One of the enduring truths of big companies is that they aren’t innovative. They are “innovative” in the marketing sense, but fail to ever execute on new ideas, particularly when those ideas cannibalize existing products and revenues.
So it often takes a real competitor to force these incumbent, legacy businesses to evolve in any meaningful way. Usually that change leads to disruption, in the classic way that Clayton Christensen describes in “The Innovator’s Dilemma.” An upstart company creates a new technology or business model that is better for an under-served segment of a market, and as that company improves, it competes directly with the incumbent and eventually wins over its market with a vastly superior product.
Unfortunately, real life isn’t so easy, as WeWork and MoviePass have shown us over the past few years.
In both cases, there were incumbents. In movie theaters, you had AMC and the like, which built a business model around ticket sales (shared with movie studios) and food/beverage concessions that targeted occasional customers at a high price point. Meanwhile, in commercial real estate, you had large landowners and family holders who demanded extremely long rent terms at high prices, often with personal financial guarantees from the CEO of the tenant firm.
Obvious Ventures, the firm co-founded by Medium CEO and Twitter co-founder Ev Williams, announced today that it has closed its third fund “OV3” at $271,828,182, a number that the graphing calculator-owning among us may recognize as e or Euler’s number.
When asked whether the firm had to return any LP money just so it could land at its magic number, Obvious’s Gabe Kleinman threw a “no comment” my way.
The firm has a bit of a tradition in being cutesy with its fund sizes. Their first fund was $123,456,789 and the second fund clocked in at $191,919,191. The focus on the naming scheme isn’t an accident, there isn’t too much to draw attention to with this fund in terms of changes to Obvious’s investment strategies, Kleinman tells TechCrunch.
“We’re investing in companies that are reimagining trillion dollar categories,” Kleinman tells TechCrunch. “… and these play out across our three themes, which are sustainable systems, healthy living and ‘people power.'”
Obvious saw some successful exits in 2019, including the public offering of Beyond Meat.
The venture-backed insurance world is more than the Lemonades and MetroMiles of the world. There’s more room in the industry for startups to shake things up. One such company, Cambridge-based Insurify, is out today with a new venture round that greatly expands its capital base.
The startup, which had accepted just $6.6 million over two rounds before its latest investment, has raised $23 million in a Series A led by MTECH Capital and VIOLA FinTech. Prior investors MassMutual Ventures and Nationwide took part in the new investment.
TechCrunch hasn’t caught up with the company since our own Sarah Buhr covered its first $2 million deal back in early 2016. As you’d expect, a lot has changed in the last four years.
Zacharia, formerly of Gartner, came up with the idea for Insurify after she had an accident years ago. Following an unsatisfying experience working with the insurance industry after the fact, she discovered that consumers “have very, very little idea of how much coverage they need,” and that insurance providers (Insurify started out working with car insurance and is expanding to life and home insurance, as well) were “really struggling to [access] digital consumers because they have very poor UIs, [and] their APIs [were] not up to date.”
Enter Insurify, which bridges that gap. Working to build “automation behind insurance,” Insurify wants to help people find the coverage that they need, online, at a fair price; it’s a good business for the startup, which gets paid when consumers buy new insurance through its tooling.
Insurify, according to Zacharia, operates as a licensed agent for the various types of insurance it helps consumers find.
It’s more than a middleperson, however. The startup wants to bring the buying of insurance more firmly into the digital world. Today, Insurify completes 65% of its new policies online, and provides pre-loaded information to carriers when it passes a consumer over to their side of things.
Insurify is also building out its own technology products that exist a little past insurance, including a “wallet” that lets users manage multiple policies in one place.
TechCrunch asked Zacharia why she decided to raise capital now. According to the CEO, after doing “a lot with almost nothing,” her company is ready to accelerate its go-to-market motion.
In practical terms, the new capital will help Insurify with “horizontal expansion,” like “launching new verticals” that will include home, rental and other types of insurance, she said. Even more interesting, the Series A will also be used to fuel the startup’s marketing arm, which Zacharia says is run like a “hedge fund.” Insurify’s marketing efforts are “automated through [an] artificial intelligence model,” she told TechCrunch, which estimates “the value of every click” through a set of algorithms that it tunes regularly.
(We’ll avoid making a joke about hedge fund returns at this juncture.)
The CEO went on to say that “putting more money and more fuel behind [Insurify’s] marketing engine could really help us tremendously at this point,” helping to explain why Insurify decided to take on more capital when it did.
The startup had options when it came to investor selection, with Zacharia telling TechCrunch that her firm “had multiple, different term sheets” from which to choose. Why MTECH and VIOLA as lead investors? Zacharia emphasized venture partner selection as key, also highlighting the experiences and expertise of each firm (insurance with MTECH, and fintech with VIOLA).
It will be fascinating to see what happens at the meeting point of new capital, an operating marketing engine and an expanding set of products. Presumably Insurify can grow like heck from that confluence of factors. We’ll ask in a few months.
To kick off 2020, one of Europe’s newer — and more successful — investment firms has closed a fresh, oversubscribed fund, one sign that VC in the region will continue to run strong in the year ahead after startups across Europe raised between $35 billion and $36 billion in 2019.
Felix Capital, the London VC founded by Frederic Court that was one of the earlier firms to identify and invest in the trend of direct-to-consumer businesses, has raised $300 million, money that it plans to use to continue investing in creative and consumer startups and platform plays as well as begin to tap into a newer area, fintech — specifically startups that are focused on consumer finance.
Felix up to now has focused mostly on earlier-stage investments — it now has $600 million under management and 32 companies in its portfolio in eight countries — based across both Europe and the US. Court said in an interview that a portion of this fund will now also go into later, growth rounds, both for companies that Felix has been backing for some time as well as newer faces.
As with the focus of the investments, the make-up of the fund itself has a strong European current: the majority of the LPs are European, Court noted. Although Asia is something it would like to tackle more in the future both as a market for its current portfolio and as an investment opportunity, he added, the firm has yet to invest into the region or substantially raise money from it.
Felix made its debut in 2015, founded by Court after a strong run at Advent Capital where he was involved in a number of big exits. While Court had been a strong player in enterprise software, Felix was a step-change for him into more of a primary focus on consumer startups focused on fashion, lifestyle and creative pursuits.
That has over the years included investing in companies like the breakout high-fashion marketplace Farfetch (which he started to back when still at Advent and is now public), Gwyneth Paltrow’s GOOP, the jewellery startup Mejuri, trend-watching HighSnobiety, and fitness startup Peloton (which has also IPO’d).
It’s not an altogether easygoing, vanilla list of cool stuff. Peloton and GOOP have had been mightily doused in snarky and sharky sentiments; and sometimes it even seems as if the brands themselves own and cultivate that image. As the saying goes, there’s no such thing as bad press, I guess.
Although it wasn’t something especially articulated in startup land at the time of Felix’s launch, what the firm was honing in on was a rising category of direct-to-consumer startups, essentially all in the area of e-commerce and building brands and businesses that were bypassing traditional retailers and retail channels to develop primary relationships with consumers through newer digital channels such as social media, messaging and email (alongside their own DTC websites).
This is not Felix’s sole focus, with investments into a range of platform businesses like corporate travel site TravelPerk, Amazon -backed food delivery juggernaut Deliveroo and Moonbug (a platform for children’s entertainment content); and increasingly later stage rounds (for example it was part of a $104 million round at TravelPerk; a $70 million round for marketplace-building service Mirakl; and $23 million for Mejuri.
Court’s track record prior to Felix, and the success of the current firm to date, are two likely reasons why this latest fund was oversubscribed, and why Court says it wants to further spread its wings into a wider range of areas and investment stages.
The interest in consumer finance is not such a large step away from these areas, when you consider that they are just the other side of the coin from e-commerce: saving money versus spending money.
“We see this as our prism of opportunity,” said Court. “Just as we had the intuition that there was a space for investors looking at [DTC]… we now think there is enough evidence that there is demand from consumers for new ways of dealing with money and personal finance.”
The firm has from the start operated with a board of advisors who also invest money through Felix while also holding down day jobs.
They include the likes of executives from eBay, Facebook, and more. David Marcus –who Court backed when he built payments company Zong and eventually sold it to eBay before he went on to become a major mover and shaker at Facebook and is now has the possibly Sisyphean task of building Calibra — is on the list, but that has not translated into Felix dabbling in cryptocurrency.
“We are watching cryptocurrency, but if you take a Felix stance on the area, it’s only had one amazing brand so far, bitcoin,” said Court. “The rest, for a consumer, is very difficult to understand and access. It’s still really early, but I’ve got no doubt that there will be some things emerging, particularly around the idea of ‘invisible money.'”
Not the city, the $57 million-funded cryptocurrency custodian startup. When someone wants to keep tens or hundreds of millions of dollars in Bitcoin, Ethereum, or other coins safe, they put them in Anchorage’s vault. And now they can trade straight from custody so they never have to worry about getting robbed mid-transaction.
With backing from Visa, Andreessen Horowitz, and Blockchain Capital, Anchorage has emerged as the darling of the cryptocurrency security startup scene. Today it’s flexing its muscle and war chest by announcing its first acquisition, crypto risk modeling company Merkle Data.
Anchorage has already integrated Merkle’s technology and team to power today’s launch of its new trading feature. It eliminates the need for big crypto owners to manually move assets in and out of custody to buy or sell, or to set up their own in-house trading. Instead of grabbing some undisclosed spread between the spot price and the price Anchorage quotes its clients, it charges a transparent per transaction fee of a tenth of a percent.
It’s stressful enough trading around digital fortunes. Anchorage gives institutions and token moguls peace of mind throughout the process while letting them stake and vote while their riches are in custody. Anchorage CEO Nathan McCauley tells me “Our clients want to be able to fund a bank account with USD and have it seamlessly converted into crypto, securely held in their custody accounts. Shockingly, that’s not yet the norm–but we’re changing that.”
Founded in 2017 by leaders behind Docker and Square, Anchorage’s core business is its omnimetric security system that takes passwords that can be lost or stolen out of the equation. Instead, it uses humans and AI to review scans of your biometrics, nearby networks, and other data for identity confirmation. Then it requires consensus approval for transactions from a set of trusted managers you’ve whitelisted.
With Anchorage Trading, the startup promises efficient order routing, transparent pricing, and multi-venue liquidity from OTC desks, exchanges, and market makers. “Because trading and custody are directly integrated, we’re able to buy and sell crypto from custody, without having to make risky external transfers or deal with multiple accounts from different providers” says Bart Stephens, founder and managing partner of Blockchain Capital.
Trading isn’t Anchorage’s primary business, so it doesn’t have to squeeze clients on their transactions and can instead try to keep them happy for the long-term. That also sets up Anchorage to be foundational part of the cryptocurrency stack. It wouldn’t disclose the terms of the Merkle Data acquisition, but the Pantera Capital-backed company brings quantative analysts to Anchorage to keep its trading safe and smart.
“Unlike most traditional financial assets, crypto assets are bearer assets: in order to do anything with them, you need to hold the underlying private keys. This means crypto custodians like Anchorage must play a much larger role than custodians do in traditional finance” says McCauley. “Services like trading, settlement, posting collateral, lending, and all other financial activities surrounding the assets rely on the custodian’s involvement, and in our view are best performed by the custodian directly.”
Anchorage will be competing with Coinbase, which offers integrated custody and institutional brokerage through its agency-only OTC desk. Fidelity Digital Assets combines trading and brokerage, but for Bitcoin only. BitGo offers brokerage from custody through a partnership with Genesis Global Trading. But Anchorage hopes its experience handling huge sums, clear pricing, and credentials like membership in Facebook’s Libra Association will win it clients.
McCauley says the biggest threat to Anchorage isn’t competitors, thoguh, but hazy regulation. Anchorage is building a core piece of the blockchain economy’s infrastructure. But for the biggest financial institutions to be comfortable getting involved, lawmakers need to make it clear what’s legal.
Zinier, a startup that is bringing automation to the field service management realm, announced today that it has raised $90 million in fresh funding as it looks to tackle new categories and court more clients.
The San Francisco-based startup said its $90 million Series C financing round was led by ICONIQ Capital and saw participation from Tiger Global Management, and existing investors Accel, Founders Fund, Qualcomm Ventures, Nokia-backed NGP Capital, and France-based Newfund Capital.
The new financing round pushed the five year-old startup’s total raise to $120 million, and valued it above $500 million, one of its investors told TechCrunch. Zinier co-founder and chief executive Arka Dhar declined to comment on the valuation.
Zinier is helping the electricity and telecom industries automate their field services, a job that has typically innovated slowly and relied on legacy systems and manual processes, Dhar told TechCrunch in an interview.
“Field service means everything that happens from work of origination, their scheduling and dispatching, matching the right person with the right task at the right location, and at the end, verifying the task. It’s a complex, manual and disparate system. It typically sees 20% of our client’s expenses. We are optimizing these processes with AI to help these clients become more efficient and save money,” said Dhar.
Dhar declined to reveal all the major Zinier’s clients, but said some of the biggest players in the electricity and telecoms businesses work with the startup. 40% of the startup’s clients today are based in the U.S., 40% is in Latin America, and the rest is in Asia Pacific. The startup said it works with Black & Veatch and Car-Sa, and maintains strategic partnerships with system integrators such as Capgemini and Tata Consultancy Services.
Until two years ago, Zinier focused on the telecom industry, but has since expanded to serve energy and utility spaces. The fresh fund would help the startup double down its efforts in non-telecom industries, Dhar said.
A number of players are working on the field service management space. Major giants such as Salesforce and Microsoft own stakes in firms that operate in this industry and also offer their own products. ServiceMax was earlier acquired by GE Digital for $915 million. Without calling names, Dhar cautioned that some of its competitors are merely digitizing the pen and paper logs, and are not really optimizing the process.
“It is critical for companies to optimize this costly and complex part of their business, and Zinier has the platform-based technology and team to take on this global, multi-industry market. We are excited to partner with Zinier and support them in their mission of changing the paradigm on field service work on a global scale,” said Will Griffith, Partner at ICONIQ Capital.
ActionIQ co-founder and CEO Tasso Argyros knows that there are plenty of companies promising to help businesses use their customer data to deliver personalized experiences — as he put it, “The space has gotten very, very hot over the last couple of years.”
But in the face of growing competition, ActionIQ (founded in 2014 and headquartered in New York) has attracted some impressive customers like The New York Times, Conde Nast, American Eagle Outfitters, Vera Bradley and Pandora Media, as well as high-profile investors like Sequoia Capital and Andreessen Horowitz.
Today, it’s announcing that it has raised $32 million in Series C funding.
“At this point, we believe we are four to five years ahead of the market,” Argyros told me. “[Customer data platforms are] very hot, you see people really jumping into it, but nobody really has a product.”
He attributed the rise of these platforms to the growth in customer acquisition costs: “Everybody’s switched their focus from ‘How do we acquire more customers?’ to ‘How do you grow lifetime value?'”
The key, Argyros said, is “delivering personalized experiences at scale.” So if you’re a business trying to understand which customers need to be convinced to stick around, which customers are ready to upgrade to a paid subscription and so on, you need a platform like ActionIQ: “What’s common about all these questions is that they’re all data questions.”
He described ActionIQ’s approach as “product-first,” creating self-serve tools for enterprises rather than relying on consulting or IT services, and he said the product is designed to “drive intelligent actions activated through any channel.”
Argyros contrasted this approach with the large marketing clouds, where he said that stitching together products from various acquisitions has led to “a huge data gap between what marketing clouds promise and what they can actually deliver.” And he said other customer data platforms are limited to bringing the data together — but “just putting customer data in one place, that doesn’t mean business can use the customer data to drive value.”
March Capital Partners led the round, with participation from Cisco Ventures, as well as previous investors Sequoia, Andreessen and FirstMark Capital. Meredith Finn, a partner at March, is joining ActionIQ’s board of directors.
“From my professional experience at Salesforce and Twitter, when it comes to building a relationship with your customers, data is everything,” Finn said in a statement. “ActionIQ took a data-first approach from day one in contrast to many vendors that are now scrambling to address their data gaps by duct taping data infrastructure to their existing point solutions. … The potential of such a platform is limitless, and spans well beyond traditional marketing channels to other areas of customer interactions including web and mobile app experiences, customer support, and sales.”
ActionIQ has now raised a total of $75 million in funding. And while the Series C isn’t significantly larger that the $30 million that ActionIQ raise din 2017, Argyros said the company didn’t need to raise a huge round this time around, because it’s already built out the core product.
“A lot of dollars were invested heavily in the product way before the demand was there,” he said. “The Series B was pretty significant because there was so much upfront product investment. … Most of these funds are going towards expanding the business in sales and marketing.”
Collaborative Fund emerged on the scene nearly 10 years ago to fund seed-stage and, as time passed, early-stage startups, many of them in New York, where the firm is based.
Apparently, the firm has ambitions to do more later-stage investing, too. It just brought aboard Ian Friedman, former co-head of Goldman Sachs Investment Partners, Venture Capital & Growth Equity, as a general partner.
We spoke yesterday with Friedman, a Canadian who graduated from the University of Western Ontario before heading to sunny LA to work for the Boston Consulting Group. After that, he moved to Bain Capital in Boston, followed by a stint at Stanford to get his MBA, where he was recruited by Goldman to work in New York, where he still lives.
Joby Aviation has raised a $590 million Series C round of funding, including $394 million from lead investor Toyota Motor Corporation, the company announced today. Joby is in the process of developing an electric air taxi service, which will make use of in-house developed electric vertical take-off and landing (eVTOL) aircraft that will in part benefit from strategic partner Toyota’s vehicle manufacturing experience.
This brings the total number of funding in Joby Aviation to $720 million, and its list of investors includes Intel Capital, JetBlue Technology Ventures, Toyota AI Ventures and more. Alongside this new round of funding, Joby gains a new board member: Toyota Motor Corporation EVP Shigeki Tomoyama.
Founded in 2009, Joby Aviation is based in Santa Cruz, California. The company was founded by JoeBen Bevirt, who also founded consumer photo and electronics accessory maker Joby. Its proprietary aircraft is a piloted eVTOL, which can fly at up to 200 miles per hour for a total distance of over 150 miles on a single charge. Because it uses an electric drivetrain and multi rotor design, Joby Aviation says it’s “100 times quieter than conventional aircraft during takeoff and landing, and near-silent when flying overhead.”
These benefits make eVTOL craft prime candidates for developing urban aerial transportation networks, and a number of companies, including Joby as well as China’s EHang, Airbus and more are all working on this type of craft for use in this kind of city-based short-hop transit for both people and cargo.
The sizeable investment made by Toyota in this round is a considerable bet for the automaker on the future of air transportation. In a press release detailing the round, Toyota President and CEO Akio Toyoda indicated that the company is serious about eVTOLs and air transport in general.
“Air transportation has been a long-term goal for Toyota, and while we continue our work in the automobile business, this agreement sets our sights to the sky,” Toyoda is quoted as saying. “As we take up the challenge of air transportation together with Joby, an innovator in the emerging eVTOL space, we tap the potential to revolutionize future transportation and life. Through this new and exciting endeavor, we hope to deliver freedom of movement and enjoyment to customers everywhere, on land, and now, in the sky.”
Joby Aviation believes that it can achieve significant cost benefits vs. traditional helicopters for short aerial flights, eventually lowering costs through maximizing utilization and fuel savings to the point where it can be “accessible to everyone.” To date, Joby has completed sub-scale testing on its aircraft design, and begun full flight tests of production prototypes, along with beginning the certification process for its aircraft with the Federal Aviation Administration (FAA) at the end of 2018.
Wipro Ventures, the investment arm of one of India’s largest IT companies by market capitalization, said on Thursday it has raised $150 million for its second fund as it looks to invest in more enterprise startups and venture capitalist funds.
As with its $100 million maiden fund in 2015, Wipro Ventures will use its second fund to invest in early and mid-stage startups worldwide that are building enterprise solutions in cybersecurity, analytics, cloud infrastructure, test automation and AI, said Biplab Adhya and Venu Pemmaraju, managing partners at Wipro Ventures, in an interview with TechCrunch.
Through its maiden fund, Wipro Ventures invested in 16 startups and five VC funds. Adhya said two of its portfolio startups — including Demisto, which sold to Palo Alto for $560 million — have seen an exit, while others are showing good signs.
“We are pleased with the traction these startups are showing and the value we have added to Wipro, and we look forward to continuing this journey,” he said.
Adhya said Wipro Ventures looks to be a long-term investor in a startup. In addition to often participating in a startup’s follow-on financial rounds, it tends to stay with a startup until its IPO, he said.
Of the 16 startups Wipro Ventures has invested in to date, 11 are based in the U.S., four in Israel and one in India. Adhya said geography tends not to play a crucial role when investing in a startup, and he is open to ideas from anywhere in the world.
A corporate giant showing interest in picking stake in private equity firms is not a new phenomenon. Leaving aside the American giants such as Google, Microsoft and Facebook, all of which operate investment arms, Indian IT giants have also been at it for years.
HCL and Infosys, two other IT giants in India, have also invested in — or outright acquired — dozens of startups in recent years. A 2017 CB Insights report showed that Wipro and Infosys, which runs Innovation Fund, alone had invested in 28 firms and acquired eight startups.
Adhya said Wipro Ventures is now investing in six to eight startups each year.
One of the benefits of taking money from a corporate giant is sometimes getting access to their other customers. And that appears to be true of Wipro. More than 100 of Wipro’s global customers have deployed solutions from its portfolio startups, Adhya said.
In a statement, Rishi Bhargava, a founder of Demisto, explained the benefit. “Within the first year of our partnership, Wipro and Demisto were working together on dozens of Fortune 1000 opportunities and closing a majority of them.
“It’s exciting to see Wipro Ventures continue to enhance the startup ecosystem with new capital while helping companies boost their bottom line,” he added.
Venture Highway, a VC firm in India founded by former Google executive Samir Sood, said on Thursday it has raised $78.6 million for its second fund as it looks to double down on investing in early-stage startups.
The firm, founded in 2015, has invested in more than two dozen startups to date, including social network ShareChat, which last year raised $100 million in a financing round led by Twitter; social commerce Meesho, which has since grown to be backed by Facebook and Prosus Ventures; and Lightspeed-backed OkCredit, which provides a bookkeeping app for small merchants.
Moving forward, Venture Highway aims to lead pre-seed and seed financing rounds and cut checks between $1 million to $1.5 million on each investment (up from its earlier investment range of $100,000 to $1 million), said Sood in an interview with TechCrunch.
Venture Highway counts Neeraj Arora, former business head of WhatsApp who played an instrumental role in selling the messaging app to Facebook, as a founding “anchor of LPs” and advisor. Arora and Sood worked together at Google more than a decade ago and helped the Silicon Valley giant explore merger and acquisition deals in Asia and other regions.
Samir Sood, the founder of Venture Highway
The VC firm said it has already made a number of investments through its second fund. Some of those deals include investments in OkCredit, mobile esports platform MPL, Gurgaon-based supply chain SaaS platform O4S, social commerce startup WMall, online rental platform CityFurnish, community platform MyScoot and online gasoline delivery platform MyPetrolPump.
As apparent from the aforementioned names, Venture Highway focuses on investing in startups that are using technology to address problems that have not been previously tackled.
Last year Venture Highway also participated in a funding round of Marsplay, a New Delhi-based startup that operates a social app where influencers showcase beauty and apparel content to sell to consumers.
“It’s very rare to have investors who keep their calm, get into an entrepreneurial mindset and help founders achieve their dreams. Throughout the journey, Venture Highway has been extremely helpful, emotionally available (super important to founders) and very resourceful,” said Misbah Ashraf, 26-year-old co-founder and chief executive of Marsplay, in an interview with TechCrunch.
There is no “theme” or category that Venture Highway is particularly interested in, said Sood. “As long as there is a tech layer; and the startup is doing something where we or our network of LPs, advisors and investors can add value, we are open to discussions,” he said.
This is the first time Venture Highway has raised money from LPs. The firm’s first fund was bankrolled by Sood and Arora.
Dozens of local and international VC funds are today active in India, where startups raised a record $14.5 billion last year. But a significant number of them focus on late-stage deals.
Goldman Sachs is investing in African tech companies. The venerable American investment bank and financial services firm has backed startups from Kenya to Nigeria and taken a significant stake in e-commerce venture Jumia, which listed on the NYSE in 2019.
Though Goldman declined to comment on its Africa VC activities for this article, the company has spoken to TechCrunch in the past about specific investments.
Goldman Sachs is one of the most enviable investment banking shops on Wall Street, generating $36 billion in net revenues in 2019, or roughly $1 million per employee. It’s the firm that always seems to come out on top, making money during the financial crisis while its competitors were hemorrhaging. For generations, MBAs from the world’s top business schools have clamored to work there, helping make it a professional incubator of sorts that has spun off alums into leadership positions in politics, VC and industry.
All that cache is why Goldman’s name popping up related to African tech got people’s attention, including mine, several years ago.
I was in SF last week and met with more than a dozen VCs over the course of two days. This was post the holidays, post their visits to the ski chalets in Tahoe and the island beaches, and in the smack dab of one of the most important fundraise periods of the year — the mid-to-late January to April stretch when all the backlog of startups from Q4 initiate their fundraises for the new year.
And the one constant refrain I heard over and over again across these conversations was just this: VCs are tired.
The reasons were similar if not perfectly overlapping. The biggest driver was the sheer flood of venture dollars targeting too few deals in the Valley these days. Consumer investing has become passé as exits disappear and the mobile wave crests (last year was the first year B2B investing overtook consumer investing in modern memory), forcing everyone to chase the same set of SaaS companies.
VCs described to me how the top deals start and close their fundraises in 48-72 hours. Several VCs groused that dozens of firms now descend like hawks on the unwitting but fortunate target startup, angling for a term sheet and willing to give up valuation and preferences left and right for any chance at the cap table. Earlier investors are just as desperate to own that equity, and no longer play any sort of honest broker role that they might have in the past.
Plus, the FOMO of the moment is more acute than ever — a VC at the end of the day might have already seen a dozen companies, but gets a late night intro to one last company — perhaps the company that could make or break their career. And so they will take that one last meeting, and then one more last meeting, hoping to find some meaningful edge against the competition.
And so VCs are running ragged around South Park, and increasingly, flying around the world scouring for any alpha wherever they can find it. Increasingly, it feels, they aren’t finding it though.
Firms are doing what they can. They are staffing up, trying to hire more raw talent in the hopes of finding that last undiscovered company. They scour their own portfolios and probe their founders, trying to find a tip to a deal that their competitor may have missed. They host dinner after dinner (sometimes multiple in one night — as I sometimes witness when I get an invitation to all of them as if I can be in more than one place at the same time), again, hoping to find some bit of magic.
Ironically, the “tired” line was something I used to hear from seed investors, who constantly had to churn through dozens of under-hearted startups to find the gold. Now, I’ve heard this language more and more from later-stage VCs, where the Excel spreadsheet drives the valuation more than a relationship with a founder — and everyone can read the gridiron of SaaS metrics.
All of this in some ways is good for startup founders (and their earliest investors) — higher markups are going to result in more resources with less dilution, and that’s always nice. The challenge is that relationships are being forged in the most intense of sale processes, and that means that founders may only have a short period of time to work with a partner before committing a board seat to that individual. Personalities are hard to judge in such a crucible.
As are the numbers. We’ve chatted a bit about reneged term sheets on Equity, but it’s a pattern that I hear whispered about more and more. Less due diligence is happening before the term sheet is signed (again, to beat out the rabid competition), and there is now more buyer’s remorse from VCs (and very occasionally founders) that can lead to a botched round along the way.
Lack of bandwidth, hyper-velocity, a pittance of sleep — all of these are intensifying the sensitivity of VC returns. Email a VC an hour before or after and it may well change the result of a fundraise. VCs once had a reputation for plodding and slow deliberation. That old normal is definitely dead right now, and in its place is a new, modern VC who is going to determine millions of dollars in a few minutes on a jet fuel of caffeine and ambition.
It’s the best and worst of times, and I can’t help but wonder what the results of the 2019 and 2020 vintage years are going to look like 8-10 years from now.
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.
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.
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.
Funnel, the Stockholm-based startup that offers technology to help businesses prepare — or make “business-ready” — their marketing data for better reporting and analysis, has closed $47 million in Series B funding.
Leading the round is Eight Roads Ventures and F-Prime Capital, with participation from existing investors Balderton Capital, Oxx, Zobito and Industrifonden, in addition to Kreos Capital.
Funnel says it will use the injection of capital to accelerate its plans in the U.S., where the company is seeing “strong demand” from enterprises. It also will invest in its technical teams to further its vision of “creating a single source of truth of marketing, sales and other commerce data.”
Founded in 2014 by Fredrik Skantze and Per Made, who are also behind Facebook advertising tool Qwaya, Funnel set out to let marketers automate their online marketing data from multiple platforms in real time, so that they can more accurately analyse their online marketing spend.
Initially that included visualising the marketing data, but now the company has decided to focus solely on collecting the data from all of the disparate marketing channels, and cleaning it up and normalizing it so that it can be imported into popular business intelligence tools to be analysed.
“[We have] shifted away from visualising the marketing data to ‘just’ collecting and making it business-ready as we have seen that to be the real pain point for customers,” Funnel co-founder and CEO Fredrik Skantze tells TechCrunch.
“Visualisation is done well in existing business intelligence tools once the data is properly prepared. Automating the collection and preparation of the data has proven to be a very hard thing to do right and we wanted to make sure we were the best at this which we now confidently can say we are as we hear that again and again from customers.”
To that end, Skantze explains that Funnel has direct connections to tools like Tableau and Google Data Studio. The idea is that customers can instantly visualize the data in the tools they are already familiar with.
Since we last covered Funnel mid 2017, the overarching trend has been an explosive growth in digital marketing. Skantze says that in 2017, 39% of worldwide marketing spend was digital and mostly e-commerce, gaming and app companies that were putting the majority of their budgets online. Since then, forecasts have been repeatedly adjusted upwards, and in 2020, leading markets like the U.K. are now approaching 70% for digital marketing.
“That means the big brands are putting their big budgets online,” he says. “These brands are moving their marketing online because of the performance promise of digital marketing. But delivering on that performance promise requires being data-driven. This is a huge shift for these organizations that they are gradually coming to grips with as they are traditionally more branding focused. It requires creating new roles like marketing analytics, marketing technologists and putting in place a data infrastructure. This is complex.”
That, of course, plays nicely into the hands of Funnel, which is seeing enterprises far beyond e-commerce and apps utilise its wares. “We have spent the last year building out the enterprise readiness of our product and offering [features] like security certifications and enterprise features to be ready to take on these customers,” adds Skantze.
Meanwhile, during the last year, the Funnel team has grown from 73 to 140, and the company signed new office space for a total of 400 people across Stockholm and Boston, ready for further expansion.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
This week Danny and Alex were back together to riff over a the latest early-stage rounds, the latest on the late-stage front, and more. It was yet another stacked week, forcing us to pick and choose a bit.
Starting off, however, here’s the rounds that caught our eyes this past week:
Leaving the earlier stages and heading to the other end of the spectrum, we touched on Cloudinary passing the $60 million ARR mark, ExtraHop aiming for $100 million ARR mark in short order, and SiteMinder’s new $70 million round that gave it a $750 million valuation after crossing $70 million ARR last year.
Got all that? Like we said, it has been busy.
The two main stories this week on the show were the big Plaid deal, and what’s going on in the United States’s own venture market.
With Plaid, Visa spent more than $5 billion to acquire the financial data API service in one of the first blockbuster exits of the year, making some VCs at Spark Capital and other firms very happy.
Meanwhile, the U.S. venture capital landscape is changing rapidly as more and more regions outside of Silicon Valley bulk up on their startups. The Valley is barely a majority of VC dollars these days, while regions like the mid-Atlantic and the Southeast are raising their profiles quickly. We talk about that, plus the more than a dozen mega funds that launched last year.
Wrapping up, it appears that the venture capitalist classes are tired. Not that we feel too poorly for them, but it goes to show that there’s so much going on these days that no one is getting any rest. No matter how much money they have.
I talked yesterday about how VCs are just tired these days. Too many deals, too little time per deal, and constant hyper-competition with other VCs for the same equity.
One founder friend of mine noted to me last night that he has already received inbound requests from more than 90 investors over the past year about his next round — and he’s not even (presumably) fundraising. “I may have missed a few,” he deadpans, and really, how could one not?
All that frenetic activity though leads us to the paradox at the heart of 2020 venture capital: it’s the largest funds that are writing the earliest, smallest checks.
That’s a paradox because big funds need big rounds to invest in. A billion dollar fund can’t write eight hundred $1 million seed checks with dollars left over for management fees (well, they could, but that would be obnoxious and impossible to track). Instead, the usual pattern is that as a firm’s fund size grows, its managing partners increasingly move to later-stage rounds to be able to efficiently deploy that capital. So the $200 million fund that used to write $8 million series As transforms into a $1 billion fund writing $40 million series Bs and Cs.
That’s logical. Yet, the real logic is a bit more complicated. Namely, that everyone is raising huge funds.
As this week’s big VC report from the National Venture Capital Association made clear, 2019 was in many ways the year of the big fund (and SoftBank didn’t even raise!). 21 “mega-funds” launched last year (defined as raising more than $500 million), and that was actually below the numbers in 2018.
All that late-stage capital is scouring for late-stage deals, but there just aren’t that many deals to do. Sure, there are great companies and potentially great returns lying around, but there are also dozens of funds plotting to get access to that cap table, and valuation is one of the only levers these investors have to stand out from the fray.
This is the story of Plaid in many ways. The fintech data API layer, which Visa announced it is intending to acquire this past week for $5.3 billion, raised a $250 million series C in late 2018 from Index and Kleiner, all according to Crunchbase. Multiple VC sources have told me that “everyone” looked at the deal (everyone being the tired VCs if you will).
But as one VC who said “no” on the C round defended to me this week, the valuation last year was incredibly rich. The company had revenues in 2018 in the upper tens of millions or so I have been told, which coupled with its publicly-reported $2.65 billion series C valuation implies a revenue multiple somewhere in the 30-50x range — extremely pricey given the company’s on-going fight with banks to ensure it can maintain data access to its users’ accounts.
Jeff Kauflin at Forbes reported that the company’s revenues in 2019 are now in the lower three digits of millions, which means that Visa likely paid a similarly expensive multiple to acquire the company. Kleiner and Index doubled their money in a year or so, and no one should complain about that kind of IRR (particularly in growth investing), but if it weren’t for Visa and the beneficial alchemy of exit timing, all might have turned out very differently.
Worse that just expensive valuations, these later-stage rounds can become very proprietary and exclusive. From the sounds of it, Plaid ran a fairly open process for its series C round, which allowed a lot of firms to look at the deal, helping to drive the valuation up while limiting dilution for earlier investors and the founder. But that’s not the only way to handle it.
Increasingly, firms who invested early are also trying to invest later. That series A investor who put in $5 million also wants to put in the $50 million series B and the $250 million series C. After all, they have the capital, already know the company, have a relationship with the CEO, and can avoid a time-consuming fundraise in the process.
So for many deals today, those later-stage cap tables are essentially locking out new investors, because there is already so much capital sitting around the cap table just salivating to double down.
That gets us straight to the paradox. In order to have access to later-stage rounds, you have to already be on the cap table, which means that you have to do the smaller, earlier-stage rounds. Suddenly, growth investors are coming back to early-stage rounds (including seed) just to have optionality on access to these startups and their fundraises.
As one VC explained to me last week (paraphrasing), “What’s weird today is that you have firms like Sequoia who show up for seed rounds, but they don’t really care about … anything. Valuation, terms, etc. It’s all a play for those later-stage rounds.” I think that’s a bit of an exaggeration to be clear, but ultimately, those one million-dollar checks are essentially a rounding error for the largest funds. The real return is in the mega rounds down the road.
Does that mean seed funds will cease to exist? Certainly not, but it’s hard to make money and build a balanced, risk-adjusted portfolio when your competitors literally don’t care and consider the investment a marketing and access expense. As for founders — the times are still really, really good if you can check the right VC boxes.
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 $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 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, infastructure 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.
In films, TV shows and books — and even in video games where characters are designed to respond to user behavior — we don’t perceive characters as beings with whom we can establish two-way relationships. But that’s poised to change, at least in some use cases.
Interactive characters — fictional, virtual personas capable of personalized interactions — are defining new territory in entertainment. In my guide to the concept of “virtual beings,” I outlined two categories of these characters:
In a series of three interviews, I’m exploring the startup opportunities in both of these spaces in greater depth. First, Michael Dempsey, a partner at VC firm Compound who has blogged extensively about digital characters, avatars and animation, offers his perspective as an investor hunting for startup opportunities within these spaces.
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 startups, 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.
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 finance 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 related 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 any of its income-generating prowess to business and venture funding activities in Catalyst Fund markets like Nigeria, India and Mexico.