyTrip, said.

It’s a great combination: Making the ubiquity of typically unorganized local guesthouse-style rooms with the more organized and efficient — but pricier — hotel option.

Some of the new capital will also go into broadening RedDoorz’s tech infrastructure, building a second engineering hub in Vietnam. (RedDoorz’s current regional tech hub is based in India.)

China’s Transsion and Kenya’s Wapi Capital partner on Africa fund

Chinese mobile-phone and device maker Transsion is teaming up with Kenya’s Wapi Capital to source and fund early-stage African fintech startups.

Headquartered in Shenzhen, Transsion is a top-seller of smartphones in Africa that recently confirmed its imminent IPO.

Wapi Capital is the venture fund of Kenyan fintech startup Wapi Pay—a Nairobi based company that facilitates digital payments between African and Asia via mobile money or bank accounts.

Investments for the new partnership will come from Transsion’s Future Hub, an incubator and seed fund for African startups opened by Transsion in 2019.

Starting September 2019, Transsion will work with Wapi Capital to select early-stage African fintech companies for equity-based investments of up to $100,000, Transsion Future Hub Senior Investor Laura Li told TechCrunch via email.

Wapi Capital won’t contribute funds to Transsion’s Africa investments, but will help determine the viability and scale of the startups, including due diligence and deal flow, according to Wapi Pay co-founder Eddie Ndichu.

Wapi Pay and Transsion Future Hub will consider ventures from all 54 African countries and interested startups can reach out directly to either organization, Ndichu and Li confirmed.

The Wapi Capital fintech partnership is not Transsion’s sole VC focus in Africa. Though an exact fund size hasn’t been disclosed, the Transsion Future Hub will also make startup investments on the continent in adtech, fintech, e-commerce, logistics, and media and entertainment, according to Li.

Transsion Future Hub’s existing portfolio includes Africa focused browser company Phoenix, content aggregator Scoop, and music service Boomplay.

Wapi Capital adds to the list of African located and run venture funds—which have been growing in recent years—according to a 2018 study by TechCrunch and Crunchbase. Wapi Capital will also start making its own investments and is looking to raise $1 million this year and $10 million over the next three years, according to Ndichu, who co-founded the fund and Wapi Pay with his twin brother Paul.

Transsion’s commitment to African startup investments comes as the company is on the verge of listing on China’s new Nasdaq-style STAR Market tech exchange. Transsion confirmed to TechCrunch this month the IPO is in process and that it could raise up to 3 billion yuan (or $426 million).

Transsion sold 124 million phones globally in 2018, per company data. In Africa, Transsion holds 54% of the feature phone market — through its brands Tecno, Infinix and Itel — and in smartphone sales is second to Samsung and before Huawei, according to International Data Corporation stats.

Transsion has R&D centers in Nigeria and Kenya and its sales network in Africa includes retail shops in Nigeria, Kenya, Tanzania, Ethiopia and Egypt. The company also has a manufacturing facility in Ethiopia.

Transsion’s move into venture investing tracks greater influence from China in African tech.

China’s engagement with African startups has been light compared to China’s deal-making on infrastructure and commodities.

Transsion’s Wapi Pay partnership is the second recent event — after Chinese owned Opera’s big venture spending in Nigeria — to reflect greater Chinese influence and investment in the continent’s digital scene.

 

 

 

 

 

 

 

A.Capital Partners, founded by Ronny Conway, targets $140 million for its third fund

Silicon Valley investor Ronny Conway is raising his third early-stage venture fund, shows a new SEC filing that states the fund’s target is $140 million and that the first sale has yet to occur.

The now six-year-old firm, A.Capital, focuses on both consumer and enterprise tech, and has offices in Menlo Park and San Francisco.

Among the many brand-name companies in its portfolio are Coinbase, Airbnb, Pinterest, and Reddit. (You can find its other investments here.)

Conway led the seed-stage program of Andreessen Horowitz (a16z) for roughly four years in its earliest days and left in 2013 to raise his debut fund, which closed with $51 million in capital commitments. He also raised two, smaller parallel funds at the time.

According to SEC filings, he sought out $140 million for his second fund, though he never announced its close.

A.Capital is today run by Conway, along with General Partner Ramu Arunachalam (also formerly of a16z) and Kartik Talwar, who worked previously with Conway’s brother Topher, and his famed father, Ron, at their separate venture firm, SV Angel.

Conway maintains a far lower profile than his father, who throughout his venture career has nurtured relationships not only with founders but with tech reporters and local politicians.

Though now ancient history in Silicon Valley years, Ronny Conway has been credited with introducing a16z to Instagram when it was a nascent mobile photo-sharing app.

Conway, a former Googler, met Instagram cofounder Kevin Systrom in the several years when Systrom, too, worked for the search giant, beginning in 2006. It turned out to be a highly worthwhile introduction to a16z, though it could have been even lucrative. Though the firm made a seed-stage bet on Instagram, it didn’t follow up with another check because of a separate investment in a competing startup that would eventually flounder (PicPlz).

It was a sensitive issue at the time for a16z, with some noting its missed opportunity. In fact, firm cofounder Ben Horowitz felt compelled to write in a blog post that when Facebook acquired Instagram for $1 billion in 2012, a16z did just fine, wringing $78 million from its $250,000 seed investment in the startup.

UrbanClap, India’s largest home services startup, raises $75M

UrbanClap, a marketplace for freelance labor in India and the UAE, has raised $75 million in a new financing round to expand its business.

The Series E round for the four-and-a-half-year old India-based startup was led Tiger Global. Existing investors Steadview Capital, which led the startup’s Series D in December last year, and Vy Capital also participated in the current round. The startup, which has raised about $185 million to date, said some early investors sold portions of their stake as part of the new round.

Through its platform, UrbanClap matches service people such as cleaners, repair staff and beauticians with customers across 10 cities in India and Dubai and Abu Dhabi. The startup supports 20,000 “micro-franchisees” (service professionals) with around 450,000 transactions taking place each month, cofounder and CEO Abhiraj Bhal told TechCrunch.

Bhal said that UrbanClap helps offline service workers, who have traditionally relied on getting work through middleman such as some store or word of mouth networks, to find more work. And they earn more, too. UrbanClap offers a more direct model, with workers keeping 80% of the cost of their jobs. That, Bhal said, means workers can earn multiples more and manage their own working hours.

“The UrbanClap model really allows them to become service entrepreneurs. Their earnings will shoot up two or three-fold, and it isn’t uncommon to see it rise as much as 8X — it’s a life-changing experience,” he said. Average value of a service is between $17 to $22, according to the company.

In recent years, UrbanClap has also started to offer training, credit, and basic banking services to better support the service workers on its platform. On its website, UrbanClap claims to offer 73 services — including kitchen cleaning, hairdressing, and yoga training. It says it has served 3 million customers.

Bhal said that around 20-25% of applicants are accepted into the platform, that’s a decision based on in-person meetings, background and criminal checks, as well as a “skills” test. Workers are encouraged to work exclusively — though it isn’t a requirement — and they wear UrbanClap outfits and represent the brand with customers.

Joy Capital closes $700M for early-stage investments in China

Joy Capital, the venture capital firm that’s backed Luckin, NIO, Mobike and other investor darlings in China, just raised $700 million for a new fund focusing on early-to-growth stage startups.

Launched in 2015 by a team of former investors at Legend Capital, the investment arm of PC maker Lenovo’s parent company, Joy Capital made the news official (in Chinese) on Monday. It didn’t identify the limited partners in this new corpus of funding but said they include “top” public pension funds and insurance companies. Its existing pool of investors counts those from sovereign wealth funds, education-focused endowment funds, family funds and parent funds.

The fresh money boosted Joy’s total tally to over 10 billion yuan ($1.45 billion) under management, with a focus on backing cutting edge technologies and companies involved in the digital upgrade of China’s traditional sectors, or what Joy’s founding partner Liu Erhai (pictured above) dubbed the “new infrastructure” in an op-ed for the China Securities Journal. Targets can include the likes of logistics companies, online car rental platforms or bike-sharing apps.

As a relatively young fund, Joy Capital has so far achieved a few large outcomes. One of its portfolio companies NIO became China’s first electric vehicle startup to go public in the U.S. as a rival to Tesla. It’s also funded Luckin, the Starbucks nemesis from China that floated in the U.S. only 18 months after inception. The fund’s other big wins include Mobike, the bike-sharing pioneer that was sold to Meituan Dianping for $2.7 billion and fast-growing house-sharing unicorn Danke Apartment.

Joy Capital’s new raise arrived at a time when Chinese venture investors are coping with a cash crunch amid a cooling economy exacerbated by the expansion of U.S. tariffs. We reported that private equity and venture capital firms in the country raised 30% less in the first six months of 2019 compared to a year earlier, and the number of investors that managed to attract fundings was down 52% in the same period.

The Wing poaches Snap’s comms director

Women-focused co-working space The Wing has hired Rachel Racusen as vice president of communications. Racusen has been the director of communications at Snap, the developer of Snapchat, since late 2016.

Racusen’s exit represents the latest in a series of departures at the “camera company.”

Earlier this year, the company’s chief financial officer Tim Stone stepped down. Shortly after, The Wall Street Journal reported that Snap had fired its global security head Francis Racioppi after an investigation uncovered that he had engaged in an inappropriate relationship with an outside contractor. Snap CEO Evan Spiegel reportedly asked the company’s HR chief Jason Halbert to step down as a result of the investigation’s findings.

Racusen worked under Snap’s chief communications officer Julie Henderson, who had joined late last year from 21st Century Fox.

Racusen has a history in politics similar to several other executives at The Wing. Ahead of her Snap tenure, she served as the associate communications director under President Barack Obama . Before that, she was a vice president at MSNBC and the public affairs firm SKDKnickerbocker, where The Wing co-founder and chief executive officer Audrey Gelman worked prior to launching her business.

Four months after closing a $75 million Series C, The Wing is making two other key additions to its management team. The company has brought on Nickey Skarstad as vice president of product and Saumya Manohar as general counsel. Skarstad joins from Airbnb, where she was a product lead on the Airbnb Experiences team. Saumya Manohar spent the last three years as Casper’s vice president of legal.

Backed by Sequoia Capital, Upfront Ventures, NEA, Airbnb, WeWork and others, The Wing has raised more than $100 million to date.

“We’re thrilled to be bringing this group of seasoned and talented women to build out our executive team,” Gelman said in a statement. “The Wing is the perfect home for leaders who thrive on fast growth and want to combine their social values with their work practice.”

Online catering marketplace ezCater gets another $150M at a $1.25B valuation

In 2007, Stefania Mallett and Briscoe Rodgers conceived of ezCater, an online marketplace for business catering, and began building the company in Mallet’s Boston home, mostly at her kitchen table.

Recently, sitting at that same table, Mallett negotiated with Brad Twohig of Lightspeed Venture Partners the final terms of a $150 million Series D-1 at a $1.25 billion valuation. Lightspeed, alongside GIC, co-led the round, with participation from Light Street Capital, Wellington Management, ICONIQ Capital and Quadrille Capital.

“Raising money or getting to unicorn status, it’s all nice validation but that’s not the purpose, the purpose of being in business is to grow a very successful company with happy customers and happy employees,” Mallett, ezCater’s chief executive officer, told TechCrunch. “We are going to have cupcakes with unicorns on them. That will take us about a half hour, then we will get back to work.”

EzCater co-founder and CEO Stefania Mallett

Mallett compares ezCater to Expedia . The travel company doesn’t own and operate hotels, nor do they create them. EzCater, similarly, works with 60,500 restaurants and caterers around the U.S. to fulfill orders, but at no point do they work directly with food nor make any deliveries themselves.

Since its inception, the ezCater marketplace has grown considerably, expanding 100 percent annually for the last eight years, Mallett tells us. Though, like most unicorns, ezCater isn’t profitable yet.

Both Mallett and Rodgers are software industry veterans, establishing engineering careers prior to tackling business catering. The pair bootstrapped the company until 2011, when they secured a small Series A investment of $2.7 million. That same year, U.S. foodtech startups raised $176 million, per PitchBook. EzCater would go on to raise more than $300 million in equity funding, including its latest round, and VC interest in foodtech would explode. Already this year, U.S. foodtech startups have brought in $626 million after pulling in a whopping $5 billion in 2018.

EzCater has benefited from this boom. The company raised a $100 million Series D just 10 months ago.

“We really didn’t need the money, we have quite a lot of money in the bank from the last round,” Mallett said. “There was so much talk of a funding winter and a recession coming so we said maybe we should try to raise money and then people jumped on it so we thought OK, why not? If there is a funding winter, we’re set; if not, well, we are still set.”

The investment comes hot off the heels of ezCater’s acquisition of Monkey Group, a cloud platform for take-out, delivery and catering. Mallett declined to disclose terms of the deal but said the partnership makes ezCater the indisputable market leader in catering management software. The company will use its recently expanded war chest to accelerate its international expansion and, potentially, continue its M&A streak. As for the future, an initial public offering is amongst the possibilities.

“We certainly are considering it,” Mallett said. “As we’ve grown, we’ve become more sophisticated and mature; that puts us in a good position to continue operating as a successful standalone company or be acquired by a public company or go public if we see an opportunity to do that. We are not wedded to any of these outcomes.”

Equity Shot: Lyft files to go public and we’re stoked

Hello and welcome to an Equity Shot, a short-form episode of the show where we dive into a single breaking news story. Guess what we’re talking about today?! It’s Lyft . You guessed correctly.

The Lyft S-1 is the very first major S-1 event of 2019. As you might recall, the government shutdown gummed the IPO process by halting the Securities and Exchange Commission, an agency that plays the most active role in helping a company go public. Now the government is open, and Lyft’s formerly private filing is now a public filing.

You can read Kate’s deep dive here or mine here, but what follows is an overview of what we chatted about on the show. Here’s the SEC filing if you want to follow along.

Up top are revenue and growth. Lyft’s revenue grew from $1.06 billion to nearly $2.2 billion from 2017 to 2018. That’s impressive.

Next is costs. Lyft’s costs rose dramatically during 2018, compared to the year prior. In fact, Lyft’s total cost profile rose from $1.77 billion in 2017 to a staggering $3.13 billion in 2018. That’s a lot, and each figure is far higher than its revenue.

Which lead us to losses. Sure those revenue numbers look hot, but Lyft, at the same time, lost $911 million on 2018 revenue and $688 million the previous year. Though, as Alex points out, that ratio is improving, pointing to a positive (maybe even profitable???) future for Lyft.

However, while the S-1 had its ups and downs, two data points stood out that weren’t GAAP, but did make us appreciate Lyft’s work a bit more. As we explain, Lyft’s share of bookings (total value of services) from its platform is rising as is its revenue-per-rider. Those bode well for the future, too.

We closed the episode with some chatter on Lyft’s plan to reward its drivers. The business is helping drivers — the core of its business — earn a piece of that tasty IPO pie with a $10,000 bonus. TechCrunch’s Megan Rose Dickey has more on that here. Plus, we’d have been remiss not to discuss Lyft’s scooter play, which it apparently spent $60 million on last year.

All that and we got an S-1 done. Let’s have a few more, and quickly.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast, Pocket Casts, Downcast and all the casts.

VCs give us their predictions for startups and tech in Southeast Asia in 2019

The new year is well underway and, before January is out, we polled VCs in Southeast Asia to get their thoughts on what to expect in 2019.

The number of VCs in the region has increased massively in recent years, in no small part due to forecasts of growth in the tech space as internet access continues to shoot up among Southeast Asia’s cumulative population of more than 600 million consumers.

There are other factors, including economic growth and emerging middle classes, but with more than 3.8 million people becoming first-time internet users each month — thanks to smartphones — Southeast Asia’s ‘digital economy’ is tipped to more than triple to reach $240 billion by 2025. That leaves plenty of opportunity for tech and online businesses and, by extension, venture capitalists.

With a VC corpus that now numbers dozens of investment firms, TechCrunch asked the people who write the checks what is on the horizon for 2019.

The only rule was no more than three predictions — below, in no particular order, is what they told us.


Albert Shyy, Burda

Funds will continue to invest aggressively in Southeast Asia in the first half of this year but capital will tighten up by Q4 as funds and companies prepare for a possible recession. I think we will see a lot of companies opportunistically go out to fundraise in Q1/Q2 to take advantage of a bull market.

We will see two to three newly-minted unicorns from the region this year, after a relative lull last year.

This will (finally) be the year that we start to see some consolidation in the e-commerce scene


Dmitry Levit, Cento

A significant portion of capital returned by upcoming U.S. IPOs to institutional investors will be directed to growth markets outside of China, with India and Southeast Asia being the likeliest beneficiaries. Alternative assets such as venture and subsets of private equity in emerging markets will enter their golden age.

The withdrawal of Chinese strategic players held back by weakened domestic economy, prudent M&A by local strategics and ongoing caution among Japanese, Korean and global corporates, combined with ongoing valuations exuberance by late-stage investors allocating funds to Southeast Asia, will continue holding back large liquidity events. Save perhaps for a roll-up of a local champion or two into a global IPO. Fundraising will get more troublesome for some of Southeast Asia’s larger unprofitable market leaders. Lack of marquee liquidity events and curtailed access to late-stage capital for some will lead to a few visible failures (our money is on the subsidy-heavy wallets!) and a temporary burst of short-term skepticism around Southeast Asia as an investment destination towards the end of 2019.

The trend towards the emergence of value-chain specific funds and fund managers will continue, as digitalization is reaching ever further into numerous industry sectors and as Southeast Asia hosts an increasing portion of global supply chains. We foresee at least dozen new venture firms and vehicles emerging in 2019 with clear sector-led investment thesis around the place of Southeast Asian economies in the global value chains of fashion industry, agriculture and food; labour, healthcare services; manufacturing, construction tech and so on, with investment teams that have the necessary expertise to unravel this increasing complexity.


Willson Cuaca, East Ventures

Jakarta becomes Southeast Asia’s startup capital surpassing Singapore in terms of the number of deals and investment amount.

As Indonesia’s startup scene heats up, regional seed and series A funds move away from Indonesia and target Vietnam, Malaysia, Thailand and the Philippines (in market priority order).

Southeast gets two new unicorns.


Rachel Lau, RHL Ventures

North Asian companies will provide well-needed liquidity as they withdraw capital from developed American and European markets due to the Federal Reserve’s actions. The FED raised interest rates and reduced the size of its balance sheet (by not replacing the bonds that were maturing at a rate of $50 billion a month). This has been seen in the recent fundraising exercise by Southeast Asian unicorns. Grab has recently seen an impressive list of North Asian investors such as Mirae, Toyota and Yamaha . A recent stat stated that 85 percent of the funding of Southeast Asia startups have gone to billion dollar unicorn such as Grab and Gojek, bypassing the early stage startups that are more in need for funding, this trend is expected to continue. Therefore, we will see early-stage companies and venture capitalists becoming more focused on generating cash flow from operating operations instead as fundraising activities become more difficult.

A growth in urbanization in Southeast will create new job opportunities in small/medium businesses, as evident in China. Currently, only 12 percent of Asia’s urban population live in megacities, while four percent live in towns of fewer than 300,000 inhabitants. New companies will see the blurred lines between brick and mortar businesses vs pure online businesses. In the past year or so, we have seen more and more offline businesses going online and more online businesses going offline.

Fertility rates in the Philippines, Laos, Cambodia, Indonesia and Vietnam exceed 2.1 births per woman — the level that sustains a population — but rates below 1.5 in Singapore and Thailand mean their populations will decline without immigration. As we see more startup activities coming to Southeast Asian countries, we expect to see more qualified foreign talent moving to the region vs staying in low growth American and European countries.


Kay-Mok Ku, Gobi Ventures

First Chinese “Seaward” Unicorn in Southeast Asia. In recent years, a growing number of Chinese startups are targeting overseas markets from the get go (known as Chuhai 出海 or “Seaward”). These Chinese entrepreneurs typically bring with them best practices in consumer marketing and product development honed by a hyper-competitive home market, supported by strong, dedicated technical team based out of China and increasingly capitalized by Chinese VCs which have raised billion-dollar funds.

Consolidation among ASEAN Unicorns. While ASEAN now boasts 10 unicorns, they are duplicative in the sense that more than one exists in a particular category, which is unsustainable for winner-takes-all markets. For example, in the ASEAN ride-hailing space, while one unicorn is busy with regional geographic expansion, the other simply co-exists by staying focused on scope expansion within its home market. This will never happen in a single country market like China but now that the ASEAN ride hailing unicorns are finally locking horns, the stage may be set for a Didi-Kuadi like scenario to unfold.

ASEAN jumps on Chinese 5G bandwagon. The tech world in the future will likely bifurcate into American and Chinese-led platforms. As it is, emerging markets are adopting Chinese business models based on bite-sized payment and have embraced Chinese mobile apps often bundled with cheap Chinese smartphones. Looking ahead, 5G will be a game changer as its impact goes beyond smartphones to generic IoT devices, having strategic implications for industries such as autonomous driving. As a result, the US-China Trade War will likely evolve into a Tech War and ASEAN will be forced to choose side.


Daren Tan, Golden Equator Capital

We are excited by growth in the AI and deep tech sectors. The focus has generally been on consumer-focused tech in Southeast Asia as an emerging market, but we are starting to see proprietary solutions emerge for industries such as medtech and fintech. AI also has great applicability across a wide range of consumer sectors in reducing reliance on manpower and creating cost savings.

Data analytics to uncover organizational efficiencies and customer trends will continue to be even more widely used, but there will also be greater emphasis on securing such data especially confidential information in light of multiple high-profile data breaches in 2018. Tools enabling the collection, storage, safe-keeping and analysis of data will be essential.

We are seeing the emergence of more institutional funds from North Asia. So far it has predominantly been Chinese tech giants like Tencent and Alibaba, now we are starting to see Korean and Japanese institutions placing greater emphasis on investment in the Southeast Asian region.


Vinnie Lauria, Golden Gate Ventures

Even more capital flowing from U.S. and China into Southeast Asia, with VCs from both locations soon to open offices in the region

A fresh wave of Series A investments into Vietnam.

Ten exits over $100 million.

 


Amit Anand, Jungle Ventures

The emergence of a financial services super app, think the Meituan or WeChat but only for financial services: The Southeast Asian millennial is one of the most underserved customer from a financial services perspective whether it is payments, consumer goods loans, personal loans, personal finance management, investments or other financial services. We will see the emergence of digital platforms that will aggregate all these related services and provide a one stop financial services shop for this digitally native consumer.

Digitisation of SMEs will be new fintech: Southeast Asia is home to over 100 million SMEs that are at the cusp of digital transformation. Generational change in ownership, local governments push for digitization and increased globalization have created a perfect storm for these SMEs to adopt cloud and other digital technologies at neck-breaking pace. Startups focussing on this segment will get mainstream attention from the venture community over the next few years as they look for new industries that are getting enabled or disrupted by technology.


Kuo-Yi Lim and Peng Ong, Monk’s Hill Ventures

Lyft and Uber go public and show the path to profitability for other rideshare businesses. This has positive effect for the regional rideshare players but also puts pressure on them to demonstrate the same economics in ridesharing. Regional rideshare players double down on super-app positioning instead, to demonstrate value in other ways as rideshare business alone may not reach profitability — ever.

The trade war between China and the US reaches a truce, but a general sense of uncertainty lingers. This is now the new norm — things are less certain and companies have to plan for more adverse scenarios. In the short term, Southeast Asia benefits. Companies — Chinese, American etc — see Southeast Asia as the neutral ground. Investment pours in, creating jobs across industries. Acquisition of local champions intensifies as foreign players jostle for the lead positions.

“Solve the problem” – tech companies will become more prominent… tech companies that are real-estate brokers, recruiters, healthcare providers, food suppliers, logistics… why: many industries are very inefficient.


Hian Goh, Openspace Ventures

Fight to quality will happen. Fundraising across all stages from seed to Series C and beyond will be challenging if you don’t have the metrics. Investors will want to see a path to profitability, or an ability to turn profitable if the environment becomes worse. This will mean Saas companies with stable cash flows, vertical e-commerce with strong metrics will be attractive investment opportunities.

Investor selection will become critical, as investors take a wait and see approach. Existing or new investors into companies will be judged upon their dry powder in their funds and their ability to fund further rounds

The regulatory risk for fintech lenders will be higher this year, rising compliance cost and uncertainty on licensing, which would lead to consolidation in the market.


Heang Chhor, Qualgro

Southeast Asia: an intensifying battlefield for tech investments

There has never been so much VC money in Southeast Asia chasing interesting startups, at all life cycle stages. The 10 most active local and regional VCs have raised their second or third funds recently, amassing at least two times more money than a few years ago, probably reaching a total amount close to $1 billion. In addition, international VCs have also doubled down on their allocation into the region, while top Chinese VCs have visibly stated their intent not to miss the dynamic momentum. Several growth funds have recently built a local presence in order to target Southeast Asia tech companies at Series C and beyond. Not counting the amount going to the unicorns, there might be now more than $3-4 billion available for seed to growth stages, which may be 3-4 times the amount of three years ago. There are, of course, many more good startups coming up to invest into. But the most promising startups will be in a very favorable position to negotiate higher valuation and better terms. However, they should not forget that, eventually, what creates value is how they make a difference with their tech capabilities or their business model, how they acquire and retain the best talent, with the funds raised, not only how much money they will be able to raise. Most local and regional corporate VCs are likely to lose in this more intense investment game.

Significant VC money investing into so-called ‘AI-based startups’, but are there really much (deep) Artificial Intelligence capabilities around?

A good portion of the SEA startups claim they have ‘something-AI’. Investors are overwhelmed, if not confused, by the ‘AI claim’ that they find in most startup pitches. While there is no doubt that Southeast Asia will grow its own strong AI-competence pool in the future, unfortunately today most ‘AI-based’ business models from the region would still be just ‘good algorithms or machine learning’ that can process some amount of data to come up with good-enough outcomes, that do not always generate substantial business value to users/customers. The significant budget that some of the very-well-funded Southeast Asia unicorns are putting into their ‘AI-based apps’ or ‘AI platform’ is unlikely to make a real difference for the consumers, for lack of deep AI competences in the region. 2019 may be another year of AI-promise, not realized. Hopefully, public and private research labs, universities and startups will continue to be (much more) strongly supported (especially by governments) to significantly build bigger AI talent pool, which means growing and attracting AI talent into the region.

Bigger Series A and Series B rounds to fuel more convincing growth trajectory, towards growth-stage fundraising.

Although situations vary a lot: typical Series A in Southeast Asia used to be around $5 million, and Series B around $10-15 million. Investors tended to accept that normally companies would raise money after 18 months or so, between A and B, and between B and C. There has been an increasing number of larger raises at A and B recently, and very likely this trend will accelerate. The fact that VCs now have much more money to deploy into each investment will contribute to this trend. However, the required milestones for raising Series C have become much more around: minimum scale and very solid growth (and profit) drivers. Therefore, entrepreneurs will have to look for getting as much funding reserve as possible, irrespective of time between raises, to build growth engines that take their companies past the milestones of the next Series, be it B or C. In the future, we will see more Series A of $10 million and more Series B of well-above $20 million. Compelling businesses will not have too much difficulties for doing so, but most Southeast Asia entrepreneurs would be wise to learn to more effectively master fundraising skills for capturing much bigger amounts than in the past. Of course, this assumes that their businesses are compelling enough in the eyes of investors.


Vicknesh R Pillay, TNB Aura

Out-sized valuations will be less commonplace in 2019 as Southeast Asian investors learn from experience and become more sophisticated. Therefore, we do see opportunities at Series A/B for undervalued deals due to lack of early-stage funding while we expect to continue to see the trend of the majority of venture capital investments going into later stage companies (Series C and beyond) due to lower risk appetite and ‘herd’ mentality.

2018 has also seen the rapid emergence of many corporate venture capital funds and innovation programs. But, 2019 will see large corporations cutting back on their allocation towards startup investing which would be the easiest option for them in case of adverse news to the jittery public markets in 2019.

With the growth of AI, the need for API connections and increased thought leadership to embrace tech, Southeast Asia is going to see an upsurge in SaaS startups and existing startups moving to a Saas business model. Hence, we expect increased investments into Saas companies focused on IoT and cybersecurity as hardware data and software are moved onto the cloud.


Chua Kee Lock, Vertex Ventures

Southeast Asia VC investment pace has grown steadily and significantly since 2010 where it started from less than $100 million in VC investment in the region. For the first eight months of 2018, the region’s VC investment was over $5.4 billion. For the whole of 2018, it will likely end around $8 billion. For 2019, we expect the VC investment pace to surpass 2018 level and record between $9-10 billion. Southeast Asia will continue to attract more VC investments because:

(1) Governments in Southeast Asia, especially ASEAN, continue their support policy to encourage startups.

(2) young demographics and the fast technology adoption in Southeast Asia give rise to more innovative and disruptive ideas.

(3) global investors looking for a better return and will naturally focus on growing emerging market like Southeast Asia.

The trend towards gig economy will begin to have an impact in the region. In developed economies like the U.S, gig economy is expected to reach over 40 percent by 2020. The young population will look for more freelance opportunities as a way to increase income levels while still maintaining flexibility. This will include white-collar work like computer programming, accounting, customer service, etc. and also blue-collar work like delivery services, ride-sharing, home services, etc. We believe that the gig economy will grow to over 15 percent in Southeast Asia by 2019.

AI-heavy or -driven startups will begin to make inroads into Southeast Asia.


Victor Chua, Vynn Capital

The BIG convergence — there will more integration between industries and sectors. Traveloka went into car rental, Blibli went into travel business and these are only some examples. There is a lot of synergistic value between travel startups and food startups or between property startups and automotive startups. Imagine a future where you travel to a city where you stay in an apartment you rented through a marketplace (like Travelio, my portfolio company), and when you need to book a restaurant you can make the reservation through a platform that is integrated with the property manager, and when you need to move around you go down to the car park to drive a car you rent from an automotive marketplace. There is clear synergy between selective industries and this leads to an overall convergence between companies, between industries.

More channels to raise Series B/C, early-stage companies find fundraising more challenging — We have seen a number of VC funds raising or already raised growth funds, this means that there are now more channels for Series A or B companies to raise growth rounds. As the market matures, there will be more competition for investments amongst growth funds as there is considerably more growth in the number of growth funds than companies that are raising at growth-stage. On the flip side, the feel is that there is a consistent growth in the number of early-stage companies, yet the amount of capital in early-stage funds is not growing as much as more VCs prefer bigger and later stages, due to the maturity of their existing portfolio companies.

Newcomers gaining weight — there will be at least 10 companies that will hit a valuation of at least $100 million. These valuations will not be based on a single market exposure. Companies that raise larger rounds will need to show that they are regional.


Thanks to all the VCs who took part, I certainly felt like the class teacher collecting assignments.

President Bolsonaro should boost Brazil’s entrepreneurial ecosystem

Romero Rodrigues
Contributor

Romero Rodrigues is a managing partner at Redpoint eVentures, the Brazilian-focused arm of the Silicon Valley venture firm Redpoint.

In late October following a significant victory for Jair Bolsonaro in Brazil’s presidential elections, the stock market for Latin America’s largest country shot up. Financial markets reacted favorably to the news because Bolsonaro, a free-market proponent, promises to deliver broad economic reforms, fight corruption and work to reshape Brazil through a pro-business agenda. While some have dubbed him as a far-right “Trump of the Tropics” against a backdrop of many Brazilians feeling that government has failed them, the business outlook is extremely positive.

When President-elect Bolsonaro appointed Santander executive Roberto Campos as new head of Brazil’s central bank in mid-November, Brazil’s stock market cheered again with Sao Paulo’s Bovespa stocks surging as much as 2.65 percent on the day news was announced. According to Reuters, “analysts said Bolsonaro, a former army captain and lawmaker who has admitted to having scant knowledge of economics, was assembling an experienced economic team to implement his plans to slash government spending, simplify Brazil’s complex tax system and sell off state-run companies.”

Admittedly, there are some challenges as well. Most notably, pension-system reform tops the list of priorities to get on the right track quickly. A costly pension system is increasing the country’s debt and contributed to Brazil losing its investment-grade credit rating in 2015. According to the new administration, Brazil’s domestic product could grow by 3.5 percent during 2019 if Congress approves pension reform soon. The other issue that’s cropped up to tarnish the glow of Bolsonaro coming into power are suspect payments made to his son that are being examined by COAF, the financial crimes unit.

While the jury is still out on Bolsonaro’s impact on Brazilian society at large after being portrayed as the Brazilian Trump by the opposition party, he’s come across as less authoritarian during his first days in office. Since the election, his tone is calmer and he’s repeatedly said that he plans to govern for all Brazilians, not just those who voted for him. In his first speech as president, he invited his wife to speak first which has never happened before.

Still, according to The New York Times, “some Brazilians remain deeply divided on the new president, a former army captain who has hailed the country’s military dictators and made disparaging remarks about women and minority groups.”

Others have expressed concern about his environment impact with the “an assault on environmental and Amazon protections” through an executive order within hours of taking office earlier this week. However, some major press outlets have been more upbeat: “With his mix of market-friendly economic policies and social conservativism at home, Mr. Bolsonaro plans to align Brazil more closely with developed nations and particularly the U.S.,” according to the Wall Street Journal this week.

Based on his publicly stated plans, here’s why President Bolsonaro will be good for business and how his administration will help build an even stronger entrepreneurial ecosystem in Brazil:

Bolsonaro’s Ministerial Reform

President Temer leaves office with 29 government ministries. President Bolsonaro plans to reduce the number of ministries to 22, which will reduce spending and make the government smaller and run more efficiently. We expect to see more modern technology implemented to eliminate bureaucratic red tape and government inefficiencies.

Importantly, this will open up more partnerships and contracting of tech startups’ solutions. Government contacts for new technology will be used across nearly all the ministries including mobility, transportation, health, finance, management and legal administration – which will have a positive financial impact especially for the rich and booming SaaS market players in Brazil.

Government Company Privatization

Of Brazil’s 418 government-controlled companies, there are 138 of them on the federal level that could be privatized. In comparison to Brazil’s 418, Chile has 25 government-controlled companies, the U.S. has 12, Australia and Japan each have eight, and Switzerland has four. Together, Brazil-owned companies employ more than 800,000 people today, including about 500,000 federal employees. Some of the largest ones include petroleum company Petrobras, electric utilities company EletrobrasBanco do Brasil, Latin America’s largest bank in terms of its assets, and Caixa Economica Federal, the largest 100 percent government-owned financial institution in Latin America.

The process of privatizing companies is known to be cumbersome and inefficient, and the transformation from political appointments to professional management will surge the need for better management tools, especially for enterprise SaaS solutions.

STEAM Education to Boost Brazil’s Tech Talent

Based on Bolsonaro’s original plan to move the oversight of university and post-graduate education from the Education Ministry to the Science and Technology Ministry, it’s clear the new presidential administration is favoring more STEAM courses that are focused on Science, Technology, Engineering, the Arts and Mathematics.

Previous administrations threw further support behind humanities-focused education programs. Similar STEAM-focused higher education systems from countries such as Singapore and South Korea have helped to generate a bigger pipeline of qualified engineers and technical talent badly needed by Brazilian startups and larger companies doing business in the country. The additional tech talent boost in the country will help Brazil better compete on the global stage.

The Chicago Boys’ “Super” Ministry

The merger of the Ministry of Economy with the Treasury, Planning and Industry and Foreign Trade and Services ministries will create a super ministry to be run by Dr. Paulo Guedes and his team of Chicago Boys. Trained at the Department of Economics in the University of Chicago under Milton Friedman and Arnold Harberger, the Chicago Boys are a group of prominent Chilean economists who are credited with transforming Chile into Latin America’s best performing economies and one of the world’s most business-friendly jurisdictions. Joaquim Levi, the recently appointed chief of BNDES (Brazilian Development Bank), is also a Chicago Boy and a strong believer in venture capital and startups.

Previously, Guedes was a general partner in Bozano Investimentos, a pioneering private equity firm, before accepting the invitation to take the helm of the world’s eighth-largest economy in Brazil. To have a team of economists who deeply understand the importance of rapid-growth companies is good news for Brazil’s entrepreneurial ecosystem. This group of 30,000 startup companies are responsible for 50 percent of the job openings in Brazil and they’re growing far faster than the country’s GDP.

Bolsonaro’s Pro-Business Cabinet Appointments

President Bolsonaro has appointed a majority of technical experts to be part of his new cabinet. Eight of them have strong technology backgrounds, and this deeper knowledge of the tech sector will better inform decisions and open the way to more funding for innovation.

One of those appointments, Sergio Moro, is the federal judge for the anti-corruption initiative knows as “Operation Car Wash.” With Moro’s nomination to Chief of the Justice Department and his anticipated fight against corruption could generate economic growth and help reduce unemployment in the country. Bolsonaro’s cabinet is also expected to simplify the crazy and overwhelming tax system. More than 40 different taxes could be whittled down to a dozen, making it easier for entrepreneurs to launch new companies.

In general terms, Brazil and Latin America have long suffered from deep inefficiencies. With Bolsonaro’s administration, there’s new promise that there will be an increase in long-term infrastructure investments, reforms to reduce corruption and bureaucratic red tape, and enthusiasm and support for startup investments in entrepreneurs who will lead the country’s fastest-growing companies and make significant technology advancements to “lift all boats.”

Growing pains at venture-backed Moogsoft lead to layoffs

Eight months after bringing in a $40 million Series D, Moogsoft‘s co-founder and chief executive officer Phil Tee confirmed to TechCrunch that the IT incident management startup had shed 18 percent of its workforce, or just over 30 employees.

The layoffs took place at the end of October; shortly after, Moogsoft announced two executive hires. Among the additions was Amer Deeba, who recently resigned from Qualys after the U.S. Securities and Exchange Commission charged him with insider trading.

Founded in 2012, San Francisco-based Moogsoft provides artificial intelligence for IT operations (AIOps) to help teams work more efficiently and avoid outages. The startup has raised $90 million in equity funding to date, garnering a $220 million valuation with its latest round, according to PitchBook. It’s backed by Goldman Sachs, Wing Venture Capital, Redpoint Ventures, Dell’s corporate venture capital arm, Singtel Innov8, Northgate Capital and others. Wing VC founder and long-time Accel managing partner Peter Wagner and Redpoint partner John Walecka are among the investors currently sitting on Moogsoft’s board of directors.

Tee, the founder of two public companies (Micromuse and Riversoft) admitted the layoffs affected several teams across the company. The cuts, however, are not a sign of a struggling business, he said, but rather a right of passage for a startup seeking venture scale.

“We are a classic VC-backed startup that has sort of grown up,” Tee told TechCrunch earlier today. “In pretty much every successful company, there is a point in time where there’s an adjustment in strategy … Unfortunately, when you do that, it becomes a question of do we have the right people?”

Moogsoft doubled revenue last year and added 50 Fortune 200 companies as customers, according to a statement announcing its latest capital infusion. Tee said he’s “extremely chipper” about the road ahead and the company’s recent C-suite hires.

Moogsoft’s newest hires, CFO Raman Kapur (left) and COO Amer Deeba (right).

Moogsoft announced its latest executive hires on November 2, only one week after completing the round of layoffs, a common strategy for companies looking to cast a shadow on less-than-stellar news, like major staff cuts. Those hires include former Splunk vice president of finance Raman Kapur as Moogsoft’s first-ever chief financial officer and Amer Deeba, a long-time Qualys executive, as its chief operating officer.

Deeba spent the last 17 years at Qualys, a publicly traded provider of cloud-based security and compliance solutions. In August, he resigned amid allegations of insider trading. The SEC announced its charges against Deeba on August 30, claiming he had notified his two brothers of Qualys’ missed revenue targets before the company publicly announced its financial results in the spring of 2015.

“Deeba informed his two brothers about the miss and contacted his brothers’ brokerage firm to coordinate the sale of all of his brothers’ Qualys stock,” the SEC wrote in a statement. “When Qualys publicly announced its financial results, it reported that it had missed its previously-announced first-quarter revenue guidance and that it was revising its full-year 2015 revenue guidance downward. On the same day, Deeba sent a message to one of his brothers saying, ‘We announced the bad news today.’ The next day, Qualys’s stock price dropped 25%. Although Deeba made no profits from his conduct, Deeba’s brothers collectively avoided losses of $581,170 by selling their Qualys stock.”

Under the terms of Deeba’s settlement, he is ineligible to serve as an officer or director of any SEC-reporting company for two years and has been ordered to pay a $581,170 penalty.

Tee, for his part, said there was never any admission of guilt from Deeba and that he’s already had a positive impact on Moogsoft.

“[Deeba] is a tremendously impressive individual and he has the full confidence of myself and the board,” Tee said.

 

Brex has partnered with WeWork, AWS and more for its new rewards program

Brex, the corporate card built for startups, unveiled its new rewards program today.

The billion-dollar company, which announced its $125 million Series C three weeks ago, has partnered with Amazon Web Services, WeWork, Instacart, Google Ads, SendGrid, Salesforce Essentials, Twilio, Zendesk, Caviar, HubSpot, Orrick, Snap, Clerky and DoorDash to give entrepreneurs the ability to accrue and spend points on services and products they use regularly.

Brex is lead by a pair of 22-year-old serial entrepreneurs who are well aware of the costs associated with building a startup. They’ve been carefully crafting Brex’s list of partners over the last year and say their cardholders will earn roughly 20 percent more rewards on Brex than from any competitor program.

“We didn’t want it to be something that everyone else was doing so we thought, what’s different about startups compared to traditional small businesses?” Brex co-founder and chief executive officer Henrique Dubugras told TechCrunch. “The biggest difference is where they spend money. Most credit card reward systems are designed for personal spend but startups spend a lot more on business.”

Companies that use Brex exclusively will receive 7x points on rideshare, 3x on restaurants, 3x on travel, 2x on recurring software and 1x on all other expenses with no cap on points earned. Brex carriers still using other corporate cards will receive just 1x points on all expenses.

Most corporate cards offer similar benefits for travel and restaurant expenses, but Brex is in a league of its own with the rideshare benefits its offering and especially with the recurring software (SalesForce, HubSpot, etc.) benefits.

San Francisco-based Brex has raised about $200 million to date from investors including Greenoaks Capital, DST Global and IVP.  At the time of its fundraise, the company told TechCrunch it planned to use its latest capital infusion to build out its rewards program, hire engineers and figure out how to grow the business’s client base beyond only tech startups.

“This is going to allow us to compete even more with Amex, Chase and the big banks,” Dubugras said.

Jane.VC, a new fund for female entrepreneurs, wants founders to cold email them

Want to pitch a venture capitalist? You’ll need a “warm introduction” first. At least that’s what most in the business will advise.

Find a person, typically a man, who made the VC you’re interested in pitching a whole bunch of money at some point and have them introduce you. Why? Because VCs love people who’ve made them money; naturally, they’ll be willing to hear you out if you’ve got at least one money maker on your side.

There’s a big problem with that cycle. Not all entrepreneurs are friendly with millionaires and not all entrepreneurs, especially those based outside Silicon Valley or from underrepresented backgrounds, have anyone in their network to provide them that coveted intro.

Jane.VC, a new venture fund based out of Cleveland and London wants entrepreneurs to cold email them. Send them your pitch, no wealthy or successful intermediary necessary. The fund, which has so far raised $2 million to invest between $25,000 and $150,000 in early-stage female-founded companies across industries, is scrapping the opaque, inaccessible model of VC that’s been less than favorable toward women.

“We like to say that Jane.VC is venture for every woman,” the firm’s co-founder Jennifer Neundorfer told TechCrunch.

Neundorfer, who previously founded and led an accelerator for Midwest startups called Flashstarts after stints at 21st Century Fox and YouTube, partnered with her former Stanford business school classmate Maren Bannon, the former chief executive officer and co-founder of LittleLane. So far, they’ve backed insurtech company Proformex and Hatch Apps, an enterprise software startup that makes it easier for companies to create and distribute mobile and web apps.

“We are going to shoot them straight”

Jane.VC, like many members of the next generation of venture capital funds, is bucking the idea that the best founders can only be found in Silicon Valley. Instead, the firm is going global and operating under the philosophy that a system of radical transparency and honesty will pay off.

“Let’s be efficient with an entrepreneur’s time and say no if it’s not a hit,” Neundorfer said. “I’ve been on the opposite end of that coaching. So many entrepreneurs think a VC is interested and they aren’t. An entrepreneur’s time is so valuable and we want to protect that. We are going to shoot them straight.”

Though Jane.VC plans to invest across the globe, the firm isn’t turning its back on Bay Area founders. Neundorfer and Bannon will leverage their Silicon Valley network and work with an investment committee of nine women based throughout the U.S. to source deals. 

“We are women that have raised money and have been through the ups and downs of raising money in what is a very male-dominated world,” Neundorfer added. “We believe that investing in women is not only the right thing to do but that you can make a lot of money doing it.”

Used car site Vroom is raising $70M six months after a big round of layoffs

After cutting a big portion of its staff in March, Vroom is back pitching investors. Yesterday, the site for buying and selling used cars filed to raise $70 million in new equity funding.

Vroom has already secured $30 million of that $70 million target, signaling confidence from investors that it’ll become profitable and beat out key competitors in the space, like Carvana and Shift.

The startup wants to make the process of buying a used car as easy as ordering a pizza. With more than 3,000 cars for sale on the site, Vroom delivers directly to its customers’ doorsteps. Since it was founded in 2013, Vroom has brought in $320 million from General Catalyst, T. Rowe Price, Altimeter and others, reaching a valuation of $655 million in July 2017.

Vroom declined to comment on its upcoming round.

As part of the March layoffs, Vroom, which is headquartered in New York City, also shuttered its Dallas, Texas and Whitestown, Indiana locations. The official number of employees Vroom let go is unclear, though when news of the layoffs broke, the company listed 845 employees on its website. Today, the site list “600+” or about 30% fewer employees.

The cuts, the company said, were part of a restructuring that would allow Vroom to focus on profitability. This is what the company had to say in March:

“While Vroom’s business is healthy and financially stable, we’re always looking to align our resources to fulfill our long-term vision and deliver on our mission,” the statement said. “In sharpening our focus on profitability, we recently made some adjustments to our strategy that has impacted our headcount. While decisions like this are never easy, we are putting the company in a better position to become the leader in online car buying and continue to invest in future areas of growth.”

It’s not surprising Vroom is back in the fundraising game. Buying and selling cars is a capital-intensive business. 

Vroom’s competitors have similarly raised a lot of capital. Carvana brought in more than $300 million in equity funding, as well as $400 million in debt, before hitting the stock markets in 2017. Shift has raised roughly $110 million to date. Beepi, a cautionary tale in the business of selling used cars online, landed $150 million in VC funding, then failed to sell its business twice, ultimately selling for parts to multiple buyers, including Vroom.

LinkedIn’s China rival Maimai raises $200M ahead of planned US IPO

Editor’s note: This post originally appeared on TechNode, an editorial partner of TechCrunch based in China.

Maimai, China’s biggest rival to LinkedIn, has revealed today that it received a $200 million D Series investment back in April in what the company claims to be the largest investment in the professional networking market. That’s surprising but correct: LinkedIn went public in 2011 and was bought by Microsoft for $26 million in 2016, but it raised just over $150 million from investors as a private company.

Global venture capital DST led the round for Maimai which include participation from existing investors of IDG, Morningside Venture Capital, and DCM.

The new capital takes Maimai to $300 million raised from investors, according to CrunchbaseCaixin reports that the valuation of the company is more than $1 billion which would see the firm enter the global unicorn club.

Beyond the fundraising, the firm said it plans to invest RMB 1 billion (around $150 million) over the next three years in a career planning program that it launched in partnership with over 1,000 companies. Those partners include global top-500 firm Cisco and Chinese companies such as Fashion Group and Focus Media.

This investment could be the last time Maimai taps the private market for cash. That’s because the company is gearing up for a U.S. IPO and overseas expansion in the second half of 2019, according to the company founder and CEO Lin Fan.

Launched in the fall of 2013, Maimai aims particularly at business people as a platform to connect professional workers and offer employment opportunities. The service now claims over 50 million users. As a Chinese counterpart of LinkedIn, Maimai has competed head-on with Chinese arm of the U.S. professional networking giant since its establishment and gradually gained an upper hand with features tailored to local tastes.

maimai

It can be hard to gauge the population of social networks, but Chinese market research firm iResearch ranked Maimai ahead of LinkedIn for the first time in the rankings of China’s most popular social networking apps in April last year. The firm further gained ground this year as its user penetration rate reaching 83.8 percent in June, far higher than LinkedIn China’s 11.8 percent, according to data from research institute Analysys.

As a China-born company, Maimai gained momentum over the past two years with localized features, such as anonymous chat, mobile-first design, real-name registration, and partnerships with Chinese corporations. But like all Chinese tech services, it is subject to the state’s tight online regulation. The government watchdog has ordered Maimai to remove the anonymous posting section on its platform last month. The same issue applies to LinkedIn, which has been criticized for allowing its Chinese censorship to spill over and impact global users.

With assistance from Jon Russell

Crypto firm Pantera Capital is looking to raise up to $175 million for a new venture fund

Pantera Capital, which has made its mark in recent years by investing early and often in a wide variety of digital assets, is looking to raise up to $175 million for its third venture fund — an enormous jump from the $25 million it deployed for its second venture fund and its $13 million debut venture fund, which it closed in 2013.

Firm partner Paul Veradittakit says the target amount is a “function of how fast the space is moving, the talent coming in, the opportunities, and the sizing of rounds. With more interesting later-stage investments [on our radar], too, we want to be flexible and able to move with the market.”

Whether the firm closes with $175 million or another number is an open question. A newly processed SEC filing shows it has so far rounded up more than $71 million in capital commitments from 90 investors, an amount that Veradittakit calls a “first close.”

Certainly, Pantera is accustomed to managing meaningful sums of money. In addition to its venture funds, which are structured like most traditional venture funds — they feature a 10-year investing period, similar economics, and involve good old-fashioned checks to startups in exchange for some amount of equity — the firm is also juggling three other strategies.

As we reported last year, one of its newest funds is a hedge fund that’s focused exclusively on initial coin offerings. As firm founder Dan Morehead told us at the time, Pantera buys pre-sale ICOs, “basically getting a discount to the ICO price by getting in early, when it’s just a team and a white paper.” Meanwhile, Morehead had added, “We help provide the right connections, whether in terms of marketing or recruiting or business development.

The vehicle is evergreen, says Veradittakit, meaning it has an indefinite fund life that lets investors come and go.

The other two other funds that Pantera currently oversees are also structured like hedge funds. One is a Bitcoin fund that has attracted plenty of investors over the years, and returned a lot to them, too, according to the calculations of Morehead. In fact, he wrote two weeks ago that the fund, launched five years ago, has enjoyed a lifetime return of 10,136.15 percent net of fees and expenses.

The very last fund invests in cryptocurrencies that are already trading on exchanges — an approach that includes machine learning to algorithmically invest in crypotcurrencies, as well as allows for some discretionary input by Pantera’s top brass, which includes Morehead, Veradittakit, and Joey Krug, who joined Pantera last year after cofounding the market forecasting startup Augur. (It went on to orchestrate the first ICO on the ethereum network.)

Explains Veradittakit of this last pool, it’s for “if you are’t sure that Bitcoin will remain the dominant cryptocurrency, or you’re interested in other use cases that may arise, or you just want to build a diversified portfolio of assets that have asymmetrical returns as bitcoin, or maybe return even more because they feature lower valuations.”

In some ways, the venture efforts of Pantera —   which employs 38 people altogether in San Francisco and Menlo Park, Ca. —  may be its most challenging given the nature of VC. Investors in the asset class are typically willing to wait a handful of years for a firm to produce returns; in Pantera’s case, because it is betting exclusively on ventures, tokens, and projects related to blockchain tech, digital currency, and crypto assets, some of those returns could potentially take even longer.

Veradittakit doesn’t sound concerned. Rattling off some of Pantera’s venture investments to date, including in BitStamp, Xapo, Ripple, and Circle, not to mention more recent investments in Chain, Abra, Veem Polychain, and Z Cash, he sounds more like a proud parent. Pantera has invested in “lots of wallets and exchanges focused around the world, in Coinbases of different geographies, in enterprise-related blockchain companies. More recently, we’ve funded everything from big data to decentralized application platforms.”

It’s still very early days, he acknowledges. But “in terms of returns, there will be companies that create something completely disruptive. There will be M&A [opportunities] more often and that [come together] more quickly than other companies.”

If everything goes as planned, Pantera will be there when they do, and it will have more resources to deploy than ever.

Real estate property manager and developer JLL launches a $100 million tech investment fund

The multi-billion dollar real estate developer and property manager JLL is getting into the tech investment game with the launch of a new $100 million fund run by corporate subsidiary JLL Spark.

Initially envisioned as a technology-focused business unit of the multinational real estate company, the firm eventually turned to the more traditional venture capital investment model as a way to get more exposure to all of the new technologies that are coming to market, according to JLL SPark’s co-chief executive Mihir Shah.

For Shah and his co-founder Yishai Lerner running the real estate company’s investment firm is the first foray by either executive into the world of real estate or property technology. But both men have been working in the startup world of the Bay Area for at over a decade.

In fact, the two serial entrepreneurs launched one of their first companies from the TechCrunch 50 conference way back in 2007 (it was a mobile app that mimicked Yelp).

The two eventually sold their mobile review business to GroupOn and began doing some angel investing. It was during that venture into the wild world of seed stage prospecting that Shah got bitten by the real estate bug while trying to buy some commercial real estate.

“I was looking at the process and was thinking ‘Wow! That is not a modern process,’” Shah said.

Unbeknownst to Shah, at the same time he was looking for commercial real estate, the commercial real estate industry was looking for someone like him.

JLL had put out feelers and hired head hunters to find someone who could take the lead at the firm’s burgeoning technology practice, Shah said.

“They had all sorts of internal initiatives bringing in new technology companies and services to their existing clients,” Shah said. “They understood that technology was going to transform all aspects of the industry.”

One of the first steps that JLL had taken was to acquire Stessa, which developed and sold asset management software for the real estate industry. But Shah and Lerner quickly realized that the buy and build strategy wouldn’t be robust enough for JLL’s needs.

“Over the last six months we saw how much innovation was happening in the proptech space and we thought it made more sense to launch a venture fund,” Shah said.

The firm will invest anywhere from a few hundred thousand dollars to a few million into seed stage or Series A companies with the option to dabble in later stage deals, according to Shah. The firm has made two investments so far — neither one of them in startups.

The commitments have been in one accelerator program, the New York-based Metaprop, which focuses on real estate tech investment, and Navitas Capital, which is billed as a later stage investor in the same space.

Both investments appear to be geared toward educating the firm’s two principals on the market and what’s already happening in the space.

The benefit that a corporate firm like JLL can provide to startups is the access to pilot projects where companies can deploy their technologies and, indeed, that’s the pitch that Shah makes to potential portfolio companies.

“Money is not enough,” he said. “There’s a lot of products out there, but they’re struggling with distribution.” JLL has designated a few buildings in top cities around the world to fast track new technologies and provide trial spaces for them to develop, Shah told me. “Our value as a strategic is to build that bridge and make that connection.”

“Creating this $100 million venture fund through JLL Spark allows us to continue to lead the real estate industry in bringing the best proptech ideas to reality,” said Christian Ulbrich, JLL’s Global chief executive. “It complements and expands our substantial ongoing investments in innovative, cutting-edge digital solutions, which is a core part of our Beyond strategic vision and commitment to achieve ambitions for our clients.”

 

How did Thumbtack win the on-demand services market?

Earlier today, the services marketplace Thumbtack held a small conference for 300 of its best gig economy workers at an event space in San Francisco.

For the nearly ten-year-old company the event was designed to introduce some new features and a redesign of its brand that had softly launched earlier in the week. On hand, in addition to the services professionals who’d paid their way from locations across the U.S. were the company’s top executives.

It’s the latest step in the long journey that Thumbtack took to become one of the last companies standing with a consumer facing marketplace for services.

Back in 2008, as the global financial crisis was only just beginning to tear at the fabric of the U.S. economy, entrepreneurs at companies like Thumbtack andTaskRabbit were already hard at work on potential patches.

This was the beginning of what’s now known as the gig economy. In addition to Thumbtack and TaskRabbit, young companies like Handy, Zaarly, and several others — all began by trying to build better marketplaces for buyers and sellers of services. Their timing, it turns out, was prescient.

In snowy Boston during the winter of 2008, Kevin Busque and his wife Leah were building RunMyErrand, the marketplace service that would become TaskRabbit, as a way to avoid schlepping through snow to pick up dog food .

Meanwhile, in San Francisco, Marco Zappacosta, a young entrepreneur whose parents were the founders of Logitech, and a crew of co-founders including were building Thumbtack, a professional services marketplace from a home office they shared.

As these entrepreneurs built their businesses in northern California (amid the early years of a technology renaissance fostered by patrons made rich from returns on investments in companies like Google and Salesforce.com), the rest of America was stumbling.

In the two years between 2008 and 2010 the unemployment rate in America doubled, rising from 5% to 10%. Professional services workers were hit especially hard as banks, insurance companies, realtors, contractors, developers and retailers all retrenched — laying off staff as the economy collapsed under the weight of terrible loans and a speculative real estate market.

Things weren’t easy for Thumbtack’s founders at the outset in the days before its $1.3 billion valuation and last hundred plus million dollar round of funding. “One of the things that really struck us about the team, was just how lean they were. At the time they were operating out of a house, they were still cooking meals together,” said Cyan Banister, one of the company’s earliest investors and a partner at the multi-billion dollar venture firm, Founders Fund.

“The only thing they really ever spent money on, was food… It was one of these things where they weren’t extravagant, they were extremely purposeful about every dollar that they spent,” Banister said. “They basically slept at work, and were your typical startup story of being under the couch. Every time I met with them, the story was, in the very early stages was about the same for the first couple years, which was, we’re scraping Craigslist, we’re starting to get some traction.”

The idea of powering a Craigslist replacement with more of a marketplace model was something that appealed to Thumbtack’s earliest investor and champion, the serial entrepreneur and angel investor Jason Calcanis.

Thumbtack chief executive Marco Zappacosta

“I remember like it was yesterday when Marco showed me Thumbtack and I looked at this and I said, ‘So, why are you building this?’ And he said, ‘Well, if you go on Craigslist, you know, it’s like a crap shoot. You post, you don’t know. You read a post… you know… you don’t know how good the person is. There’re no reviews.’” Calcanis said. “He had made a directory. It wasn’t the current workflow you see in the app — that came in year three I think. But for the first three years, he built a directory. And he showed me the directory pages where he had a photo of the person, the services provided, the bio.”

The first three years were spent developing a list of vendors that the company had verified with a mailing address, a license, and a certificate of insurance for people who needed some kind of service. Those three features were all Calcanis needed to validate the deal and pull the trigger on an initial investment.

“That’s when I figured out my personal thesis of angel investing,” Calcanis said.

“Some people are market based; some people want to invest in certain demographics or psychographics; immigrant kids or Stanford kids, whatever. Mine is just, ‘Can you make a really interesting product and are your decisions about that product considered?’ And when we discuss those decisions, do I feel like you’re the person who should build this product for the world And it’s just like there’s a big sign above Marco’s head that just says ‘Winner! Winner! Winner!’”

Indeed, it looks like Zappacosta and his company are now running what may be their victory lap in their tenth year as a private company. Thumbtack will be profitable by 2019 and has rolled out a host of new products in the last six months.

Their thesis, which flew in the face of the conventional wisdom of the day, was to build a product which offered listings of any service a potential customer could want in any geography across the U.S. Other companies like Handy and TaskRabbit focused on the home, but on Thumbtack (like any good community message board) users could see postings for anything from repairman to reiki lessons and magicians to musicians alongside the home repair services that now make up the bulk of its listings.

“It’s funny, we had business plans and documents that we wrote and if you look back, the vision that we outlined then, is very similar to the vision we have today. We honestly looked around and we said, ‘We want to solve a problem that impacts a huge number of people. The local services base is super inefficient. It’s really difficult for customers to find trustworthy, reliable people who are available for the right price,’” said Sander Daniels, a co-founder at the company. 

“For pros, their number one concern is, ‘Where do I put money in my pocket next? How do I put food on the table for my family next?’ We said, ‘There is a real human problem here. If we can connect these people to technology and then, look around, there are these global marketplace for products: Amazon, Ebay, Alibaba, why can’t there be a global marketplace for services?’ It sounded crazy to say it at the time and it still sounds crazy to say, but that is what the dream was.”

Daniels acknowledges that the company changed the direction of its product, the ways it makes money, and pivoted to address issues as they arose, but the vision remained constant. 

Meanwhile, other startups in the market have shifted their focus. Indeed as Handy has shifted to more of a professional services model rather than working directly with consumers and TaskRabbit has been acquired by Ikea, Thumbtack has doubled down on its independence and upgrading its marketplace with automation tools to make matching service providers with customers that much easier.

Late last year the company launched an automated tool serving up job requests to its customers — the service providers that pay the company a fee for leads generated by people searching for services on the company’s app or website.

Thumbtack processes about $1 billion a year in business for its service providers in roughly 1,000 professional categories.

Now, the matching feature is getting an upgrade on the consumer side. Earlier this month the company unveiled Instant Results — a new look for its website and mobile app — that uses all of the data from its 200,000 services professionals to match with the 30 professionals that best correspond to a request for services. It’s among the highest number of professionals listed on any site, according to Zappacosta. The next largest competitor, Yelp, has around 115,000 listings a year. Thumbtack’s professionals are active in a 90 day period.

Filtering by price, location, tools and schedule, anyone in the U.S. can find a service professional for their needs. It’s the culmination of work processing nine years and 25 million requests for services from all of its different categories of jobs.

It’s a long way from the first version of Thumbtack, which had a “buy” tab and a “sell” tab; with the “buy” side to hire local services and the “sell” to offer them.

“From the very early days… the design was to iterate beyond the traditional model of business listing directors. In that, for the consumer to tell us what they were looking for and we would, then, find the right people to connect them to,” said Daniels. “That functionality, the request for quote functionality, was built in from v.1 of the product. If you tried to use it then, it wouldn’t work. There were no businesses on the platform to connect you with. I’m sure there were a million bugs, the UI and UX were a disaster, of course. That was the original version, what I remember of it at least.”

It may have been a disaster, but it was compelling enough to get the company its $1.2 million angel round — enough to barely develop the product. That million dollar investment had to last the company through the nuclear winter of America’s recession years, when venture capital — along with every other investment class — pulled back.

“We were pounding the pavement trying to find somebody to give us money for a Series A round,” Daniels said. “That was a very hard period of the company’s life when we almost went out of business, because nobody would give us money.”

That was a pre-revenue period for the company, which experimented with four revenue streams before settling on the one that worked the best. In the beginning the service was free, and it slowly transitioned to a commission model. Then, eventually, the company moved to a subscription model where service providers would pay the company a certain amount for leads generated off of Thumbtack.

“We weren’t able to close the loop,” Daniels said. “To make commissions work, you have to know who does the job, when, for how much. There are a few possible ways to collect all that information, but the best one, I think, is probably by hosting payments through your platform. We actually built payments into the platform in 2011 or 2012. We had significant transaction volume going through it, but we then decided to rip it out 18 months later, 24 months later, because, I think we had kind of abandoned the hope of making commissions work at that time.”

While Thumbtack was struggling to make its bones, Twitter, Facebook, and Pinterest were raking in cash. The founders thought that they could also access markets in the same way, but investors weren’t interested in a consumer facing business that required transactions — not advertising — to work. User generated content and social media were the rage, but aside from Uber and Lyft the jury was still out on the marketplace model.

“For our company that was not a Facebook or a Twitter or Pinterest, at that time, at least, that we needed revenue to show that we’re going to be able to monetize this,” Daniels said. “We had figured out a way to sign up pros at enormous scale and consumers were coming online, too. That was showing real promise. We said, ‘Man, we’re a hot ticket, we’re going to be able to raise real money.’ Then, for many reasons, our inexperience, our lack of revenue model, probably a bunch of stuff, people were reluctant to give us money.”

The company didn’t focus on revenue models until the fall of 2011, according to Daniels. Then after receiving rejection after rejection the company’s founders began to worry. “We’re like, ‘Oh, shit.’ November of 2009 we start running these tests, to start making money, because we might not be able to raise money here. We need to figure out how to raise cash to pay the bills, soon,” Daniels recalled. 

The experience of almost running into the wall put the fear of god into the company. They managed to scrape out an investment from Javelin, but the founders were convinced that they needed to find the right revenue number to make the business work with or without a capital infusion. After a bunch of deliberations, they finally settled on $350,000 as the magic number to remain a going concern.

“That was the metric that we were shooting towards,” said Daniels. “It was during that period that we iterated aggressively through these revenue models, and, ultimately, landed on a paper quote. At the end of that period then Sequoia invested, and suddenly, pros supply and consumer demand and revenue model all came together and like, ‘Oh shit.’”

Finding the right business model was one thing that saved the company from withering on the vine, but another choice was the one that seemed the least logical — the idea that the company should focus on more than just home repairs and services.

The company’s home category had lots of competition with companies who had mastered the art of listing for services on Google and getting results. According to Daniels, the company couldn’t compete at all in the home categories initially.

“It turned out, randomly … we had no idea about this … there was not a similarly well developed or mature events industry,” Daniels said. “We outperformed in events. It was this strategic decision, too, that, on all these 1,000 categories, but it was random, that over the last five years we are the, if not the, certainly one of the leading events service providers in the country. It just happened to be that we … I don’t want to say stumbled into it … but we found these pockets that were less competitive and we could compete in and build a business on.”

The focus on geographical and services breadth — rather than looking at building a business in a single category or in a single geography meant that Zappacosta and company took longer to get their legs under them, but that they had a much wider stance and a much bigger base to tap as they began to grow.

“Because of naivete and this dreamy ambition that we’re going to do it all. It was really nothing more strategic or complicated than that,” said Daniels. “When we chose to go broad, we were wandering the wilderness. We had never done anything like this before.”

From the company’s perspective, there were two things that the outside world (and potential investors) didn’t grasp about its approach. The first was that a perfect product may have been more competitive in a single category, but a good enough product was better than the terrible user experiences that were then on the market. “You can build a big company on this good enough product, which you can then refine over the course of time to be greater and greater,” said Daniels.

The second misunderstanding is that the breadth of the company let it scale the product that being in one category would have never allowed Thumbtack to do. Cross selling and upselling from carpet cleaners to moving services to house cleaners to bounce house rentals for parties — allowed for more repeat use.

More repeat use meant more jobs for services employees at a time when unemployment was still running historically high. Even in 2011, unemployment remained stubbornly high. It wasn’t until 2013 that the jobless numbers began their steady decline.

There’s a question about whether these gig economy jobs can keep up with the changing times. Now, as unemployment has returned to its pre-recession levels, will people want to continue working in roles that don’t offer health insurance or retirement benefits? The answer seems to be “yes” as the Thumbtack platform continues to grow and Uber and Lyft show no signs of slowing down.

“At the time, and it still remains one of my biggest passions, I was interested in how software could create new meaningful ways of working,” said Banister of the Thumbtack deal. “That’s the criteria I was looking for, which is, does this shift how people find work? Because I do believe that we can create jobs and we can create new types of jobs that never existed before with the platforms that we have today.”

Southern California needs to find its hub for it to develop its own tech ecosystem

Recognizing the tens of billions of dollars that the Southern Californian region leaves on the table, because it hasn’t taken its rightful place in the American technology industry, a new group called  the Alliance for Southern California Innovation has just released a report to analyze how SoCal can work to assume its pole position.

Through interviews with 100 leaders of the technology ecosystem and an analysis of venture capital funding for the region, the organization has concluded (with the help of the Boston Consulting Group) that the promise of a regional rival to Northern California’s silicon valley won’t be fulfilled without the establishment of a geographic hub and a willingness to overcome regional differences.

Founded by Steve Poizner last year to accelerate the growth of a startup entrepreneurial ecosystem in Southern California, The Alliance is building a network of investors, entrepreneurs and universities to provide ballast in the south to the dominance of the Northern California tech industry.

The Alliance estimates that Southern California’s tech community could be one-third the size of Silicon Valley’s by supporting or further developing the six pillars it already has for innovation to occur.

The potential impact making these changes could have is an added 200,000 new jobs and growth of $100 billion for the whole economic region.

“Over the past several years we have observed a significant decrease in startups leaving SoCal,” said Greg Becker, CEO of Silicon Valley Bank . “We’ve also seen a substantial inflow of venture capital from all over the world.”

In fact, as is well-reported, the luster of Silicon Valley is fading. As BCG writes in its report:

The good news for SoCal and any region with tech ambitions is that the Bay Area has in some ways been too successful. Our research revealed a saturation level causing unprecedented challenges, starting with exorbitant housing prices and runaway operating costs that accelerate a startup’s “burn rate”—its monthly spending.

Los Angeles investor Mark Suster, a general partner with Upfront Ventures, has been beating the drum for Los Angeles as a new tech hub for a while — and billion dollar exits for Ring and Dollar Shave Club, in addition to the public offering for Snap, lend credence to his position.

Suster has also noted for years that the region produces more technology doctorates than any other geography in the United States. Caltech generates more patents than any other university while UCLA boasts more startups founded by its graduate than any other school in the nation. Meanwhile, UCSD in San Diego has a deep bench of biotechnology expertise stemming from its proximity to the Sanford Consortium for Regenerative Medicine, the Salk Institute, and the Scripps Research Institute.

However, to thrive, BCG recommends taking six steps to bolster the the ecosystem and its chances to begin to catch up to Silicon Valley.

The consulting firm says that Southern California needs more local venture capital; the individual geographies need to work to promote their regional strengths; regions need to collaborate more closely with each other; founders need to start gunning for that IPO slot instead of taking acquisition offers; the region’s commitment to diversity needs to be emphasized; and finally the embarrassment of entrepreneurial riches needs to be promoted abroad.

“Southern California is a region of extreme innovation; however, it is so spread-out, making it hard to navigate,” said Steve Poizner founder and board chair of the Alliance, in a statement. “We believe by finding, filtering and aggregating exciting startups from top universities, research institutes, and incubators/accelerators, we can demonstrate the combined strength of SoCal in a compelling way to top investors and thought leaders.”

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