Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
Natasha and Danny and Alex and Grace were all here to chat through the week’s biggest tech happenings. This week felt oddly comforting from a tech news perspective: Facebook is copying something, early-stage startup data is flawed enough to talk about and sweet DoorDash is buying robots for undisclosed sums.
So, here’s a rundown of the tech news we got into (as always, jokes aren’t previewed so you’ll have to listen to the actual show to get our critique and Award Winning Analysis*):
- Ethena raising $ 2 million more for corporate training that is not awful, and Zeta raising $ 1.5 million for couples’ banking. Natasha has been killing the early-stage beat lately.
- How seed data could be getting harder and harder to parse from Alex’s desk, and why VC data in general is dicey, from Danny’s. We discuss if directional data is useful, and why the limited numbers could have a cultural impact on signal.
- Reddit raises $ 250 million, but doesn’t tell us who the investors are and what the money is precisely going to. Still, the company has had quite a year so far, so the capital comes at an interesting time.
- Justo, an online grocery based in Mexico, raises $ 65 million as the pandemic continues to shake up the way we live and shop.
- DoorDash buys a salad robot, which brings Natasha nostalgia and Danny anger.
- The inverted SoftBank J-Curve thesis is a must-listen and read.
- And from the world of dating, a big M&A deal that caught our attention, and the latest from the Bumble IPO.
In good news, long-time Equity producer Chris Gates is back starting next week, which means we’ll have our biggest crew ever helping get the show put together. And, in other good news, there’s going to be more Equity than ever for you to hear. Coming soon.
*OK, so not award-winning yet. But soon enough, because manifestation works.
Edtech is so widespread, we already need more consumer-friendly nomenclature to describe the products, services and tools it encompasses.
I know someone who reads stories to their grandchildren on two continents via Zoom each weekend. Is that “edtech?”
Similarly, many Netflix subscribers sought out online chess instructors after watching “The Queen’s Gambit,” but I doubt if they all ran searches for “remote learning” first.
Edtech needs to reach beyond underfunded public school systems to become more sustainable, which is why more investors and founders are focusing on lifelong learning.
Besides serving traditional students with field trips and art classes, a maturing sector is now branching out to offer software tutors, cooking classes and singing lessons.
For our latest investor survey, Natasha Mascarenhas polled 13 edtech VCs to learn more about how “employer-led up-skilling and a renewed interest in self-improvement” is expanding the sector’s TAM.
Here’s who she spoke to:
- Deborah Quazzo, managing partner, GSV Ventures
- Ashley Bittner, founding partner, Firework Ventures (a future of work fund with portfolio companies LearnIn and TransfrVR)
- Jomayra Herrera, principal, Cowboy Ventures (a generalist fund with portfolio companies Hone and Guild Education)
- John Danner, managing partner, Dunce Capital (an edtech and future of work fund with portfolio companies Lambda School and Outschool)
- Mercedes Bent and Bradley Twohig, partners, Lightspeed Venture Partners (a multistage generalist fund with investments including Forage, Clever and Outschool)
- Ian Chiu, managing director, Owl Ventures (a large edtech-focused fund backing highly valued companies including Byju’s, Newsela and Masterclass)
- Jan Lynn-Matern, founder and partner, Emerge Education (a leading edtech seed fund in Europe with portfolio companies like Aula, Unibuddy and BibliU)
- Benoit Wirz, partner, Brighteye Ventures (an active edtech-focused venture capital fund in Europe that backs YouSchool, Lightneer and Aula)
- Charles Birnbaum, partner, Bessemer Venture Partners (a generalist fund with portfolio companies including Guild Education and Brightwheel)
- Daniel Pianko, co-founder and managing director, University Ventures (a higher ed and future of work fund that is backing Imbellus and Admithub)
- Rebecca Kaden, managing partner, Union Square Ventures (a generalist fund with portfolio companies including TopHat, Quizlet, Duolingo)
- Andreata Muforo, partner, TLCom Capital (a generalist fund backing uLesson)
Full Extra Crunch articles are only available to members
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In other news: Extra Crunch Live, a series of interviews with leading investors and entrepreneurs, returns next month with a full slate of guests. This year, we’re adding a new feature: Our guests will analyze pitch decks submitted by members of the audience to identify their strengths and weaknesses.
If you’d like an expert eye on your deck, please sign up for Extra Crunch and join the conversation.
Thanks very much for reading! I hope you have a fantastic weekend — we’ve all earned it.
Senior Editor, TechCrunch
13 investors say lifelong learning is taking edtech mainstream
Rising African venture investment powers fintech, clean tech bets in 2020
After falling into yesterday’s wild news cycle, Alex Wilhelm returned to The Exchange this morning with a close look at venture capital activity across Africa in 2020.
“Comparing aggregate 2020 figures to 2019 results, it appears that last year was a somewhat robust year for African startups, albeit one with fewer large rounds,” he found.
For more context, he interviewed Dario Giuliani, the director of research firm Briter Bridges, which focuses on emerging markets in Africa, Asia and Latin America.
Talent and capital are shifting cybersecurity investors’ focus away from Silicon Valley
New cybersecurity ecosystems are popping up in different parts of the world.
Some of of that growth has been fueled by an exodus from the Bay Area, but many early-stage security startups already have deep roots in East Coast cities like Boston and New York.
In the United Kingdom and Europe, government innovation programs have helped entrepreneurs close higher numbers of Series A and B rounds.
Investor interest and expertise is migrating out of Silicon Valley: This post will help you understand where it’s going.
Will Apple’s spectacular iPhone 12 sales figures boost the smartphone industry in 2021?
Today’s smartphones are unfathomably feature-rich and durable, so it’s logical that sales have slowed.
A phone purchased 18 months ago is probably “good enough” for many consumers, especially in times of economic uncertainty.
Then again, of the record $ 111.4 billion in revenue Apple earned last quarter, $ 65.68 billion came from phone sales, largely driven by the release of the iPhone 12.
Even though “Apple’s success this quarter was kind of a perfect storm,” writes Hardware Editor Brian Heater, “it’s safe to project a rebound for the industry at large in 2021.”
The 5 biggest mistakes I made as a first-time startup founder
Finmark co-founder and CEO Rami Essaid wrote a post for Extra Crunch that candidly describes the traps he laid for himself that made him a less-effective entrepreneur.
As someone who’s worked closely with founders at several startups, each of the points he raised resonated deeply with me.
In my experience, many founders have a hard time delegating, which can quickly create cultural and operational problems. Rami’s experience bears this out:
“I became a human GPS: People could follow my directions, but they struggled to find the way themselves. Independent thinking suffered.”
Dear Sophie: How can I sponsor my mom and stepdad for green cards?
I just got my U.S. citizenship! My husband and I want to bring my mom and her husband to the U.S. to help us take care of our preschooler and toddler.
My biological dad passed away several years ago when I was an adult and my mom has since remarried.
— Appreciative in Aptos
Check out the amazing speakers joining us on Extra Crunch Live in February
Next month, Extra Crunch Live returns with a lineup of guests who are extremely well-qualified to discuss early-stage startups.
Each Wednesday at noon PPST/3 p.m. EST, join a conversation with founders and the investors who backed their companies:
Gaurav Gupta (Lightspeed Venture Partners) + Raj Dutt (Grafana Labs)
Aydin Senkut (Felicis Ventures) + Kevin Busque (Guideline)
Steve Loughlin (Accel) + Jason Boehmig (Ironclad)
Matt Harris (Bain Capital) + Isaac Oates (Justworks)
Also, we’re adding a new feature to Extra Crunch Live — our guests will offer advice and feedback on pitch decks submitted by Extra Crunch members in the audience!
10 VCs say interactivity, regulation and independent creators will reshape digital media in 2021
Since the pandemic disrupted the social rhythms of work and school, many of us have compensated by changing our relationship to digital media.
For instance, I purchased a new sofa and thicker living room curtains several months ago when I realized we have no idea when movie theaters will reopen.
Last year, podcast sponsors spent almost $ 800 million to reach listeners, but ad revenue is estimated to surpass $ 1 billion this year. Clearly, I’m not the only person who used a discount code to buy a new product in 2020.
At this point, I can scarcely keep track of the multiple streaming platforms I’m subscribed to, but a new voice-activated remote control that comes with my basic cable plan makes it easier to browse my options.
Media reporter Anthony Ha spoke to10 VCs who invest in media startups to learn more about where they see digital media heading in the months ahead. For starters, how much longer can we expect traditional advertising models to persist?
And in a world with hundreds of channels, how are creators supposed to compete for our attention? What sort of discovery tools can we expect to help us navigate between a police procedural set in a Scandinavian village and a 90s sitcom reboot?
Here’s who Anthony interviewed:
- Daniel Gulati, founding partner, Forecast Fund
- Alex Gurevich, managing director, Javelin Venture Partners
- Matthew Hartman, partner, Betaworks Ventures
- Jerry Lu, senior associate, Maveron
- Jana Messerschmidt, partner, Lightspeed Venture Partners
- Michael Palank, general partner, MaC Venture Capital (with additional commentary from MaC’s Marlon Nichols)
- Pär-Jörgen Pärson, general partner, Northzone
- M.G. Siegler, general partner, GV
- Laurel Touby, managing director, Supernode Ventures
- Hans Tung, managing partner, GGV Capital
Normally, we list each investor’s responses separately, but for this survey, we grouped their responses by question. Some readers say they use our surveys to study up on an individual VC before pitching them, so let us know which format you prefer.
Does a $ 27 billion or $ 29 billion valuation make sense for Databricks?
Data analytics platform Databricks is reportedly raising new capital that could value the company between $ 27 billion and $ 29 billion.
By the end of Q3 2020, Databricks had surpassed a $ 350 million run rate — a $ 150 million YoY increase, reports Alex Wilhelm.
At the time, he described the company as “an obvious IPO candidate” with “broad private-market options.”
Which begs the question: “Can we come up with a set of numbers that help make sense of Databricks at $ 27 billion?”
End-to-end operators are the next generation of consumer business
Rapid shifts in the way we buy goods and services disrupted old-school marketplaces like local newspapers and the Yellow Pages.
Today, I can use my phone to summon a plumber, a week’s worth of groceries or a ride to a doctor’s office.
End-to-end operators like Netflix, Peloton and Lemonade take a lot of time and energy to reach scale, but “the additional capital required is often outweighed by the value captured from owning the entire experience.”
Unpacking Chamath Palihapitiya’s SPAC deals for Latch and Sunlight Financial
On January 25, Social Capital CEO Chamath Palihapitiya tweeted that he was making two blank-check deals.
Enterprise SaaS company Latch makes keyless entry systems; Sunlight Financial helps consumers finance residential solar power installations.
“There are nearly 300 SPACs in the market today looking for deals,” noted Alex Wilhelm, who unpacked both transactions.
“There’s no escaping SPACs for a bit, so if you are tired of watching blind pools rip private companies into the public markets, you are not going to have a very good next few months.”
Fintechs could see $ 100 billion of liquidity in 2021
On Monday, we published the Matrix Fintech Index, a three-part study that weighs liquidity, public markets and e-commerce trends to create a snapshot of an industry in perpetual flux.
For four years running, the S&P 500 and incumbent financial services companies have been outperformed by companies like Afterpay, Square and Bill.com.
In light of steady VC investment, increasing consumer adoption and a crowded IPO pipeline, “fintech represents one of the most exciting major innovation cycles of this decade.”
Drupal’s journey from dorm-room project to billion-dollar exit
On January 15, 2001, then-college student Dries Buytaert released Drupal 1.0.0, an open-source content-management platform. At the time, about 7% of the world’s population was online.
After raising more than $ 180 million, Buytaert exited to Vista Equity Partners for $ 1 billion in 2019.
Enterprise reporter Ron Miller interviewed Buytaert to learn more about his 18-year journey.
“His story is compelling, but it also offers lessons for startup founders who also want to build something big,” says Ron.
Some time ago, I gave up on the idea of finding a thread that connects each story in the weekly Extra Crunch roundup; there are no unified theories of technology news.
The stories that left the deepest impression were related to two news pegs that dominated the week — Visa and Plaid calling off their $ 5.3 billion acquisition agreement, and sizzling-hot IPOs for Affirm and Poshmark.
Watching Plaid and Visa sing “Let’s Call The Whole Thing Off” in harmony after the U.S. Department of Justice filed a lawsuit to block their deal wasn’t shocking. But I was surprised to find myself editing an interview Alex Wilhelm conducted with Plaid CEO Zach Perret the next day in which the executive said growing the company on its own is “once again” the correct strategy.
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Use discount code ECFriday to save 20% off a one- or two-year subscription
In an analysis for Extra Crunch, Managing Editor Danny Crichton suggested that federal regulators’ new interest in antitrust enforcement will affect valuations going forward. For example, Procter & Gamble and women’s beauty D2C brand Billie also called off their planned merger last week after the Federal Trade Commission raised objections in December.
Given the FTC’s moves last year to prevent Billie and Harry’s from being acquired, “it seems clear that U.S. antitrust authorities want broad competition for consumers in household goods,” Danny concluded, and I suspect that applies to Plaid as well.
In December, C3.ai, Doordash and Airbnb burst into the public markets to much acclaim. This week, used clothing marketplace Poshmark saw a 140% pop in its first day of trading and consumer-financing company Affirm “priced its IPO above its raised range at $ 49 per share,” reported Alex.
In a post titled “A theory about the current IPO market”, he identified eight key ingredients for brewing a debut with a big first-day pop, which includes “exist in a climate of near-zero interest rates” and “keep companies private longer.” Truly, words to live by!
Come back next week for more coverage of the public markets in The Exchange, an interview with Bustle CEO Bryan Goldberg where he shares his plans for taking the company public, a comprehensive post that will unpack the regulatory hurdles facing D2C consumer brands, and much more.
If you live in the U.S., enjoy your MLK Day holiday weekend, and wherever you are: Thanks very much for reading Extra Crunch.
Senior Editor, TechCrunch
I'm taking the credit/blame for this headline https://t.co/2KYLsTxeHq
— Walter Thompson (@YourProtagonist) January 12, 2021
Rapid growth in 2020 reveals OKR software market’s untapped potential
After spending much of the week covering 2021’s frothy IPO market, Alex Wilhelm devoted this morning’s column to studying the OKR-focused software sector.
Measuring objectives and key results are core to every enterprise, perhaps more so these days since knowledge workers began working remotely in greater numbers last year.
A sign of the times: This week, enterprise orchestration SaaS platform Gtmhub announced that it raised a $ 30 million Series B.
To get a sense of how large the TAM is for OKR, Alex reached out to several companies and asked them to share new and historical growth metrics:
“Some OKR-focused startups didn’t get back to us, and some leaders wanted to share the best stuff off the record, which we grant at times for candor amongst startup executives,” he wrote.
5 consumer hardware VCs share their 2021 investment strategies
For our latest investor survey, Matt Burns interviewed five VCs who actively fund consumer electronics startups:
- Hans Tung, managing partner, GGV Capital
- Dayna Grayson, co-founder and general partner, Construct Capital
- Cyril Ebersweiler, general partner, SOSV
- Bilal Zuberi, partner, Lux Capital
- Rob Coneybeer, managing director, Shasta Ventures
“Consumer hardware has always been a tough market to crack, but the COVID-19 crisis made it even harder,” says Matt, noting that the pandemic fueled wide interest in fitness startups like Mirror, Peloton and Tonal.
Bonus: Many VCs listed the founders, investors and companies that are taking the lead in consumer hardware innovation.
A theory about the current IPO market
If you’re looking for insight into “why everything feels so damn silly this year” in the public markets, a post Alex wrote Thursday afternoon might offer some perspective.
As someone who pays close attention to late-stage venture markets, he’s identified eight factors that are pushing debuts for unicorns like Affirm and Poshmark into the stratosphere.
TL;DR? “Lots of demand, little supply, boom goes the price.”
Poshmark prices IPO above range as public markets continue to YOLO startups
Clothing resale marketplace Poshmark closed up more than 140% on its first trading day yesterday.
In Thursday’s edition of The Exchange, Alex noted that Poshmark boosted its valuation by selling 6.6 million shares at its IPO price, scooping up $ 277.2 million in the process.
Poshmark’s surge in trading is good news for its employees and stockholders, but it reflects poorly on “the venture-focused money people who we suppose know what they are talking about when it comes to equity in private companies,” he says.
Will startup valuations change given rising antitrust concerns?
This week, Visa announced it would drop its planned acquisition of Plaid after the U.S. Department of Justice filed suit to block it last fall.
Last week, Procter & Gamble called off its purchase of Billie, a women’s beauty products startup — in December, the U.S. Federal Trade Commission sued to block that deal, too.
Once upon a time, the U.S. government took an arm’s-length approach to enforcing antitrust laws, but the tide has turned, says Managing Editor Danny Crichton.
Going forward, “antitrust won’t kill acquisitions in general, but it could prevent the buyers with the highest reserve prices from entering the fray.”
Dear Sophie: What’s the new minimum salary required for H-1B visa applicants?
I’m a grad student currently working on F-1 STEM OPT. The company I work for has indicated it will sponsor me for an H-1B visa this year.
I hear the random H-1B lottery will be replaced with a new system that selects H-1B candidates based on their salaries.
How will this new process work?
— Positive in Palo Alto
Venture capitalists react to Visa-Plaid deal meltdown
After news broke that Visa’s $ 5.3 billion purchase of API startup Plaid fell apart, Alex Wilhelm and Ron Miller interviewed several investors to get their reactions:
- Anshu Sharma, co-founder and CEO, SkyflowAPI
- Amy Cheetham, principal, Costanoa Ventures
- Sheel Mohnot, co-founder, Better Tomorrow Ventures
- Lucas Timberlake, partner, Fintech Ventures
- Nico Berardi, founder and general partner, ANIMO Ventures
- Allen Miller, VC, Oak HC/FT
- Sri Muppidi, VC, Sierra Ventures
- Christian Lassonde, VC, Impression Ventures
Plaid CEO touts new ‘clarity’ after failed Visa acquisition
Alex Wilhelm interviewed Plaid CEO Zach Perret after the Visa acquisition was called off to learn more about his mindset and the company’s short-term plans.
Perret, who noted that the last few years have been a “roller coaster,” said the Visa deal was the right decision at the time, but going it alone is “once again” Plaid’s best way forward.
2021: A SPAC odyssey
In Tuesday’s edition of The Exchange, Alex Wilhelm took a closer look at blank-check offerings for digital asset marketplace Bakkt and personal finance platform SoFi.
To create a detailed analysis of the investor presentations for both offerings, he tried to answer two questions:
- Are special purpose acquisition companies a path to public markets for “potentially promising companies that lacked obvious, near-term growth stories?”
- Given the number of unicorns and the limited number of companies that can IPO at any given time, “maybe SPACS would help close the liquidity gap?”
Flexible VC: A new model for startups targeting profitability
12 ‘flexible VCs’ who operate where equity meets revenue share
Growth-stage startups in search of funding have a new option: “flexible VC” investors.
An amalgam of revenue-based investment and traditional VC, investors who fall into this category let entrepreneurs “access immediate risk capital while preserving exit, growth trajectory and ownership optionality.”
In a comprehensive explainer, fund managers David Teten and Jamie Finney present different investment structures so founders can get a clear sense of how flexible VC compares to other venture capital models. In a follow-up post, they share a list of a dozen active investors who offer funding via these nontraditional routes.
These 5 VCs have high hopes for cannabis in 2021
For some consumers, “cannabis has always been essential,” writes Matt Burns, but once local governments allowed dispensaries to remain open during the pandemic, it signaled a shift in the regulatory environment and investors took notice.
Matt asked five VCs about where they think the industry is heading in 2021 and what advice they’re offering their portfolio companies:
- Morgan Paxhia, managing director, Poseidon Investment Management
- Emily Paxhia, managing partner, Poseidon Investment Management
- Anthony Coniglio, CEO, NewLake Capital
- Matt Shalhoub, managing partner, Green Acre Capital
- Jerel Registre, managing director, Curio WMBE Fund
This has been quite a week.
Instead of walking backward through the last few days of chaos and uncertainty, here are three good things that happened:
- Google employee Sara Robinson combined her interest in machine learning and baking to create AI-generated hybrid treats.
- A breakthrough could make water desalination 30%-40% more effective.
- Bianca Smith will become the first Black woman to coach a professional baseball team.
Despite many distractions in our first full week of the new year, we published a full slate of stories exploring different aspects of entrepreneurship, fundraising and investing.
We’ve already gotten feedback on this overview of subscription pricing models, and a look back at 2020 funding rounds and exits among Israel’s security startups was aimed at our new members who live and work there, along with international investors who are seeking new opportunities.
Plus, don’t miss our first investor surveys of 2021: one by Lucas Matney on social gaming, and another by Mike Butcher that gathered responses from Portugal-based investors on a wide variety of topics.
Thanks very much for reading Extra Crunch this week. I hope we can all look forward to a nice, boring weekend with no breaking news alerts.
Senior Editor, TechCrunch
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The Roblox Gambit
In February 2020, gaming platform Roblox was valued at $ 4 billion, but after announcing a $ 520 million Series H this week, it’s now worth $ 29.5 billion.
“Sure, you could argue that Roblox enjoyed an epic 2020, thanks in part to COVID-19,” writes Alex Wilhelm this morning. “That helped its valuation. But there’s a lot of space between $ 4 billion and $ 29.5 billion.”
Alex suggests that Roblox’s decision to delay its IPO and raise an enormous Series H was a grandmaster move that could influence how other unicorns will take themselves to market. “A big thanks to the gaming company for running this experiment for us.”
I asked him what inspired the headline; like most good ideas, it came to him while he was trying to get to sleep.
“I think that I had ‘The Queen’s Gambit’ somewhere in my head, so that formed the root of a little joke with myself. Roblox is making a strategic wager on method of going public. So, ‘gambit’ seems to fit!”
8 investors discuss social gaming’s biggest opportunities
For our first investor survey of the year, Lucas Matney interviewed eight VCs who invest in massively multiplayer online games to discuss 2021 trends and opportunities:
- Hope Cochran, Madrona Venture Group
- Daniel Li, Madrona Venture Group
- Niko Bonatsos, General Catalyst
- Ethan Kurzweil, Bessemer Venture Partners
- Sakib Dadi, Bessemer Venture Partners
- Jacob Mullins, Shasta Ventures
- Alice Lloyd George, Rogue
- Gigi Levy-Weiss, NFX
Having moved far beyond shooters and sims, platforms like Twitch, Discord and Fortnite are “where culture is created,” said Daniel Li of Madrona.
Rep. Alexandria Ocasio-Cortez uses Twitch to explain policy positions, major musicians regularly perform in-game concerts on Fortnite and in-game purchases generated tens of billions last year.
“Gaming is a unique combination of science and art, left and right brain,” said Gigi Levy-Weiss of NFX. “It’s never just science (i.e., software and data), which is why many investors find it hard.”
How to convert customers with subscription pricing
Startups that lack insight into their sales funnel have high churn, low conversion rates and an inability to adapt or leverage changes in customer behavior.
If you’re hoping to convert and retain customers, “reinforcing your value proposition should play a big part in every level of your customer funnel,” says Joe Procopio, founder of Teaching Startup.
What is up with Tesla’s value?
Alex Wilhelm followed up his regular Friday column with another story that tries to find a well-grounded rationale for Tesla’s sky-high valuation of approximately $ 822 billion.
Meanwhile, GM just unveiled a new logo and tagline.
As ever, I learned something new while editing: A “melt up” occurs when investors start clamoring for a particular company because of acute FOMO (the fear of missing out).
Delivering 500,000 cars in 2020 was “impressive,” says Alex, who also acknowledged the company’s ability to turn GAAP profits, but “pride cometh before the fall, as does a melt up, I think.”
Note: This story has Alex’s original headline, but I told him I would replace the featured image with a photo of someone who had very “richest man in the world” face.
How Segment redesigned its core systems to solve an existential scaling crisis
On Tuesday, enterprise reporter Ron Miller covered a major engineering project at customer data platform Segment called “Centrifuge.”
“Its purpose was to move data through Segment’s data pipes to wherever customers needed it quickly and efficiently at the lowest operating cost,” but as Ron reports, it was also meant to solve “an existential crisis for the young business,” which needed a more resilient platform.
Dear Sophie: Banging my head against the wall understanding the US immigration system
Now that the U.S. has a new president coming in whose policies are more welcoming to immigrants, I am considering coming to the U.S. to expand my company after COVID-19. However, I’m struggling with the morass of information online that has bits and pieces of visa types and processes.
Can you please share an overview of the U.S. immigration system and how it works so I can get the big picture and understand what I’m navigating?
— Resilient in Romania
The first “Dear Sophie” column of each month is available on TechCrunch without a paywall.
Revenue-based financing: The next step for private equity and early-stage investment
For founders who aren’t interested in angel investment or seeking validation from a VC, revenue-based investing is growing in popularity.
To gain a deeper understanding of the U.S. RBI landscape, we published an industry report on Wednesday that studied data from 134 companies, 57 funds and 32 investment firms before breaking out “specific verticals and business models … and the typical profile of companies that access this form of capital.”
Lisbon’s startup scene rises as Portugal gears up to be a European tech tiger
Mike Butcher continues his series of European investor surveys with his latest dispatch from Lisbon, where a nascent startup ecosystem may get a Brexit boost.
Here are the Portugal-based VCs he interviewed:
- Cristina Fonseca, partner, Indico Capital Partners
- Pedro Ribeiro Santos, partner, Armilar Venture Partners
- Tocha, partner, Olisipo Way
- Adão Oliveira, investment manager, Portugal Ventures
- Alexandre Barbosa, partner, Faber
- António Miguel, partner, Mustard Seed MAZE
- Jaime Parodi Bardón, partner, impACT NOW Capital
- Stephan Morais, partner, Indico Capital Partners
- Gavin Goldblatt, managing partner, Portugal Gateway
How late-stage edtech companies are thinking about tutoring marketplaces
How do you scale online tutoring, particularly when demand exceeds the supply of human instructors?
This month, Chegg is replacing its seven-year-old marketplace that paired students with tutors with a live chatbot.
A spokesperson said the move will “dramatically differentiate our offerings from our competitors and better service students,” but Natasha Mascarenhas identified two challenges to edtech automation.
“A chatbot won’t work for a student with special needs or someone who needs to be handheld a bit more,” she says. “Second, speed tutoring can only work for a specific set of subjects.”
Decrypted: How bad was the US Capitol breach for cybersecurity?
While I watched insurrectionists invade and vandalize the U.S. Capitol on live TV, I noticed that staffers evacuated so quickly, some hadn’t had time to shut down their computers.
Looters even made off with a laptop from Senator Jeff Merkley’s office, but according to security reporter Zack Whittaker, the damages to infosec wasn’t as bad as it looked.
Even so, “the breach will likely present a major task for Congress’ IT departments, which will have to figure out what’s been stolen and what security risks could still pose a threat to the Capitol’s network.”
Extra Crunch’s top 10 stories of 2020
On New Year’s Eve, I made a list of the 10 “best” Extra Crunch stories from the previous 12 months.
My methodology was personal: From hundreds of posts, these were the 10 I found most useful, which is my key metric for business journalism.
Some readers are skeptical about paywalls, but without being boastful, Extra Crunch is a premium product, just like Netflix or Disney+. I know, we’re not as entertaining as a historical drama about the reign of Queen Elizabeth II or a space western about a bounty hunter. But, speaking as someone who’s worked at several startups, Extra Crunch stories contain actionable information you can use to build a company and/or look smart in meetings — and that’s worth something.
The rest of the world may be slowing down as we prepare for Christmas and the new year, but we are not taking our foot off the gas.
Alex Wilhelm keeps a close watch on the public markets in his column The Exchange, but this week, he branched out to look at some of the metrics underpinning soaring cryptocurrency prices and turned his gaze on StockX, the consumer reseller marketplace that just raised $ 275 million in a Series E that values the company at approximately $ 2.8 billion.
“Selling a tenth of your company for north of a quarter-billion may be somewhat common among late-stage software startups with tremendous growth,” he says, but “don’t laugh — the round actually makes pretty OK sense.”
Our staff continues to file their end-of-year stories: We ran a post this morning by Manish Singh that studies India’s massive total addressable market for retail. The nation has more than 60 million mom-and-pop neighborhood stores, and companies like Walmart and Amazon are eager to offer help with payments, logistics and inventory management — as are hundreds of native and foreign startups.
In an interview with author and MIT professor Sinan Aral, Managing Editor Danny Crichton discussed some of the debates currently swirling around the desire in some quarters to regulate social media platforms. In “The Hype Machine,” Aral explores topics like neuroscience, economics and misinformation before offering potential solutions for resolving what he calls “a full-blown social media crisis.”
The stories that follow are an overview of Extra Crunch from the last five days. Complete articles are only available to members, but you can use discount code ECFriday to save 20% off a one or two-year subscription. Details here.
Thank you very much for reading Extra Crunch this week; I hope you have a safe, relaxing weekend!
Senior Editor, TechCrunch
Unpacking Poshmark’s IPO filing
How did fashion marketplace Poshmark go from posting regular losses in 2019 to generating net income in 2020?
After the company filed a public S-1 last night, Alex Wilhelm pondered the question this morning in The Exchange.
Like many e-commerce platforms, Poshmark saw a surge in activity during the COVID-19 pandemic, but it also slashed its marketing spend, which helped boost profits. As the cash-rich company prepares its road show, “Poshmark is valuable,” Alex concluded.
“How valuable the market will decide. But who will it enrich with its final pricing decision?”
Just how bad is that hack that hit US government agencies?
The breach of FireEye and SolarWinds by hackers working on behalf of Russian intelligence is “the nightmare scenario that has worried cybersecurity experts for years,” reports Zack Whittaker.
The intrusion began several months ago, but news of the breach wasn’t made public until this week.
“Given that potential victims include defense contractors, telecoms, banks, and tech companies, the implications for critical infrastructure and national security, although untold at this point, could be significant,” said Erin Kenneally, director of cyber risk analytics at Guidewire, an industry platform for insurance carriers.
In his analysis for Extra Crunch, Zack breaks down the rippling effects of supply-chain attacks that can compromise platforms like SolarWinds, which is used by more than 420 of the Fortune 500.
From startups to Starbucks: The embedded API opportunity
Embedded finance connects services like payment processing with everyday activities like grabbing a coffee before unlocking an e-scooter.
“The ability to be at the right place at the right time, supporting consumers and merchants alike, where they want it, how they want it and when they want it — cannot be understated,” says Simon Wu, an investment director with Cathay Innovation.
In a post that identifies embedded finance’s top providers and enablers, he offers advice for startups and established brands that are hoping to “earn and build customer loyalty while generating new revenue streams.”
Is rising usage driving crypto’s recent price boom?
Bitcoin is at an all-time high.
CoinMarketCap reports that crypto market values have reached almost $ 659 billion; that figure was just $ 140 billion in March 2020.
“These gains have created a huge amount of wealth for crypto holders,” Alex Wilhelm wrote yesterday.
To get a better handle on why crypto values are sky-bound, he parsed some basic industry metrics, including the number of unique bitcoin addresses, fees paid and transactions per day.
“Do the price gains make sense in the short term? Who knows,” he wrote, “but they are not based on nothing.”
2020 was a disaster, but the pandemic put security in the spotlight
For his year-end Extra Crunch story, security reporter Zack Whittaker looked back at the myriad security challenges and vulnerabilities COVID-19 brought to the fore.
The hacks of Fire Eyes and SolarWinds were just one link in the chain: How well is your company prepared to deal with file-encrypting malware, hackers backed by nation-states or employees accessing secure systems from home?
“With 2020 wrapping up, much of the security headaches exposed by the pandemic will linger into the new year,” says Zack.
Inside Zoox’s six-year ride from prototype to product
After six years of research and development, autonomous vehicle company Zoox this week unveiled an electric robotaxi that can carry four people at a maximum speed of 75 miles per hour.
Automotive writer Kirsten Korosec interviewed Zoox co-founder and CTO Jesse Levinson to learn more about the vehicle’s development and how the company overcame a series of technical and legal challenges.
“I would say that if you have a big idea and you’re confident that it makes sense, you should at least explore the idea, rather than giving up because the current regulations aren’t designed for it,” said Levinson.
Kirsten only had 15 minutes to interview Levinson, but this comprehensive interview covers topics like regulatory compliance, Zoox’s relationship with parent company Amazon and the highest (and lowest) moments he experienced along the way.
Pluralsight $ 3.5B deal signals a matured edtech market
In one of the largest enterprise acquisitions of 2020, Visa Equity Partners this week purchased Utah-based edtech startup Pluralsight for $ 3.5 billion.
According to the entrepreneurs and investors reporter Natasha Mascarenhas spoke to, this deal “shows the strength of edtech’s capital options as the pandemic continues.”
“What’s happening in edtech is that capital markets are liquidating,” a major change from “the old days where the options to exit were very narrow,” says Deborah Quazzo, a managing partner at GSV Advisors and seed investor in Pluralsight.
Dear Sophie: How did immigration change for startup founders in 2020?
I’m on an F1 OPT and am about to incorporate a startup with my two American co-founders.
What were the biggest immigration changes in 2020 affecting us?
—Ambitious in Albany
How to pick an investor in good or bad times
Founders and the VCs who back them may not be friends, but they’re usually friendly.
Investors are on a first-name basis with entrepreneurs from their portfolio companies and frequently have candid conversations with them about life, work and the world in general. In the before times, they might even have shared a meal or attended a baseball game together.
But make no mistake, it is a top-down relationship — the investor will always have the upper hand. When an entrepreneur accepts a check, they are hiring their next boss.
In an Extra Crunch guest post, Quiq CEO and founder Mike Myer poses two questions for founders who are considering a new relationship with a VC:
- How can the investor help the business?
- What’s the risk that the investor will hurt the business?
From India’s richest man to Amazon and 100s of startups: The great rush to win neighborhood stores
In India, about 90% of consumers buy their everyday goods from neighborhood-based kirana stores instead of supermarkets.
As a result, U.S. retail giants like Walmart and Amazon have adopted an “if you can’t beat them, join them” approach, offering the nation’s 60 million mom-and-pop shops software for inventory control, payments and e-commerce.
India’s retail market will be worth an estimated $ 1.3 trillion by 2025, but e-commerce represents just 3% of that activity today, reports Manish Singh.
For his final Extra Crunch story of 2020, he looked at the startups and major players who are hoping to carve out their niche in one of the world’s largest retail ecosystems.
ClickUp CEO talks hiring, raising and scaling in the white-hot productivity space
Earlier this year, business productivity software startup ClickUp raised a $ 35 million Series A.
Now, just six months later, the company has closed a second round of $ 100 million that values the San Diego-based startup at $ 1 billion.
Lucas Matney interviewed CEO Zeb Evans this week to learn more about how the company was buoyed by pandemic-based behavior shifts that doubled its customer base and multiplied revenue by a factor of nine.
“I think that the biggest thing that we’ve always focused on is shipping a new version of ClickUp every week. That is our differentiation,” he said. “We’ve kind of created these iterative cycles called natural product-market fit and it’s been hard to keep up with that.”
2020’s top 10 enterprise M&A deals totaled a staggering $ 165B
In 2018, the total value of the year’s 10 top enterprise mergers and acquisitions reached $ 87 billion; last year, that figure fell to just $ 40 billion.
But in 2020, 10 M&A deals accounted for $ 165.2 billion.
“Last year’s biggest deal — Salesforce buying Tableau for $ 15.7 billion — would have only been good for fifth place on this year’s list,” notes enterprise reporter Ron Miller. “And last year’s fourth largest deal, where VMware bought Pivotal for $ 2.7 billion, wouldn’t have even made this year’s list at all.”
Whether you’ve heard of this retail holiday or not, you should check out these tech deals.
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As remote work continues to solidify its place as a critical aspect of how businesses exist these days, a startup that has built a platform to help companies source and bring on one specific category of remote employees — engineers — is taking on some more funding to meet demand.
Turing — which has built an AI-based platform to help evaluate prospective, but far-flung, engineers, bring them together into remote teams, then manage them for the company — has picked up $ 32 million in a Series B round of funding led by WestBridge Capital. Its plan is as ambitious as the world it is addressing is wide: an AI platform to help define the future of how companies source IT talent to grow.
“They have a ton of experience in investing in global IT services, companies like Cognizant and GlobalLogic,” said co-founder and CEO Jonathan Siddharth of its lead investor in an interview the other day. “We see Turing as the next iteration of that model. Once software ate the IT services industry, what would Accenture look like?”
It currently has a database of some 180,000 engineers covering around 100 or so engineering skills, including React, Node, Python, Agular, Swift, Android, Java, Rails, Golang, PHP, Vue, DevOps, machine learning, data engineering and more.
In addition to WestBridge, other investors in this round included Foundation Capital, Altair Capital, Mindset Ventures, Frontier Ventures and Gaingels. There is also a very long list of high-profile angels participating, underscoring the network that the founders themselves have amassed. It includes unnamed executives from Google, Facebook, Amazon, Twitter, Microsoft, Snap and other companies, as well as Adam D’Angelo (Facebook’s first CTO and CEO at Quora), Gokul Rajaram, Cyan Banister and Scott Banister, and Beerud Sheth (the founder of Upwork), among many others (I’ll run the full list below).
Turing is not disclosing its valuation. But as a measure of its momentum, it was only in August that the company raised a seed round of $ 14 million, led by Foundation. Siddharth said that the growth has been strong enough in the interim that the valuations it was getting and the level of interest compelled the company to skip a Series A altogether and go straight for its Series B.
The company now has signed up to its platform 180,000 developers from across 10,000 cities (compared to 150,000 developers back in August). Some 50,000 of them have gone through automated vetting on the Turing platform, and the task will now be to bring on more companies to tap into that trove of talent.
Or, “We are demand-constrained,” which is how Siddharth describes it. At the same time, it’s been growing revenues and growing its customer base, jumping from revenues of $ 9.5 million in October to $ 12 million in November, increasing 17x since first becoming generally available 14 months ago. Current customers include VillageMD, Plume, Lambda School, Ohi Tech, Proxy and Carta Healthcare.
Remote work = immediate opportunity
A lot of people talk about remote work today in the context of people no longer able to go into their offices as part of the effort to curtail the spread of COVID-19. But in reality, another form of it has been in existence for decades.
Offshoring and outsourcing by way of help from third parties — such as Accenture and other systems integrators — are two ways that companies have been scaling and operating, paying sums to those third parties to run certain functions or build out specific areas instead of shouldering the operating costs of employing, upsizing and sometimes downsizing that labor force itself.
Turing is essentially tapping into both concepts. On one hand, it has built a new way to source and run teams of people, specifically engineers, on behalf of others. On the other, it’s using the opportunity that has presented itself in the last year to open up the minds of engineering managers and others to consider the idea of bringing on people they might have previously insisted work in their offices, to now work for them remotely, and still be effective.
Siddarth and co-founder Vijay Krishnan (who is the CTO) know the other side of the coin all too well. They are both from India, and both relocated to the Valley first for school (post-graduate degrees at Stanford) and then work at a time when moving to the Valley was effectively the only option for ambitious people like them to get employed by large, global tech companies, or build startups — effectively what could become large, global tech companies.
“Talent is universal, but opportunities are not,” Siddarth said to me earlier this year when describing the state of the situation.
A previous startup co-founded by the pair — content discovery app Rover — highlighted to them a gap in the market. They built the startup around a remote and distributed team of engineers, which helped them keep costs down while still recruiting top talent. Meanwhile, rivals were building teams in the Valley. “All our competitors in Palo Alto and the wider area were burning through tons of cash, and it’s only worse now. Salaries have skyrocketed,” he said.
After Rover was acquired by Revcontent, a recommendation platform that competes against the likes of Taboola and Outbrain, they decided to turn their attention to seeing if they could build a startup based on how they had, basically, built their own previous startup.
There are a number of companies that have been tapping into the different aspects of the remote work opportunity, as it pertains to sourcing talent and how to manage it.
They include the likes of Remote (raised $ 35 million in November), Deel ($ 30 million raised in September), Papaya Global ($ 40 million also in September), Lattice ($ 45 million in July) and Factorial ($ 16 million in April), among others.
What’s interesting about Turing is how it’s trying to address and provide services for the different stages you go through when finding new talent. It starts with an AI platform to source and vet candidates. That then moves into matching people with opportunities, and onboarding those engineers. Then, Turing helps manage their work and productivity in a secure fashion, and also provides guidance on the best way to manage that worker in the most compliant way, be it as a contractor or potentially as a full-time remote employee.
The company is not freemium, as such, but gives people two weeks to trial people before committing to a project. So unlike an Accenture, Turing itself tries to build in some elasticity into its own product, not unlike the kind of elasticity that it promises its customers.
It all sounds like a great idea now, but interestingly, it was only after remote work really became the norm around March/April of this year that the idea really started to pick up traction.
“It’s amazing what COVID has done. It’s led to a huge boom for Turing,” said Sumir Chadha, managing director for WestBridge Capital, in an interview. For those who are building out tech teams, he added, there is now “No need for to find engineers and match them with customers. All of that is done in the cloud.”
“Turing has a very interesting business model, which today is especially relevant,” said Igor Ryabenkiy, managing partner at Altair Capital, in a statement. “Access to the best talent worldwide and keeping it well-managed and cost-effective make the offering attractive for many corporations. The energy of the founding team provides fast growth for the company, which will be even more accelerated after the B-round.”
PS. I said I’d list the full, longer list of investors in this round. In these COVID times, this is likely the biggest kind of party you’ll see for a while. In addition to those listed above, it included [deep breath] Founders Fund, Chapter One Ventures (Jeff Morris Jr.), Plug and Play Tech Ventures (Saeed Amidi), UpHonest Capital (Wei Guo, Ellen Ma), Ideas & Capital (Xavier Ponce de León), 500 Startups Vietnam (Binh Tran and Eddie Thai), Canvas Ventures (Gary Little), B Capital (Karen Appleton Page, Kabir Narang), Peak State Ventures (Bryan Ciambella, Seva Zakharov), Stanford StartX Fund, Amino Capital, Spike Ventures, Visary Capital (Faizan Khan), Brainstorm Ventures (Ariel Jaduszliwer), Dmitry Chernyak, Lorenzo Thione, Shariq Rizvi, Siqi Chen, Yi Ding, Sunil Rajaraman, Parakram Khandpur, Kintan Brahmbhatt, Cameron Drummond, Kevin Moore, Sundeep Ahuja, Auren Hoffman, Greg Back, Sean Foote, Kelly Graziadei, Bobby Balachandran, Ajith Samuel, Aakash Dhuna, Adam Canady, Steffen Nauman, Sybille Nauman, Eric Cohen, Vlad V, Marat Kichikov, Piyush Prahladka, Manas Joglekar, Vladimir Khristenko, Tim and Melinda Thompson, Alexandr Katalov, Joseph and Lea Anne Ng, Jed Ng, Eric Bunting, Rafael Carmona, Jorge Carmona, Viacheslav Turpanov, James Borow, Ray Carroll, Suzanne Fletcher, Denis Beloglazov, Tigran Nazaretian, Andrew Kamotskiy, Ilya Poz, Natalia Shkirtil, Ludmila Khrapchenko, Ustavshchikov Sergey, Maxim Matcin and Peggy Ferrell.
Catch up on the most important updates from this week.
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Ballot measures were approved in California to restrict commercial use of user data and in Michigan to require warrants for searches of electronic information.
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Catch up on the most important updates from this week.
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