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Applied XL raises $1.5M to build ‘editorial algorithms’ that track real-time data

By Anthony Ha

AppliedXL, a startup creating machine learning tools with what it describes as a journalistic lens, is announcing that it has raised $1.5 million in seed funding.

Emerging from the Newlab Venture Studio last year, the company is led by CEO Francesco Marconi (previously R&D chief at The Wall Street Journal) and CTO Erin Riglin (former WSJ automation editor). Marconi told me that AppliedXL started out by working on a number of different data and machine learning projects as it looked for product-market fit — but it’s now ready to focus on its first major industry, life sciences, with a product launching broadly this summer.

He said that AppliedXL’s technology consists of “essentially a swarm of editorial algorithms developed by computational journalists.” These algorithms benefit from “the point of view and expertise of journalists, as well as taking into account things like transparency and bias and other issues that derive from straightforward machine learning development.”

Marconi compared the startup to Bloomberg and Dow Jones, suggesting that just as those companies were able to collect and standardize financial data, AppliedXL will do the same in a variety of other industries.

He suggested that it makes sense to start with life sciences because there’s both a clear need and high demand. Customers might include competitive intelligence teams as pharmaceutical companies and life sciences funds, which might normally try to track this data by searching large databases and receiving “data vomit” in response.

“Our solution for scaling [the ability to spot] newsworthy events is to design the algorithms with the same principles that a journalist would approach a story or an investigation,” Marconi said. “It might be related to the size of the study and the number of patients, it might be related to a drug that is receiving a lot of attention in terms of R&D investment. All of these criteria that science journalist would bring to clinical trials, we’re encoding that into algorithms.”

Eventually, Marconi said the startup could expand into other categories, building industry-“micro models.” Broadly speaking, he suggested that the company’s mission is “measuring the health of people, places and the planet.”

The seed funding was led by Tuesday Capital, with participation from Frog Ventures, Team Europe and Correlation Ventures.

“With industry leading real-time data pipelining, Applied XL is building the tools and platform for the next generation of data-based decision making that business leaders will rely on for decades,” said Tuesday Capital Partner Prashant Fonseka in a statement. “Data is the new oil and the team at Applied XL have figured out how to identify, extract and leverage one of the most valuable commodities in the world.”

 

Newly-christened Percent wants to make it easier to securitize corporate debt

By Danny Crichton

Debt is the new equity. As founders run around trying to fend off prying VCs from their cap tables, they are increasingly turning to debt products like revenue-based securities in order to get the capital they need today while protecting them from dilution they don’t want tomorrow. It’s a huge business, with leading company Pipe just valued at $2 billion and others like CapChase cashing in on founders’ newly-found love of debt.

All those new securities creates a dilemma for potential investors: how do they evaluate every single new debt product from every single company? It’s a problem they face not just in the startup world, but also private debt in general as companies borrow hundreds of billions of dollars per year. The solution is securitization and syndication, aggregating the small debts from multiple companies and fusing them together into one consistent new security. It’s a major component of capital markets, but one that remains mired in legacy business practices.

Percent is building an end-to-end technology securitization platform for debt originators to connect with a much wider network of investors than traditional institutions to get the best rates at the fastest speeds. When we last checked in a year ago with the company, previously known as Cadence, it had just raised $4 million and had processed $125 million through its platform in its short lifetime.

Well, it has now structured more than $400 million across its platform, an eye-popping performance that has attracted new VC interest, this time from Sep Alavi at White Star Capital and Karen Page at B Capital. The two firms are investing $12.5 million in a Series A into Percent, with previous backers Revel Partners and Recharge Capital participating.

For CFOs, Percent’s pitch is that it can offer a wider spectrum of private debt buyers to originators, therefore lowering the cost of capital. The traditional corporate debt world remains quite clubby, with major institutional holders being connected to originators through investment banks. High fees and a limited investor base can raise expenses significantly. Through its platform, Percent can break that clubbiness and open the debt world to a wider range of buyers.

Furthermore, Percent also acts as the deal origination and transaction platform, allowing companies to easily put together debt offerings, process requests for information, and avoid the sort of “attach Excel financials to email or upload to cloud” workflow that remains a mainstay in these processes.

Percent’s business model is to take a percentage fee on the dollars originated on its platform as well as an additional percentage fee if it is the underwriter itself. In this way, it has essentially a recurring-revenue model — the more debt that is transacted on its platform, the more continuous revenue the company generates over time.

Percent scored one of its biggest wins to date with the securitization of $144 million in debt originated by FAT Brands, the owners of popular restaurant franchises like Fatburger and Johnny Rockets. Precent acted as co-lead bookrunner with lead Jefferies for the debt announced yesterday, and FAT noted that its cost of capital was significantly lower than its previous two securitizations from last year. Given the changing macro environment and the radically shifting fortunes in the foods service business in the wake of COVID-19 though, it is hard to precisely identify what changed the cost of capital and what extent a modern technology stack helped the company’s debt performance. Outside of FAT Brands, Percent has a list of many of its other originators available.

Nelson Chu, the founder and CEO of Percent, noted that he was particularly interested in finding investors with knowledge of capital markets and the enterprise sales cycle. He observed in an interview that as more and more VCs in recent years have tended to come from product and growth roles at startups rather than the traditional path through an investment bank, there are fewer VCs with knowledge or interest in the capital markets space.

Alavi at White Star has invested in a range of financial services and blockchain companies, while Page at B Capital has long been in the enterprise space at Apple and as an early employee at cloud provider Box.

Percent’s team in New York City this week. Image Credits: Percent

Percent, which is headquartered in New York City and was founded in 2018, has expanded its team by double over the past year as it scales up its engineering and sales teams.

Medchart raises $17M to help businesses more easily access patient-authorized health data

By Darrell Etherington

Electronic health records (EHR) have long held promise as a means of unlocking new superpowers for caregiving and patients in the medical industry, but while they’ve been a thing for a long time, actually accessing and using them hasn’t been as quick to become a reality. That’s where Medchart comes in, providing access to health information between businesses, complete with informed patient consent, for using said data at scale. The startup just raised $17 million across Series A and seed rounds, led by Crosslink Capital and Golden Ventures, and including funding from Stanford Law School, rapper Nas and others.

Medchart originally started out as more of a DTC play for healthcare data, providing access and portability to digital health information directly to patients. It sprung from the personal experience of co-founders James Bateman and Derrick Chow, who both faced personal challenges accessing and transferring health record information for relatives and loved ones during crucial healthcare crisis moments. Bateman, Medchart’s CEO, explained that their experience early on revealed that what was actually needed for the model to scale and work effectively was more of a B2B approach, with informed patient consent as the crucial component.

“We’re really focused on that patient consent and authorization component of letting you allow your data to be used and shared for various purposes,” Bateman said in an interview. “And then building that platform that lets you take that data and then put it to use for those businesses and services, that we’re classifying as ‘beyond care.’ Whether those are our core areas, which would be with your, your lawyer, or with an insurance provider, or clinical researcher — or beyond that, looking at a future vision of this really being a platform to power innovation, and all sorts of different apps and services that you could imagine that are typically outside that realm of direct care and treatment.”

Bateman explained that one of the main challenges in making patient health data actually work for these businesses that surround, but aren’t necessarily a core part of a care paradigm, is delivering data in a way that it’s actually useful to the receiving party. Traditionally, this has required a lot of painstaking manual work, like paralegals poring over paper documents to find information that isn’t necessarily consistently formatted or located.

“One of the things that we’ve been really focused on is understanding those business processes,” Bateman said. “That way, when we work with these businesses that are using this data — all permissioned by the patient — that we’re delivering what we call ‘the information,’ and not just the data. So what are the business decision points that you’re trying to make with this data?”

To accomplish this, Medchart makes use of AI and machine learning to create a deeper understanding of the data set in order to be able to intelligently answer the specific questions that data requesters have of the information. Therein lies their longterm value, since once that understanding is established, they can query the data much more easily to answer different questions depending on different business needs, without needing to re-parse the data every single time.

“Where we’re building these systems of intelligence on top of aggregate data, they are fully transferable to making decisions around policies for, for example, life insurance underwriting, or with pharmaceutical companies on real world evidence for their phase three, phase four clinical trials, and helping those teams to understand, you know, the the overall indicators and the preexisting conditions and what the outcomes are of the drugs under development or whatever they’re measuring in their study,” Bateman said.”

According to Ameet Shah, Partner at co-lead investor for the Series A Golden Ventures, this is the key ingredient in what Medchart is offering that makes the company’s offering so attractive in terms of long-term potential.

“What you want is you both depth and breadth, and you need predictability — you need to know that you’re actually getting like the full data set back,” Shah said in an interview. “There’s all these point solutions, depending on the type of clinic you’re looking at, and the type of record you’re accessing, and that’s not helpful to the requester. Right now, you’re putting the burden on them, and when we looked at it, we were just like ‘Oh, this is just a whole bunch of undifferentiated heavy lifting that the entire health tech ecosystem is trying to like solve for. So if [Medchart] can just commoditize that and drive the cost down as low as possible, you can unlock all these other new use cases that never could have been done before.”

One recent development that positions Medchart to facilitate even more novel use cases of patient data is the 21st Century Cures Act, which just went into effect on April 5, provides patients with immediate access, without charge, to all the health information in their electronic medical records. That sets up a huge potential opportunity in terms of portability, with informed consent, of patient data, and Bateman suggests it will greatly speed up innovation built upon the type of information access Medchart enables.

“I think there’s just going to be an absolute explosion in this space over the next two to three years,” Bateman said. “And at Medchart, we’ve already built all the infrastructure with connections to these large information systems. We’re already plugged in and providing the data and the value to the end users and the customers, and I think now you’re going to see this acceleration and adoption and growth in this area that we’re super well-positioned to be able to deliver on.”

Forget the piggy bank, Till Financial’s kids’ spend management app gets Gates’ backing

By Mary Ann Azevedo

Today’s children and teens want more power and control over their spending.

And while there are a number of financial services and apps out there aimed at helping this demographic save and invest money (Greenlight being among the most popular and well-known), one startup is coming at the space from another angle: helping younger people also better manage their spend.

Till Financial describes itself as a collaborative family financial tool that aims to empower kids to become smarter spenders. The New York-based company’s banking platform is designed to encourage “open and honest” discussions between parents and their kids. And it has just raised $5 million to help it advance on that goal.

A slew of investors put money in the round, including Elysian Park Ventures, Melinda Gates’ venture fund Pivotal Ventures with Magnify Ventures, Afore Capital, Luge Capital, Alpine Meridian Ventures, The Gramercy Fund, SM Ventures (the family office of the founders/CEOs of Stadium Goods) and Lightspeed Venture Partners’ Scout Fund. Also participating were angel investors such as the founders of fintech Petal, the founders of alcohol marketplace Drizly, the president of Transactis, and the president of 1800Flowers.

Part of Till’s goal is to help kids “learn by doing” and gain confidence in spending decisions. It arms them with a bank account, digital and physical debit card and goal-based savings. For example, say a teen wants to buy an iPad, they can set up an account that they can save toward that iPad and give family members (such as grandparents, for example) the opportunity to pitch in the same amount, or more. They can also set up recurring payments for things like Netflix or Spotify subscriptions so they can get a taste of what it’s like to pay regular bills.

“Parents and the current banking options miss the point when they just focus on savings. We need to first prepare kids to be Smarter Spenders, supported by savings and investing,” said Taylor Burton, who founded the company with Tom Pincince. “On Till, kids learn to spend with intention and purpose, while parents gain confidence and trust based on transparency and accountability.”

To Pincince, the market is clearly underserved.

“The legacy banks really don’t care about this young person and the early digital players are really missing the mark,” he said. 

And despite the plethora of apps targeting the demographic, Pincince believes there’s plenty of room for the right players.

“The reality is you’re talking about a swath of kids under the age of 18 and over the age of eight that is the single largest unbanked population,” he said. “We’re not fighting to be the top of your son’s wallet. We’re fighting to be the first product into that wallet.”

Indeed, it’s a big market — the average middle-class family in the U.S. spends $284,570 per child by the time they turn 18.

The platform is free to all families and, early on, attracted the attention of Peggy Mangot, operating partner/COO of PayPal Ventures. She invested personally in Till in its pre-seed rounds. Prior to PayPal, Mangot ran development of Greenhouse, Well Fargo’s fee-free mobile banking app that aimed to help younger users build responsible spending habits.

Mangot has three kids and recalls that when they were shopping online, she’d give them her credit card. Or, if they were going to the corner store or meeting with friends, she’d give them cash.

“But that way, the money is meaningless to them. They didn’t really know how to understand what things cost and there was no sense of ownership,” she said. “It was just me handing over cash or a card.”

What attracted her the most about Till, Mangot said, was the team’s approach to treat younger people “with respect and agency.”

She also believes that by helping children and teens understand important financial lessons at a younger age, the world will ultimately be full of more responsible adults.

“By putting these tools in the hands of these young people early, they’ll have years and years of experience before they’re more independent and have to manage their paycheck and bills,” Mangot told TechCrunch. “Once you have mass adoption, it’s going to create a much more financially literate, confident and in control set of young adults than we’ve ever had.”

Besides making money on interchange fees, Till aims to earn revenue by partnering with merchants to offer rewards to users. It also plans to earn referral fees by referring the teens to other financial institutions when they get older and have different needs.

“It’s not our intention to be your son or daughter’s forever bank. It’s our intention to be the first bank,” Pincince said. “So, they hit the age of maturity, we’re actually giving them a high-five off of our platform and introducing them to maybe their first college loan or their first credit card.”

9 investors, execs and founders discuss Zagreb’s startup potential

By Mike Butcher

Startups may not spring to mind when speaking about the beautiful country of Croatia. Indeed, the country is most popular as a tourist destination, and given that tourism accounted for about 20% of its GDP in 2018, to an extent, its pre-pandemic focus was mostly on growing its share of the international tourism market.

But Croatia’s entrepreneurs haven’t been quiet: Startups like Infobip and Rimac are significant local hero businesses now, and the region can boast of high-quality talent in the tech, automotive, manufacturing, and agtech spaces. With only two venture capital firms operating in the capital of Zagreb, the startup scene is still young, but the country’s relatively recent EU membership has given it access to a growing set of direct investment instruments.

The current tax framework on capital gains tax (zero if you hold the shares for more than two years) and a new ‘digital nomad’ visa are helping to attract investors and talent to the city, which is also close to some of the best beaches in the world.

Access to fresh, outside capital is always a catalyst for growth, so to get an inside look at Zagreb’s fast-growing startup ecosystem, we spoke with nine local founders, investors and C-level executives.

According to the respondents, Zagreb’s strongest tech areas include HR solutions, automotive, fintech, mobile gaming, IoT, insurtech, and AI. The city’s angel investor scene isn’t very strong yet, but that could be attributed to the ecosystem’s youth.


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The city has an excellent work-life balance, and most of the talent wants to stay there. “Now, with the COVID-19 pandemic, it’s easier to land remote jobs and stay in Zagreb, which will positively impact our ecosystem,” one of the investors said.

However, with competition heating up, startups looking for larger, serious investment will probably have to look beyond the country’s borders while trying to retain their engineering talent. Luckily, an increasing number of international investors are looking at Zagreb for their deal flow pipeline.

Some top Croatian startups include: Agrivi, Amodo, Ascalia, Bellabeat, Cognism, Degordian, Dok-Ing, Infobip, Mindsmiths, OptimoRoute, Oradian, Photomath, Repsly, ReversingLabs, ScoreAlarm, Sportening and AdScanner.

We surveyed:


Lucija Ilicic, CEO, PlatePay

Which are the most interesting startups in your city?
Photomath, Sportening, and Mindsmiths.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
Mostly revenue-oriented.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
People would choose to live and move here during the pandemic. Some of them did, especially having in mind that Croatia now has the digital nomad visa.

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc)
Investors: Fil Rouge Capital, Feelsgood, Zicer, Bird Incubator; Founders: Ivan Klarić, Damir Sabol, Mislav Malenica, Mate Riimac

Where do you see your city’s tech scene in five years?
The Croatian startup ecosystem really grew during last year and has huge potential. I see it as a perfect place for digital nomads, home of a few new unicorns and a European center for AI solutions development.

Can you recommend any companies that should appear in our global Startup Battlefield competition?
Sportening, Mindsmiths, and of course, PlatePay.

 

Julien Coustaury, partner, Fil Rouge Capital

Which sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Strong in fintech, automotive, insurtech, and AI. We are excited that the whole ecosystem is growing strong with flagships such as Rimac, Optimoroute, Oradian, Infobeep, Agrivi, Tvbeat, Orqa, and Bellabeat, and our relevant funding partners with us and a new PE fund that have just been creating. There is money, talent and we have unicorns in Croatia. Very few weaknesses in Croatia at the moment, especially with the current tax framework on capital gains (zero if you hold the shares for more than two years) and the digital nomad visa. A giant leap for the region!

Which are the most interesting startups in your city?
Oradian, Lebesgue, Optimoroute, Gideon Brothers, Worcon, TVbeat, Orqa, Ascalia, Epoets Society, Hoss, Jade, Miret, My Valet, Sendbee, She’s Well, Spotsie, Taia, TDA, and Twire.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
The ecosystem still a bit small to talk about the vertical focus. [We have] two active funds: SC ventures and Fil Rouge Capital. FRC runs an accelerator program along the YC model. The angel scene is a bit disappointing at the moment with not a lot of investments. Funderbeam [is] pretty active here. The quality and quantity is amazing at the moment in Croatia, probably a factor of the ecosystem being rather young.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
The current fiscal climate makes it very attractive for people to relocate/stay in Zagreb, no doubt. One million people here; proximity to one of the best seas in the world — all the ingredients are here to make it the beacon of the up and coming startup world!

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc)
FRC is definitely the main player in Zagreb; SC ventures, Funderbeam, Novak Law for lawyers, Algebra University, ZICER, Hub 385, Step RI.

Where do you see your city’s tech scene in five years?
No doubt a key hub in Europe on par with Vienna.

Can you recommend any companies that should appear in our global Startup Battlefield competition?
Oradian, Lebesgue, Optimoroute, Gideon Brothers, Worcon, TVbeat, Orqa, Ascalia, Epoets Society, Hoss, Jade, Miret, My Balet, Sendbee, She’s well, Spotsie, Taia, TDA, and Twire.

 

Josip Orsolic, CEO, Lilcodelab

Which sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
IT, automotive, manufacturing, farming (different SaaS and IoT solutions).

Which are the most interesting startups in your city?
Rimac Automobili, Microblink, Five, Nanobit, Agrivi.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
It’s a small circle of people and not a lot of diversity, although it is getting better. Many new young successful investors emerged in the last few years.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
They will stay, maybe go to the suburbs, but just looking at the rental prices for flats/apartments I don’t see any shift in people moving outside of the city.

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc)
Mate Rimac, Damir Sabol, Alan Sumina, Tomislav Car, Luka Abrus.

Where do you see your city’s tech scene in five years?
I believe the tech scene is going to grow more and more. Many companies from other countries are opening up engineering hubs in Zagreb. There is a lot of talent, people are drawn to tech jobs; it is heavily covered by the media. Each success is celebrated and covered by the media, so there is a feeling that tech companies are being pushed, even though there are other successful companies from other industries.

Can you recommend any companies that should appear in our global Startup Battlefield competition?
Agrivi, Parklio, Seek and Hit, Electrocoin, TestDome, Include.

Vedran Tolic, founder & CBO, Q agency

Which sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Strongest: Online betting, HR solutions, fintech, mobile gaming, IoT.
Weakest: Gaming for serious platforms; AI solutions are still in their infancy.

Which are the most interesting startups in your city?
PhotoMath, Agrivi, SofaScore, TalentLyft, Jenz, and Bellabeat.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
The scene is getting stronger, but for any serious investment, startups have to look beyond our borders.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
Zagreb has an excellent work-life balance, and most of the talent want to stay here. Now, with the COVID-19 pandemic, it’s easier to land remote jobs and stay in Zagreb, which will positively impact our ecosystem.

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc)
Founders: We have many charismatic founders who are raising awareness around startups and entrepreneurship in general. They are reaching large audiences and getting attention from government, the education system and the public.

Where do you see your city’s tech scene in five years?
Shifting from mostly agency work for foreign companies to a more product-oriented scene — especially in AI and ML. Products will revolve around customer and employee engagement, automation and prediction of processes which are today done by a large workforce.

Can you recommend any companies that should appear in our global Startup Battlefield competition?
Photomath, Agrivi, Bellabeat, Jenz

 

Bozidar Pavlovic, managing director, airt

Which sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
AI, SaaS, electric cars manufacturing, and software development in general.

Which are the most interesting startups in your city?
Rimac Automobili, Nanobit, Infinum, Five, Agrivi, Aircash, Identyum, Airt, Mindsmiths, Electrocoin, Agency 04, Oradian, Microblink, Photomath, Agency Q, Revuto, Optimoroute, Amodo, Lemax, Ampnet, RobotiqAI, and Velebit AI.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
The scene is growing recently — Zagreb is capital of Croatia, thus attracting capital and people. A recent near-unicorn (Rimac, with heavy investment from Hyundai and Porsche) helped raise visibility for this vibrant ecosystem.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
Even before the pandemic, Zagreb was very attractive for tech experts worldwide due to its appealing price of accommodation, security, comfort of living and relatively high salaries. I am expecting to see the masses return after vaccination.

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc)
Davor Runje, Nikola Pavesic, Drazen Orescanin, Frane Sesnic, Tin Tezak, Ante Magzan, and Luka Sucic.

Where do you see your city’s tech scene in five years?
I see it blooming, mostly due to upcoming adoption of EUR as a local currency.

Can you recommend any companies that should appear in our global Startup Battlefield competition?
Amodo, Agrivi, Photomath, Identyum.

 

Matej Zelic, COO, Spotsie

What industry sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Oil and energy, Industry 4.0. Most excited to be a part of digital transformation in the old-fashioned industries.

Which are the most interesting startups in your city?
Rimac, Agrivi, Oradian, Miret, SofaScore.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
The startup ecosystem in Croatia is still in early stages of development. The investment scene (except a few business angels) started a  few years ago backed by EU with just two VCs (FRC and SVC) without a strategic plan and focus.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
People will stay here.

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc)
Fil Rouge Capital, South Central Ventures. Mate Rimac, Damir Sabol, Frane Sesnic

Where do you see your city’s tech scene in five years?
Because of micro-location, the digital nomad program, and IT talent pool, Zagreb is on the way to becoming the No. 1 tech location in CEE and Europe.

Can you recommend any companies that should appear in our global Startup Battlefield competition?
Gideon Brothers, Spotsie.

 

Miroslav Kovac, CEO, Coffee Cloud

Which sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
IoT, software analytics, big data, coffee industry.

Which are the most interesting startups in your city?
Agrivi, Repsly.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
Very poor startup ecosystem.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
Most of the last year was in partial lockdown.

Who are the key startup people in your city? (e.g. Investors, founders, lawyers, designers, etc.)
Sasa Cvetojecic, Hrvoje Prpic, Fil Rouge Capital, Bird Incubator.

Where do you see your city’s tech scene in five years?
At the same place.

 

Vedran Blagus, investment manager, South Central Ventures

Which sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Industry is very agnostic. Most of them work in B2B or the enterprise space. They lack B2C knowledge, growth/expansion plan and investor relations.

Which are the most interesting startups in your city?
AdScanner, Agrivi, ReversingLabs, TalentLyft, Sportening, Codemap, Gideon Brothers.

What are the tech investors like? What is the investment scene like in your city? What’s their focus?
Two VCs operating – Fil Rouge Capital (Pre-Seed, Seed, Series A – industry agnostic; B2C and B2B) and South Central Ventures (Seed, Series A, B2B). In the past six to twelve months, C-level executives from corporates started investing in startups in early stages (up to EUR 200k), but keep their investments below the radar.

With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
I believe that it will stay the same as it is. Development/operations in Zagreb, expansion to other European cities by opening offices there.

Who are the key startup people in your city? (e.g. investors, founders, lawyers, designers, etc)
Founders – Matija Zulj, Marin Curkovic, Mate Rimac, Marin Saric, Alan Sumina, Matija Kopic.
Investors – Luka Sucic, Stevica Kuharski, Vedran Blagus.
Lawyers – Marijana Sarolic Robic.
Media – Ivan Brezak Brkan, Bernard Ivezic.

Where do you see your city’s tech scene in five years?
Founders who exited companies they’ve been building for the past 10 years will found new companies and/or invest in early stage startups. More international investors looking at Zagreb for pipeline/investments.

 

Daniel Stefanic, investor

Which are the most interesting startups in your city?
Infobip, Rimac seem to be hottest ones in Croatia.

Where do you see your city’s tech scene in five years?
There’s some incredibly smart people involved in STEM in Croatia – world class. They just need better pathways to commercialisation and access to capital.

Oath Care just raised $2 million to develop a social, health-focused app that groups expectant and new parents

By Connie Loizos

Being an expectant mom can be frightening, as can mothering an infant or toddler. The answers don’t come automatically, and while there’s no shortage of books and websites (and advice from grandparents) about how to parent at every stage, finding satisfying information often proves a lot harder than imagined.

There are online social groups that deliver some of the social and emotional support that new parents need, no matter where they live. There are many dozens of mom communities on Facebook, for example. However, it’s because there’s room for improvement on this theme — big groups can feel isolating, bad information abounds —that Oath Care, a young, four-person San Francisco-based startup, just raised $2 million in seed funding from XYZ Ventures, General Catalyst, and Eros Resmini, former CMO of Discord and managing partner of the Mini Fund.

What is it building? Founder Camilla Hermann describes it as a subscription-based mobile app that’s focused on improving the lives of new mothers by combining parents who have lots in common with healthcare specialists and moderators who can guide them in group chats, as well as one-on-one video calls.

More specifically, she says, for $20 per month, Oath matches pregnant and postpartum moms in circles of up to 10 based on factors like stage of pregnancy, age of child, location, and career so they can ask questions of each other, with the help of a trained moderator (who is sometimes a mother with older children).

Oath also pushes curriculum that Oath’s team is developing in-house to members based on each group’s specific needs. Not last, every group is given collective access to medical specialists who can answer general questions as part of the members’ subscription and who are also available for consultations when individualized help is needed.

Hermann says the pricing of these 15-minute-long consultations is still being developed, but that the medical experts with whom it’s already working see the app as a form of lead generation.

It’s an interesting concept, one that could be taken in a host of directions, acknowledges Hermann who says she was inspired to cofound the company based on earlier work developing a contact tracing technology created to track outbreaks like Ebola in real time.

As she said yesterday during a Zoom call with TechCrunch and her cofounder, Michelle Stephens, a pediatric clinician and research scientist: “We’ve fundamentally misunderstand something really important about health in the West; we think that [changes] happen to one person at a time or one part of the body at a time, but it always happens in interconnected systems both inside and outside the body, which fundamentally means that it is always happening in community.”

For her part, Stephens — who was introduced to Hermann at a dinner years ago — says her motivation in cofounding Oath was born out of research into childhood stress, and that by “better equipping parents to be those positive consistent caregivers in their child’s life,” Oath aims to help enable stronger, more intimate child-parent bonds.

It might sound grand for a mobile app, but it also sounds like a smart starting point. Though the idea is to match mothers in similar situations at the outset to help bolster theirs and their children’s health, it’s easy to imagine the platform evolving in a way that brings together parents in numerous groups based on interests, from preschool applications to autism to same-sex parenting. It’s easy to see the platform helping to sell products that parents need. It’s easy to imagine the company amassing a lot of valuable information.

Indeed, says Hermann, the longer-term vision for Oath is to create rich datasets that it hopes can be used to improve health outcomes, including by identifying health issues earlier. Relatedly, it also hopes to build relationships with health systems and payers in order to increase access to its products.

For now, Oath is mostly just trying to keep up with demand. Hermann says the “small and scrappy” company found its first 50 users through Facebook ads, and that this base quickly tripled organically before Oath was forced to create a growing waitlist for what has been a closed beta until now. (Oath is “anticipating a full launch in late summer,” says Stephens.)

That’s not to say the company isn’t thinking at all about next steps.

While right now it is “laser focused on building out the most exceptional experience for this specific cohort of users in this specific period of time of their lives,” says Hermann, once it builds out many more communities of small trusted groups with “high engagement and high trust,” there is “a lot you can layer on top of that. It’s virtually limitless.”

Before yesterdayYour RSS feeds

Business continuity planning is a necessity for your fund and portfolio

By Ram Iyer
Will Poole Contributor
Will Poole is co-founder and managing partner of Capria Ventures, a global financial services firm leading, partnering with and funding the largest network of fund managers collaborating to deliver superior returns and scaled impact in emerging markets.

Just shy of a year ago, I sent an email to our global fund manager partners and to our direct portfolio CEOs titled “Only the decisive survive.” At that time, not many outside of China were concerned about COVID-19. However, I was obsessed.

Hearing stories from fund manager friends with operations in China, I knew things were worse than what the Chinese press were telling the world. And I live only five miles south of the location of the first COVID death in the U.S. The pandemic was accelerating exponentially, and I wanted to get all of our partners to open their eyes to the risks and prepare as well as they could.

I’m not writing with that level of intensity or urgency this time, but I am concerned. We all need to be taking precautionary measures, not just in light of COVID, but to ensure our firms can continue to thrive when faced with unexpected tragedy.

We all need to be taking precautionary measures, not just in light of COVID, but to ensure our firms can continue to thrive when faced with unexpected tragedy.

My partner Susana invested in 90 funds over 20 years — she’s seen everything from motorcycle accidents to depression take out fund managers and CEOs. Life works that way sometimes, and it’s not always someone else. It’s the “What happens if I get hit by a bus scenario?” In this case, the bus happens to be a global pandemic.

One of our funds in Asia recently reported COVID cases in three CEOs among their 23 companies. While developed market infections and deaths are trending down, many countries are seeing serious new outbreaks, and some, like Brazil, are doing badly.

Pandemic forecasting site IHME predicts a growing caseload across sub-Saharan Africa and East Asia and Pacific regions. The LAC region is trending down overall, but some countries, including Colombia, are expected to experience a second (or third) wave of infections.

As the Economist said in mid-February, “Coronavirus is not done with humanity yet.”

Planning for your fund

A month or so ago, we were trying to move forward with an investment in a fund in Africa with whom we had been speaking and doing due diligence for a few months. They went radio silent for over two weeks. We didn’t know whether to be miffed, concerned for their health, or what.

Katie Haun on saying yes to Coinbase and where a16z’s crypto fund is placing its bets now

By Connie Loizos

Coinbase, the newly public cryptocurrency exchange, has had it share of ups and downs. Still, the nearly nine-year-old, San Francisco-based outfit got a lot right ahead of its highly successful direct listing this week, including, seemingly, inviting in former federal prosecutor Katie Haun to join its board in 2017.

At the time, Haun had just spent 11 years working for the Justice Department, handling cases relating to violent murders and organized crime and, later, the fast-growing world of cryptocurrencies. In fact, as part of her job, Haun had gotten to know Coinbase and other up-and-coming startups to better understand digital currencies and decentralized systems. Because Haun, who won every case she argued, was ready for a change, when Brian Armstrong reached out about a formal role, she said yes. (A year later, Andreessen Horowitz, which wrote its first check to Coinbase in 2013, separately brought her aboard as the venture firm’s first woman general partner.)

The combination has proved powerful and lucrative. As an independent board member at the outset, Haun was given shares for her service that are reportedly now worth roughly $150 million (a16z’s stake is valued at more than $11 billion). Meanwhile, Haun — who recently renewed her board term — says the company’s most impactful days are still ahead.

We talked yesterday with Haun about Coinbase’s valuation, its evolution from here and her work with a16z’s crypto fund, which she co-leads with longtime general partner and fellow Coinbase board member Chris Dixon, and where the team has likely “seen and done more deals in the last couple months than in the last couple years,” she said. She also noted that a16z has been pouring the majority of its money into tokens. Our chat has been edited lightly for length and clarity.

TC: You were working on these intense cases, including murder trials and at some point, your superiors at the Justice Department offer you the chance to figure out what Bitcoin is all about. How did that lead you to Coinbase?

KH: I actually came to know Coinbase through some of the work I was doing on crypto cases in the government in the early days, I founded the U.S. government’s first cryptocurrency task force out of the Justice Department and part of our job was to go meet with companies or entrepreneurs in the space and get to know what they were up to and how we could work with them. Of course, as with any industry, the government’s objectives didn’t always align with the crypto industry’s. But sometimes there were synergies [and] sometimes they might need to reach someone in the government at one of these companies. Coinbase was not the only crypto company that I was interfacing with in those government days. There were many others. But that’s how I first came to know it.

TC: Because not everyone is going to know the specifics of your career, you played a role in prosecuting Silk Road founder Ross Ulbricht and also discovering two corrupt federal agents involved in that case. Is that right?

KH: I actually did not prosecute Ross Brecht, I did not prosecute the Silk Road case. What I did prosecute is what we’ll call the twist to the Silk Road case, and that was that a couple of the agents on one of the task forces that was investigating Ross Ulbricht and the Silk Road actually turned out to be double agents working both against the government while being federal agents. When I [first received] a tip that we had a rogue federal agent, I thought it was a conspiracy theory. So I thought I would go look into that, mostly to just clear this individual’s name.

TC: Was this a career federal employee?

KH: Yes, this was a federal agent for well over a decade, and it turned out there were two, and they weren’t working together–

TC: Which is even weirder!

KH: Right? The other one was also a career federal agent, which is extremely rare. It happens on TV, where you have corrupt police or law enforcement. But I can tell you that in reality, having been a federal prosecutor for over a decade, this was certainly a first for me. And so I looked into the high level, and what we found was that, let’s just say hundreds of thousands of dollars at the time — now it would be tens of millions or even hundreds of millions of dollars at today’s prices of cryptocurrency — moving around. When we looked into it initially, we thought it must just be some poorly backstopped undercover operation. But the more we looked at it, that transfer patterns were not making sense, and they turned out to be going to personal accounts, which then really piqued our interest.

[In fact] companies like Coinbase [and] other exchanges that kept compliant records were instrumental to our ability to solve that case because of the information that we were getting from those exchanges, but also, the blockchain itself. Without the blockchain, I can definitively say we never would have solved that case. Those agents would still be federal agents today. Had they just been using wires or fiat, we would never have been able to solve the case because they were going to financial institutions across the globe and flashing the badge and saying ‘delete these records.’ They could not do that on the blockchain.

TC: In terms of traceability, a16z has investments in some NFT companies, including Dapper Labs, a blockchain company working with the NBA and others to create NFTs, and, more recently, OpenSea, which is itself an NFT marketplace. Can I ask what you think of the potential for people to use NFTs to move money illegally from point A to B? It’s something I wrote about recently. 

KH: Money laundering is something I prosecuted at the Justice Department, I prosecuted one of the largest ever, if not the largest ever, online money laundering case: the case against BTC-E. We also led an investigation into the Mount Gox hack and we harnessed blockchain technology to help solve those cases, ironically.

I did read your article, Connie, and I found it really interesting, because at first I thought, ‘Oh, yeah, NFTs’ and ‘let’s see how could criminals exploit this,’ because the thing about criminal actors is they are often early adopters of new technologies. I’ve said before, they’re beta testers.

I think when you think about money laundering, the thing you have to step back and realize is that 99.9% of money laundering crimes with fiat today succeed, which is staggering. I think there’s this perception out there that ‘Oh, when wires or fiat money or physical goods are used, money launderers can’t do their thing,’ and that’s just completely contrary to reality.

What I would say is that crypto is a step-level function improvement. The reason I say that is because it leaves these what I call digital breadcrumbs in a way that the physical world or you cash, even wires, by the way, though wires are somewhat digital, cash, physical goods don’t quite leave. With NFT’s, I think that ultimately actually it makes it easier for investigators to trace because of those digital breadcrumbs.

TC: Speaking of NFTs and some of your firm’s deals, how would you describe your pacing right now?

KH: We’re deploying currently out of our second crypto fund. And I think it’s really exciting to start seeing a lot of these things work and capture mainstream attention. And just frankly, there’s been a lot of launches also in the last six months. So that’s also been really exciting. So although the pace is definitely frenetic, it’s an incredibly exciting time in the space. Obviously, yesterday was a milestone for Coinbase but also just for the entire crypto ecosystem.

In terms of pace and how many deals we’re seeing, I would say that we’ve seen and done more deals in the last couple months than in the last couple years, and stay tuned for some of our announcements there, because we’ve done a lot in this last quarter and they haven’t all yet been announced. There’s really an explosion of activity in the space.

We’re also doubling down on investments we’ve made years ago. You mentioned Dapper Labs. The Andreessen Horowitz Crypto Funds have invested in Dapper Labs several times over the years, including out of our first crypto fund, so it’s just really exciting to see now all of the progress that team has made.

TC: How does the process of evaluating these crypto deals differ in comparison with traditional startups?

KH: Some categories are the same and some are completely different. One thing we always look for is a founding team  that has a real vision and that can execute; Coinbase is a tremendous case study in that. We also consider the total addressable market. And we look at not just the product and tech but also its defensibility. Could others come along and quickly take over this idea? Those are some of the characteristics that are the same.

What’s different in crypto is first, regulatory and compliance. Have code audits been done, [have] vulnerabilities [been] found? What’s your plan for security, particularly if you’re talking about areas like decentralized finance.

We’re also [focused on] token economics. What we’re investing in at Andreessen Horowitz Crypto now largely is tokens. Because we’re a [registered investment advisor], we have that flexibility. We still think there are plenty of [opportunities] that merit equity investment; Coinbase is a prime example of an equity investment, not a token investment, but we’re increasingly doing a lot in the token space. I would say, the majority of our funds are deployed in tokens. And when you’re talking about tokens, you want to have really thought through token economics at the outset. Has the team set aside enough tokens for the community? Once the protocol is live, what does that look like? Are they going to Airdrop tokens? What’s their go-to-market strategy? Are they incentivizing early employees with tokens? So I would say the token economic model is something that we look at very heavily.

TC: Are you saying that the firm is looking at buying tokens, meaning buying slugs of currency, versus investing in foundational technology?

KH: We see tokens as foundational technology because we see these protocols, in many cases, as foundational technology.

I think what you might be asking me is, are we investing in the tokens versus the equity of a particular company, and the answer is very much yes. I could say the vast majority of our crypto funds are deployed into the tokens themselves, the assets themselves now [including] Bitcoin or Ethereum, for example. Then apart from that, we hold tokens in a number of different protocols that we acquired just through acquiring tokens — not because we owned equity in a company that distributed the tokens.

In some instances, we have owned equity, where a team has then created a token, and we get token rights as part of our original equity investment. But increasingly, what we’re seeing is the ability to just go buy tokens. We can buy them over the counter and we are definitely doing that.

TC: What percentage of the crypto fund’s assets are invested directly in Bitcoin and Ethereum? Is it a sizable percentage?

KH: We’ve never disclosed an actual percentage, but we definitely have a sizable position in both Bitcoin and Ethereum, which I can say because we’ve disclosed that before. So that’s really all I’m comfortable saying.

TC: That Bitcoin is now so valuable has been a boon for Coinbase, which makes most of its revenue off transaction volume. Can you help readers understand how this company is worth $87 billion today? Presumably it won’t be as reliant on those fees going forward (owing to pressure from rival companies).

Sure, it’s definitely true that the company has plans to diversify from just purely transactional revenue, although make no mistake, transactional revenue continues to be an important segment of the business now but also in the future.

However, I think we see diversification away from that in terms of recurring subscriptions or services. The best way to think about Coinbase is that it’s at the ground floor in some ways, because right now you have 56 million people on the Coinbase platform but well over 100 million people around the globe doing things right now with crypto: buying it, selling, even holding crypto assets. And we really see that as the ground floor because we’re seeing projects that are enabling entirely new industries.

Within crypto, we’ve talked about one already: NFTs. There’s [decentralized finance]. But there’s just so much more out there, like digital identity.

One of the things we’ve seen with crypto is that we can’t always predict where those new behaviors or products and services will lead. I mean, when the iPhone came out, did we think that would lead to behaviors like ride hailing, the gig economy, TikTok streaming? One of the things that we see for Coinbase is that it’s very well-positioned — because it’s a crypto first company — to capitalize on all kinds of different behaviors in the crypto economy that we don’t even yet know about.

TC: A lot of wealth was generated inside of Coinbase this week, with presumably a major divide between the haves and have nots. How does a company in this position deal with that issue?

KH: People who are attracted to Coinbase are attracted for a number of reasons. Economics is certainly one of them. But the candidates I see coming through Coinbase, there’s something about the vision that attracts them to the vision of the company and to crypto as a movement and as a technology.

I can also tell you that management team is very much here for the long haul and is very much invested in building the future. At 7:22 a.m. the morning after the offering, [Coinbase sent out an email] saying: “Okay, on to the next thing, let’s keep the focus.” And by the way, the same thing was true when the price of Bitcoin hit $10,000. I just happened to be in the Coinbase offices and the mood was, let’s keep building.

TC: Can you comment on whether Andreessen Horowitz sold part of its shares in this week’s offering and if so, what percentage? I’m assuming that the firm took some money off the table.

KH: Unfortunately, I can’t comment on any of that.

Note: Because a16z is an RIA, Haun made clear during our interview that she wasn’t offering investment advice or directing her statements at any investor or prospective investor in a16z funds.

Extra Crunch roundup: UiPath’s IPO filing, predicting revenue, how to pivot properly, much more

By Walter Thompson

This is not a boast, but a warning: I could write a how-to article on almost any topic.

Give me enough time to do some research, and I can put together a reliable step-by-step for building a custom gaming PC, installing a hot water heater or interpreting public health data. But since I’ve never actually done those things, I would encourage you to ignore any advice I have to offer.

Trusted advice comes from experience. That’s why Ron Miller interviewed three entrepreneurs who have each built multiple companies to uncover some essential truths about achieving product-market fit:

  • Pouyan Salehi, CEO and co-founder, Scratchpad
  • Rami Essaid, CEO and founder,  Finmark
  • Melonee Wise, CEO and co-founder, Fetch Robotics

The basic tenets presented in Ron’s story will resonate with anyone who’s launched a startup.

Alex Wilhelm was particularly prolific this morning: For The Exchange, he studied UiPath’s 2020 quarterly results to get a clearer picture of its first S-1/A filing. Is the “somewhat slack news regarding UiPath’s potential IPO valuation” a harbinger of things to come?


Full Extra Crunch articles are only available to members.
Use discount code ECFriday to save 20% off a one- or two-year subscription.


In a follow-up, he recapped news from the public debuts of Coinbase, UiPath, Zenvia, AppLovin and Grab, all of which “adds up to a somewhat muddled picture of the current IPO market.” It feels like we’re in a turbulent window, but it’s also possible that we’re in the calm after the storm, he suggests.

Final note: I asked TechCrunch graphic designer/illustrator Bryce Durbin to create an image to accompany this primer on raising a Series A round. He didn’t just exceed my expectations — it’s my favorite TechCrunch illustration ever. Thanks, Bryce!

I hope you got something out of reading Extra Crunch this week. Have a great weekend.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

 

Building the right team for a billion-dollar startup

Image Credits: Bryce Durbin/TechCrunch

From building out Facebook’s first office in Austin to putting together most of Quora’s team, Bain Capital Ventures managing director Sarah Smith has done a bit of everything when it comes to hiring.

At TechCrunch Early Stage, she spoke about how to ensure the critical early hires are the right ones to grow a business. As an investor, Smith has a broad view into the problems companies face as they search for the right candidates to spur organizational success.

She touched on a number of issues, such as who to hire and when, when to fire, and how to ensure diversity from the earliest days.

So you want to raise a Series A

"So you want to raise a Series A" pamphlet in the style of "The Simpsons"

Image Credits: Bryce Durbin/TechCrunch

During a seed funding round, a founder needs to convince a venture capital investor on a vision. But during a Series A fundraise, napkin-stage ideas don’t make the cut — a founder needs product progress, numbers and revenue (or at least a plan to eventually generate some).

In many ways, the stakes are higher for a Series A — and Bucky Moore, a partner at Kleiner Perkins, joined TechCrunch Early Stage last week to give founders tactical advice on the process of raising one.

Moore spoke about storytelling over semantics, pricing, and where his firm sees itself “raising the bar” for startups.

With the right tools, predicting startup revenue is possible

For a long time, “revenue” seemed to be a taboo word in the startup world. Fortunately, things have changed with the rise of SaaS and alternative funding sources such as revenue-based investing VCs.

Still, revenue modeling remains a challenge for founders. How do you predict earnings when you’re still figuring it out?

How we dodged risks and raised millions for our open-source machine learning startup

Image Credits: erhui1979 / Getty Images

If you have a great idea within the open-core framework, expect your risks to be much lower than with a traditional business structure.

Clearly communicate this fact to venture capitalists for the best chance at securing the seed funding your organization needs.

But it takes more: Boasting a strong community around an emerging open-source product essentially serves as an “introduction letter” to venture capitalists. It highlights the founders’ ability to successfully execute their vision, as well as the mission to bring their product to a commercial reality.

Additionally, the iterative nature of open-source projects leads to fostering a sense of teamwork between the founders, their team, and investors and stakeholders.

Founder and investor Melissa Bradley outlines how to nail your virtual pitch meeting

Image Credits: Ureeka

Melissa Bradley is the co-founder of a startup called Ureeka, an investor at 1863 Ventures, and a professor at Georgetown’s business school. So it’s not an understatement to say that she understands the fundraising process from every angle.

She both invested and fundraised for her own startup during this last year, where the landscape has shifted drastically. At TechCrunch Early Stage, she led a session on how to nail your virtual pitch meeting.

Bradley covered how to allocate your time during the meeting, how to prepare, how to close out the meetings with a clear list of action items, and what to avoid.

Scale CEO Alex Wang and Accel’s Dan Levine explain why sometimes unconventional VC deals are best

Image Credits: Eric Millette / Scale AI

Scale CEO and co-founder Alex Wang credits their success since founding — which includes raising over $277 million and achieving breakeven status in terms of revenue — to early support from investors, including Accel’s Dan Levine.

Accel haș participated in four of Scale’s financing rounds, and Levine wrote one of the company’s very first checks. So on this past week’s episode of Extra Crunch Live, we spoke with Levine and Wang about how that first deal came together, and what their working relationship has been like in the years since.

 

Ride-hailing’s profitability promise is in its final countdown

Let’s parse Uber’s latest, vet its profit promise, consider its rivals and their performance, and then ask ourselves if the great ride-hailing and food-delivery booms will ever make back the money they cost to scale.

 

UiPath’s first IPO pricing could be a warning to late-stage investors

Co-founder and CEO of UiPath Daniel Dines

Image Credits: Noam Galai/Getty Images

For UiPath, its initial IPO price interval is a disappointment, though the company could see an upward revision in its valuation before it does sell shares and begin to trade.

But more to the point, the company’s private-market valuation bump followed by a quick public-market correction stands out as a counter-example to something that we’ve seen so frequently in recent months.

Is UiPath’s first IPO price interval another indicator that the IPO market is cooling?

 

How to choose and deploy industry-specific AI models

Image of flow chart on a blackboard.

Image Credits: alexsl / Getty Images

As artificial intelligence becomes more advanced, previously cutting-edge — but generic — AI models are becoming commonplace, such as Google Cloud’s Vision AI or Amazon Rekognition.

While effective in some use cases, these solutions do not suit industry-specific needs right out of the box. Organizations that seek the most accurate results from their AI projects will simply have to turn to industry-specific models.

Any team looking to expand its AI capabilities should first apply its data and use cases to a generic model and assess the results.

Let’s dive into each of these approaches and how businesses can decide which one works for their distinct circumstances.

Atomico’s talent partners share 6 tips for early-stage people ops success

Photo of Talent Partners Caro Chayot and Dan Hynes

Image Credits: Atomico

In the earliest stages of building a startup, it can be hard to justify focusing on anything other than creating a great product or service and meeting the needs of customers or users.

However, there are still a number of surefire measures that any early-stage company can and should put in place to achieve “people ops” success as they begin scaling, according to venture capital firm Atomico‘s talent partners, Caro Chayot and Dan Hynes.

Long story short: You need to recruit for what you need, but you also need to think about what is coming down the line.

5 questions about Grab’s epic SPAC investor deck

grab 1

Image Credits: Roslan Rahman/Getty Images

Southeast Asian superapp Grab is going public via a SPAC.

Grab, which provides ride-hailing, payments and food delivery, will trade under the ticker symbol “GRAB” on the Nasdaq exchange when the combination is complete.

Let’s walk through several key points from Grab’s SPAC investor deck, including growth, segment profitability, aggregate costs and COVID-19, among other factors.

Expect an even hotter AI venture capital market in the wake of the Microsoft-Nuance deal

Microsoft’s huge purchase of health tech AI company Nuance led the technology news cycle this week. The $19.7 billion transaction is Microsoft’s second-largest to date, only beaten by its purchase of LinkedIn some years ago.

For the AI space, the sale is a coup. Nuance was already a public company, but to see Microsoft offer a firm premium over its public-market value demonstrates the value that AI technology can have to wealthy companies. For startups working in the AI space, the Nuance deal is good news; the value of AI revenue was repriced by the acquisition’s announcement — and for the better.

In light of the megadeal, The Exchange dug into the AI venture capital market. What’s happening on the startup side of the coin in the artificial intelligence and machine learning (AI/ML) space?

What’s fueling hydrogen tech?

market-maps-hydrogen-fuel-cell

Image Credits: Bryce Durbin

When the word “hydrogen” is uttered today, the average non-insider’s mind likely gravitates toward transportation — cars, buses, maybe trains or 18-wheelers, all powered by the gas.

But hydrogen is, and does, a lot of things, and a better understanding of its other roles — and challenges within those roles — is necessary to its success in transportation.

Hydrogen is now capturing the attention of governments and private sector players, fueled by new tech, global green energy legislation and post-pandemic “green recovery” schemes.

5 product lessons to learn before you write a line of code

Rearview shot of a young businesswoman having a brainstorming session in a modern office

Image Credits: LaylaBird / Getty Images

Before a startup can achieve product-market fit, founders must first listen to their customers, build what they require and fashion a business plan that makes the whole enterprise worthwhile.

The numbers will tell the true story, but when it happens, you’ll feel it in your bones because sales will be good, customers will be happy and revenue will be growing.

Reaching that tipping point can be a slog, especially for first-time founders. To uncover some basic truths about building products, we spoke to three entrepreneurs who have each built more than one company.

Inside the US’ epic first-quarter venture capital results

In broad strokes, the United States had a crushing venture capital start to the new year, pandemic be damned.

That is especially true when we consider 2020’s full-year figures. Last year, venture capitalists deployed some $166 billion into U.S.-based startups across 12,546 rounds. In contrast, if the first quarter’s pace was maintained during the rest of 2021, the United States would see around 16,000 rounds worth around $280 billion.

Of course, we cannot see the future, so those projections are merely shared to underscore how active the first quarter proved to be.

Dear Sophie: How can I get an H-1B without the lottery?

lone figure at entrance to maze hedge that has an American flag at the center

Image Credits: Bryce Durbin/TechCrunch

Dear Sophie:

For the past few years, our company has put very promising candidates into the annual H-1B lottery. None of them have been selected — and none of them meet the requirements for other work visas like an O-1A.

We lost out again in this year’s H-1B lottery. Are there any other ways we can obtain H-1Bs for our team members?

— Soldiering On in Sunnyvale

 

Alexa von Tobel outlines how founders should manage personal finances

Alexa von Tobel

Image Credits: Alexa von Tobel

Few people are more knowledgeable on the topic of how founders should manage their finances than Alexa von Tobel.

She is a certified financial planner, started her own company in the midst of the recession (which happened to be a wildly successful personal finance startup that sold for hundreds of millions of dollars), and is now a VC who invests and advises founders.

At Early Stage 2021, she gave a presentation on how founders should think about managing their own wealth. Startup founders can often put all their money into their venture and end up paying more attention to the finances of their company than their own bank account.

Von Tobel outlined the various steps you can take to stay out of debt, build credit and accumulate wealth through investments to ensure you have financial peace of mind as you take on the most stressful venture of your life: Starting a company.

How to pivot your startup, save cash and maintain trust with investors and customers

Olive CEO Sean Lane

Image Credits: Olive

A few years ago, founder Sean Lane thought he’d achieved product-market fit.

Speaking to attendees at TechCrunch’s Early Stage virtual event, Lane said Queue, a secure digital check-in tablet for hospital waiting rooms that reduced wait times by uniting and correcting electronic medical records, was “selling like hotcakes.” But once Lane realized it would only ever address one piece of a much bigger market opportunity, he sold off the product, laid off two-thirds of the people affiliated with it and redirected the employees who were left.

Lane explained that what he really wanted to build is what his company — since renamed Olive — has now become, a robotic process automation (RPA) company that takes on hospital workers’ most tedious tasks so nurses and physicians can spend more time with patients.

Building customer-first relationships in a privacy-first world is critical

Concept of knowledge, data and protection. Paper human head with pad lock.

Image Credits: jayk7 (opens in a new window) / Getty Images

In business today, many believe that consumer privacy and business results are mutually exclusive — to excel in one area is to lack in the other. Consumer privacy is seen by many in the technology industry as an area to be managed.

But the truth is that the companies that champion privacy will be better-positioned to win in all areas. This is especially true as the digital industry continues to undergo tectonic shifts in privacy — both in government regulation and browser updates.

For startups choosing a platform, a decision looms: Build or buy?

Blank green arrow signs pointing in both directions on top of a metal post.

Image Credits: Chris Jongkind (opens in a new window)/ Getty Images

Founders shouldn’t be worried about starting companies that rely on other platforms.

Platforms exist to help startups get to users and customers faster and should be used as a means to an end, but everyone must get their piece.

Coinbase’s direct listing alters the landscape for fintech and crypto startups

Coinbase’s direct listing was a massive finance, startup and cryptocurrency event, and the transaction’s effects will be felt for some time in the public market, but also among the startups and capital that comprise the private market.

In the buildup to Coinbase’s flotation — and we’d argue especially after it released its blockbuster Q1 2021 results — there was a general expectation that the unicorn’s direct listing would provide a halo effect for other startups in the space.

The widely held perspective raised two questions: Will the success of Coinbase’s direct listing bolster private investment in crypto-focused startups, and will that success help other areas of financially focused startup work garner more investor attention?

Billion-dollar B2B: Cloud-first enterprise tech behemoths have massive potential

Abstract minimalist conceptual multiple coloured zig zag strip joined as one moving upwards on blue background.

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

The “billion-dollar B2B” paradigm refers to the forces shaping a new class of cloud-first, enterprise-tech behemoths with the potential to reach $1 billion in ARR — and achieve market capitalizations in excess of $50 billion or even $100 billion.

One of the biggest factors driving billion-dollar B2Bs is a simple but important shift in how organizations buy enterprise technology today.

How startups can ensure CCPA and GDPR compliance in 2021

Padlock in woman's hand. Data, information, property and security on the Internet concept. White background

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

Data is the most valuable asset for any business in 2021. If your business is online and collecting customer personal information, your business is dealing in data, which means data privacy compliance regulations will apply to everyone — no matter the company’s size.

Small startups might not think the world’s strictest data privacy laws — the California Consumer Privacy Act (CCPA) and Europe’s General Data Protection Regulation (GDPR) — apply to them, but it’s important to enact best data management practices before a legal situation arises.

Should Dell have pursued a more aggressive debt-reduction move with VMware?

Michael Dell, founder and chief executive officer of Dell Inc., speaks during the 2015 Dell World Conference in Austin, Texas, U.S., on Wednesday, Oct. 21, 2015. Dell said trimming debt for the massive deal to combine his namesake company with EMC Corp. should progress relatively quickly in the next couple of years. Photographer: Matthew Busch/Bloomberg via Getty Images

Image Credits: Bloomberg / Getty Images

When Dell announced it was spinning out VMware, the move itself wasn’t surprising; there had been public speculation for some time.

But Dell could have gone a number of ways in this deal, despite its choice to spin VMware out as a separate company with a constituent dividend instead of an outright sale.

It seems Dell hopes to have its cake and eat it too with this deal: It generates a large slug of cash to use for personal debt relief while securing a five-year commercial deal that should keep the two companies closely aligned.

What we all missed in UiPath’s latest IPO filing

Robotic process automation platform UiPath filed its first S-1/A this week, setting an initial price range for its shares. The numbers were impressive, if slightly disappointing because what UiPath indicated in terms of its potential IPO value was a lower valuation than it earned during its final private fundraising.

Here at The Exchange, we wondered if the somewhat slack news regarding UiPath’s potential IPO valuation was a warning to late-stage investors.

But in good news for UiPath shareholders, most everyone — ourselves included! — who discussed the company’s price range didn’t dig into the fact that the company first disclosed quarterly results to the same S-1/A filing that included its IPO valuation interval. And those numbers are very interesting, so much so that The Exchange is now generally expecting UiPath to target a higher price interval before it debuts.

But let’s dig into the company’s quarterly results to get a clearer picture of UiPath.

The IPO market is sending us mixed messages

If you only stayed up to date with the Coinbase direct listing this week, you’re forgiven. It was, after all, one heck of a flotation.

But underneath the cryptocurrency exchange’s public debut, other IPO news that matters did happen this week. And the news adds up to a somewhat muddled picture of the current IPO market.

To cap off the week, let’s run through IPO news from UiPath, Coinbase, Grab, AppLovin and Zenvia. The aggregate dataset should help you form your own perspective about where today’s IPO markets really are in terms of warmth for the often unprofitable unicorns of the world.

BrandProject expands beyond the studio model with a new $43M fund

By Anthony Ha

BrandProject —a firm that’s backed successful direct-to-consumer commerce startups like Freshly (acquired by Nestlé), Persona (also acquired by Nestlé) and Chef’s Plate (acquired by Hello Fresh) — is announcing that it has raised $43 million for what it says is its first traditional venture fund.

Founded Andrew Black, who previously co-founded Virgin Mobile Canada and served as president of LEGO Americas, BrandProject previously invested from a $12 million fund tied BrandProject Studio, where the money is just a small part of what’s being offered — apparently six of the firm’s eight team members are entirely focused on supporting startups, often serving as de facto CTOs, CFOs and CMOs.

With the new BrandProject Capital fund, the firm will be able to make larger investments in (somewhat) more mature companies. Black estimated that the new fund will be writing checks of between $1 million and $3 million; the goal is for half of the deals to be new investments, while the other half consists of follow-on investments in startups from BrandProject Studio.

“We’re going to be supporting the same type of businesses out of Studio or Capital, but with Studio, nothing’s too early for us — we’re all about team, team, team,” said Partner Hayden Williams. “But if it’s a Capital deal, we’re going to look for some evidence that something working, even if it’s a small scale.”

The focus will continue to be direct-to-consumer brands, and although the pandemic has led to tremendous e-commerce growth, Black said it hasn’t changed the BrandProject strategy.

BrandProject Team

Image Credits: BrandProject

“We haven’t adjusted our investment focus at all because of COVID,” he said. “We’ve always invested behind categories, brands and segments that we just think the world needs.”

One of the limited partners who invested in the new fund is probably BrandProject’s biggest success story — Freshly co-founder and CEO Michael Wystrach, who sold his healthy meal startup to Nestlé for $1.5 billion. Wystrach recalled reading about BrandProject in TechCrunch and, after looking the firm up, sending unsolicited meals to Partner Jay Bhatti in New York.

At that point, Freshly had only raised friends-and-family funding, and Wystrach admitted, “We would have taken a check from anyone.” But he said he was lucky that Bhatti liked the food and the firm decided to invest, with Black becoming an interim co-CEO, Bhatti serving as interim CTO and Partner Andrew Bridge serving as an interim CMO.

“What I loved about BrandProject is that they never came in and told us what kind of business we’re building,” he continued. “It was never a case where they said, ‘You need to do this.’ It was our business, and they were team members in helping us build the business.”

To illustrate the idea behind the new fund, Wystrach compared the investment ecosystem to the U.S. schools: “Where Andrew and the team come in, they’re K through 8 or maybe K through 6, they’re very hands on … With the new fund, maybe they’re moving to middle school.”

Nelo raises $3M to grow ‘buy now, pay later’ in Mexico

By Mary Ann Azevedo

Buy now, pay later is a way of paying for purchases via installment loans that generally have no interest. The concept has grown in popularity in recent years, especially in markets such as the United States, Europe and Australia. Numerous players abound, all fighting for market share — from Affirm to Klarna to Afterpay, among others.

But notably, none of these bigger players have yet to penetrate another very large market — Latin America. Enter Nelo, a startup founded by former Uber international growth team leads, which is building buy now, pay later in Mexico. The company is already live with more than 45 merchants and over 150,000 users.

San Francisco-based fintech-focused VC firm Homebrew led its recent seed round of $3 million, which also included participation from Susa Ventures, Crossbeam, Rogue Capital, Unpopular Ventures and others. With the latest capital infusion, Nelo has raised a total of $5.6 million since its 2019 inception.

Nelo is not the only player in the Mexican market. A number of others, including Alchemy and Addi, have recently outlined plans for buy now, pay later offerings in the region. But where Nelo has an advantage, believes CEO Kyle Miller, is its established relationships with about 45 merchants.

“What I’m excited about is the relationship with the merchants,” Miller told TechCrunch. “If we find a large global one and increase conversion for them, that is our defensibility [against competitors]. What’s important here is signing on merchants, since they usually only have one offering in their checkout.”

He and co-founder Stephen Hebson used to work for Uber’s international growth team, growing financial services products in India, Mexico, China and Brazil.

“We got to see a cross market where countries were accelerating and where others weren’t,” Miller recalls. “For example, China was a leader in mobile payments and digital finance in India was completely transformed.”

Nelo co-founders Stephen Hebson and Kyle Miller; Image courtesy of Nelo

But in markets like Mexico, the percentage of cash payments for trips was very high. And to Miller and Hebson, this spelled opportunity.

Nelo launched its first product in Mexico in January 2020, similar to a debit card offering from a neobank. In the middle of the year, the company launched credit installment loans.

“It became immediately clear that it was going to be our most popular feature,” Miller said. “By the end of the year, it was the vast majority of our business and something that our users were telling their friends about. We were solving a real pain point.”

Indeed, cash remains the dominant method of payment in Mexico, with an estimated 86% of all payments being in the form of cash. According to eMarketer, the region was the fastest-growing e-commerce market in the world in 2020, with 37% year over year growth.

“Access to credit is something we take for granted in the U.S.,” Miller said. “By the end of the year, we realized this was the future of business, and we decided to focus just on credit.”

In March, Nelo launched its first product via an Android app and will be launching a web app soon.

Customers can use its offering like a credit card, connecting directly with merchants such as Netflix and Spotify. Many users are paying for things like utility bills and cell phone bills, turning them from prepaid to postpay.

With its current product, the company has lent about $2 million, and is seeing growth of about 20% month over month.

“We’re seeing massive demand for this new product in the way of organic signups,” Miller said, “for all the reasons Buy Now, Pay Later has been successful in markets like the U.S., Europe and Australia.”

Paying for installments is already common in Latin America, particularly in Brazil, so the concept is not foreign to residents in the region.

“We expected this is soon going to be a competitive market, so we’re hiring data scientists and engineers to continue improving our product, and grow,” Miller said.

Nelo has about 14 employees with an engineering team in New York.

Homebrew Partner Satya Patel says he’s excited about Nelo because he believes the startup “solves a serious problem related to the lack of credit for Mexican consumers.”

“Credit card penetration is less than 10% in Mexico and other forms of credit are effectively non-existent,” he wrote via email. “Nelo makes it possible for Mexicans to easily and inexpensively increase their purchasing power at the point of sale. And importantly, Nelo is delivering this solution online, supporting growing interest in e-commerce, and also offline, where consumers regularly shop today.”

Patel adds that what Nelo is building is valuable because he is not aware of any reliable, comprehensive consumer credit rating data set in Mexico.

“They are building underwriting models based on proprietary data and growing the merchant network at an incredible rate,” he said. “This buy now, pay later opportunity is untapped in Mexico but requires a very different approach than what has been successful in other markets.”

The Nelo team, according to Patel, understands the nuances of the market and “is executing at an exceptional pace.”

Level raises $27M from Khosla, Lightspeed ‘to rebuild insurance from the ground up’

By Mary Ann Azevedo

Level, a startup that aims to give companies a more flexible way to offer benefits to employees, has raised $27 million in a Series A funding round led by Khosla Ventures and Lightspeed Venture Partners.

Operator Collective and leading angels also participated in the financing, along with previous backers First Round Capital and Homebrew. The round was raised at a “nine-figure” valuation, according to founder and CEO Paul Aaron, who declined to be more specific.

Founded in 2018, New York City-based Level says it’s “rebuilding insurance from the ground up” via flexible networks and real-time claims with the goal of helping employers and employees get the most out of their benefit dollars. 

Employers can customize plans to do things like offer 100% coverage across treatments. The company also touts the ability to process claims in four hours. 

“That’s lightning fast when compared to 30- to 60-day claims often processed by traditional payers,” said Aaron, who as one of the first employees at Square, led the network team at Oscar Health and is an inventor of several patents in the payments space.

Level first launched employer-sponsored dental benefits in the summer of 2019 and started serving its first beta customers that fall. It also now offers vision plans. The company has more than 10,000 members from companies such as Intercom, Udemy, KeepTruckin and Thistle that have paid for care via its platform. 

“Insurance is confusing and often feels unfair. Networks restrict where you can go, billing takes weeks and you always seem to owe more than you expect,” Aaron said. “We believe paying with insurance should be as easy as any other purchase.”

Level says it is taking a full-stack approach and building end-to-end tools, from automated underwriting to real-time benefit analytics. 

It plans to launch a new insurance product aimed at “helping smaller businesses offer bigger benefits” that typically only enterprises have the ability to offer. The company also aims to help employers get money back for any unused benefits after paying a fixed amount each month. Ultimately, the goal is to be able to offer a full suite of products that will allow companies of all sizes — from two employees to 20,000 — provide better benefits for their teams. 

Level claims that its self-insured dental and vision products let companies offer more coverage to their teams while often cutting nearly 20% from their benefits budget. 

“Employers already spend so much money on benefits, and neither they nor their teams get enough out of it,” said Jana Messerschmidt from Lightspeed Venture Partners, in a written statement. “Businesses of all sizes need to compete for talent with innovative benefits that help people get more from their paychecks. Level offers a far superior employee experience, and you’re getting bang for your buck.” 

Meanwhile, Khosla’s Samir Kaul said he believes Level can do for insurance and benefits “what Square Cash did for person-to-person payments.”

Investor First Round Capital claims to have saved 47% by switching from fully insured to Level. And, Thistle says it saw 41% in savings by switching to Level. 

E-commerce investor Upper90 raises $55M for equity investments

By Anthony Ha

It might be strange to hear this from a firm that just raised a $55 million equity fund, but the team at Upper90 would like to remind you that equity isn’t the only funding that’s available.

Upper90 is led by CEO Billy Libby (former head of quantitative education sales at Goldman Sachs) and Chairman Jason Finger (co-founder of Seamless), and it was the first investor in both Thrasio and Clearbanc. The firm offers debt and equity funding, and it just closed a $195 million fund in December — but the fund announced today is Upper90’s first to be devoted purely to equity financing.

Finger said he and Libby have taken this combined approach because there are often predictable parts of an online business, where (for example) “if I’m doing some marketing, I know that $1 on Facebook will generate $8 of revenue.” In those cases, “equity is the most expensive way you can finance growth,” and he said it “really fundamentally bothered me that the founders and early investors who took a lot of the risks, dedicating their life on a 24/7 basis” would often end up owning a small percentage of the company.

That doesn’t mean debt is the only solution, but in Finger’s words, founders should stop seeing big equity rounds as “a badge of honor.” Instead, they can work with Upper90 to find the “optimal capital structure” combining both elements.

“Life isn’t binary,” he added. “Part of the reason we launched an equity fund in the [e-commerce] rollup sector is that equity is an important piece for you to get the highest quality lender — they’re going to want to know that there’s equity protection underneath their credit facility.”

He also suggested that making an equity investment turns Upper90 into a “long-term partner” for the companies it backs, freeing the team from being “purely focused on the returns related to our credit.”

As alluded to earlier, Libby and Finger see the e-commerce aggregation market as one that’s particularly well-suited to their approach. (Thrasio is perhaps the best-known startup rolling up Amazon sellers, while Clearbanc offers its own revenue-based financing to e-commerce and SaaS companies.)

“I always say: What’s new is old,” Libby told me. “If we had this conversation 15 years ago, we’d be talking about rolling up gyms and dry cleaners and smoothie shops […] The infrastructure that Amazon has developed allows people to be entrepreneurs in a week, so I think that we’re still extremely early in this trend. There are going to be so many more people starting their own store on Amazon.”

And eventually, he suggested Upper90 could take a similar approach in other industries: “A content creator who starts a YouTube channel is not that different than the Amazon store owner. Five years from now, we could be talk about, what’s the value of a subscriber on YouTube, what’s the value of an influencer’s following on Instagram, how can we bring some of that revenue forward?”

Billion-dollar B2B: cloud-first enterprise tech behemoths have massive potential

By Annie Siebert
Dharmesh Thakker Contributor
Dharmesh Thakker is a general partner at Battery Ventures and a former managing director at Intel Capital.

More than half a decade ago, my Battery Ventures partner Neeraj Agrawal penned a widely read post offering advice for enterprise-software companies hoping to reach $100 million in annual recurring revenue.

His playbook, dubbed “T2D3” — for “triple, triple, double, double, double,” referring to the stages at which a software company’s revenue should multiply — helped many high-growth startups index their growth. It also highlighted the broader explosion in industry value creation stemming from the transition of on-premise software to the cloud.

Fast forward to today, and many of T2D3’s insights are still relevant. But now it’s time to update T2D3 to account for some of the tectonic changes shaping a broader universe of B2B tech — and pushing companies to grow at rates we’ve never seen before.

One of the biggest factors driving billion-dollar B2Bs is a simple but important shift in how organizations buy enterprise technology today.

I call this new paradigm “billion-dollar B2B.” It refers to the forces shaping a new class of cloud-first, enterprise-tech behemoths with the potential to reach $1 billion in ARR — and achieve market capitalizations in excess of $50 billion or even $100 billion.

In the past several years, we’ve seen a pioneering group of B2B standouts — Twilio, Shopify, Atlassian, Okta, Coupa*, MongoDB and Zscaler, for example — approach or exceed the $1 billion revenue mark and see their market capitalizations surge 10 times or more from their IPOs to the present day (as of March 31), according to CapIQ data.

More recently, iconic companies like data giant Snowflake and video-conferencing mainstay Zoom came out of the IPO gate at even higher valuations. Zoom, with 2020 revenue of just under $883 million, is now worth close to $100 billion, per CapIQ data.

Graphic showing market cap at IPO and market cap today of various companies.

Image Credits: Battery Ventures via FactSet. Note that market data is current as of April 3, 2021.

In the wings are other B2B super-unicorns like Databricks* and UiPath, which have each raised private financing rounds at valuations of more than $20 billion, per public reports, which is unprecedented in the software industry.

Do you fit the mold for the next generation of values-driven VCs?

By Annie Siebert
Jonathan Greechan Contributor
Jonathan Greechan is co-founder of the world's largest pre-seed accelerator, Founder Institute, has run over 100 webinars including 100,000+ live attendees, and is one of Meetup's most active organizers.

More individuals than ever are donning the investor cap. Almost a fifth of U.S. equity trading in 2020 was driven by mom-and-pop investors — up from around 15% in the previous year. With such impressive returns to be made, many are deciding to set up a full-fledged investment business.

With the fundraising world becoming more democratic and accessible, we should help people find the right path to setting up a venture capital firm and also make sure the right people are entering the VC sphere. Startups are changing, and any new investment manager will have to adapt to the shifting landscape. VCs today have to provide more than money to get the best portfolio, and they must have a strong focus on impact to get the best institutional investors into their funds.

Startup investors can be the financial backbone for mass disruption. That’s why, at Founder Institute, we believe in the need for more VCs with strong values: Because they will prop up the companies that will build a brighter future for humanity. We’re not the only ones — our first “accelerator for ethical VCs” was oversubscribed.

VCs today have to provide more than money to get the best portfolio, and they must have a strong focus on impact to get the best institutional investors into their funds.

So if you want to lead your own VC fund in 2021, here are the main questions aspiring investors need to ask themselves.

Are you doing this for the right reasons?

Investing in startups is not just about making money. In selecting the startups that will become future industry leaders, VCs have a lot more power than most to do good (or harm). If you’re only interested in money, you likely won’t go too far. Identifying the greatest businesses means seeing beyond their capital into the longevity of their vision, their real-life impact on society, and how much consumers will love or hate them.

After all: Most startup founders pour their blood, sweat and tears into building a business not just to make money, but also to make an impact on the world and build products that align with their mission. Any new venture capitalist looking to attract the best founders needs to think about the vision and mission of their fund in the same terms.

Although VC firms have been slow on the uptake when it comes to environmental, social and governance (ESG) goals, there are signs that times are changing. Some firms are forming a community around implementing ESG, not only because of the external impact but because it furthers their business goals. To help accelerate this trend, we asked our VC Lab participants to take The Mensarius Oath (Latin for “banker” or “financier”), a professional code of conduct for finance professionals to create an ethical, prosperous and healthy world.

What value do you bring to the table?

The number of VCs are growing and the industry is increasingly becoming concentrated. This means that simply offering large sums of money won’t get you traction with the best startups. Founders are looking for value over volume — they usually want mission alignment, connections, value-added services and industry expertise more than a blank check.

Remember that the best founders get to choose their VCs from a menu of options, not the other way around. To convince them that you’re the right match, you’ll need a proven track record in the same industry (or transferable experience from another industry) and referrals from credible people. You’ll also need a strong value proposition or niche that sets you apart from other funds. For example, Untapped Capital invests in “unexpected” and “undernetworked” founders, while R42 Group invests in AI and longevity-focused businesses.

If you don’t think you’ve got the profile to offer value to founders just yet, it’s worth taking some time to lay out exactly who you are. That is: what you hope to achieve as a fund manager, the vision you have for your portfolio companies and how you alone can help them get there.

What’s your secret sauce?

As a new VC fund without historical data points, limited partners (LPs) will naturally be cautious to invest in your fund. So, you have to build a brand that tells your story and proves your reputation.

Go back to the basics and pinpoint exactly what your strengths are. If you’re having trouble finding inspiration, use statements like, “I can get the best deal because I have X,” or, “I help grow my portfolio companies by X” to get the ball rolling. Be wary of saying that the amount of money you have is your strength — at this stage, your bank balance isn’t your competitive edge. Focus instead on what makes you unique, credible and relevant. Having a high number of strategic contacts, extensive industry experience or a backsheet of successful exits could be your secret ingredients. For extra guidance, check out this resource my team put together to help fund managers consolidate their niche in an “investment thesis.”

Once you have a list, choose your top three strengths and write a followup sentence detailing how each of them can be enriched by your network and expertise. Ideally, share these with a test group (friends, family or fellow entrepreneurs) and ask them which is the most compelling. If there’s a general consensus toward one point, you know to make that a large chunk of your VC fund’s thesis.

Do you have a solid network?

Who you know is just as important as what you know, and the most prominent VCs tend to be in the middle of a flow of information and people. Your network tells founders that you’re respected and reassures them that they will probably be brought into the fold to connect with future mentors, customers, investors or hires.

If you’re a thought leader, the alumni of a well-known company like Uber or PayPal, or if you’ve started a community around an emerging vertical, you’re more likely to form a positive deal flow. But this status and these relationships have to be established before you launch your fund — if you try to network from zero, you’ll be spinning too many plates and won’t have the social proof to back yourself up.

Don’t just rely on your gut to tell you whether your network is satisfactory. Map out your personal ecosystem, sorting people based on familiarity (close contacts or acquaintances) and defining characteristics (consumers, finance, ex-CEOs, etc.). That “map” can be as basic as an Excel sheet with a column for each category, or you could use more attractive visual tools like Canva — great for sharing with your future team and encouraging them to fill any network gaps.

What size fund do you want to launch?

A VC fund runs like any other business — you have to develop a vision, recruit a team, form an entity, raise money, deliver value and report to stakeholders. To kick things off, you need to consider what size fund you want, and then secure significant commitments from LPs — at least 10% of your total fund. LPs can be corporations, entrepreneurs, government agencies and other funds.

Also keep in mind that most LPs will want you to personally invest at least 1% of the total fund size so that you have “skin in the game.”

For that reason especially, it’s best to start small, somewhere between $5 million and $20 million, and use this “training fund” to demonstrate returns and create a launchpad for bigger raises to follow.

Can you help founders from launch to exit?

Your partnership with companies will be for the long haul, so you can’t rely just on offering value when you wire the money. Founders need consistent support across the full startup lifecycle, meaning you need to be conscious not to overpromise and fail to deliver. Think of the startups you’d most like to work with: How could you help them now? How could you help them in the future? And how could you help them exit?

You can take a skills-centric approach, where you reserve different resources and connections based on marketing, hiring, fundraising and culture-creation that can be applied as the startup grows. Alternatively, you might want to make sprint-like plans, where you check in with founders on a repeating basis and iterate the support you offer based on their progress. Whatever way you chose to structure your support, ensure that you’re realistic about what you can bring to the table, your availability, preferred involvement and how you’ll document it.

The future of VC will be driven by venture capitalists with strong values who have built funds with the new needs of founders in mind. VC may once have been exclusive and mysterious, but 2021 could be the year VC becomes a more open and fair space for businesses and investors alike.

Coinbase’s direct listing alters the landscape for fintech and crypto startups

By Anna Heim

Coinbase’s direct listing was a massive finance, startup and cryptocurrency event that impacted a host of public and private investors, early employees, and crypto-enthusiasts. Regardless of where one sits in the broader tech and venture world, Coinbase storming north of a $100 billion valuation during its first day of trading was the biggest startup happening of the year.

The transaction’s effects will be felt for some time in the public market, but also among the startups and capital that comprise the private market.

In the buildup to Coinbase’s flotation — and we’d argue especially after it released its blockbuster Q1 2021 results — there was a general expectation that the unicorn’s direct listing would provide a halo effect for other startups in the space. Anthemis’ Ruth Foxe Blader told The Exchange, for example, that “the Coinbase listing shows this great inflection point for crypto,” with another “wave” of startup work in the space coming up.

The widely held perspective raised two questions: Will the success of Coinbase’s direct listing bolster private investment in crypto-focused startups, and will that success help other areas of financially focused startup work garner more investor attention?


The Exchange explores startups, markets and money.

Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


Presuming that Coinbase’s listing will positively impact its niche and others around it is not a stretch. But to make sure we weren’t misreading sentiment, and to get deeper into the why of the concept, The Exchange reached out to venture capitalists who invest in the broader fintech world to get their take. We even roped in an analyst or two to round out our panel.

The answer is not a simple yes. There are several ways to approach investing in the cryptocurrency space — from buying coins themselves, to investing in mainstream-ish institutions like legal exchanges, to the more exotic, like supporting efforts on the forefront of the decentralized blockchain world. And while it is somewhat clear that most folks expect more capital to be available for crypto projects, it’s not clear where it may end up inside the market.

We’ll wrap by considering what impact Coinbase’s direct listing will have, if any, on non-crypto fintech venture capital investing.

After yesterday’s examination of how blazingly hot the venture capital market looked in the first quarter, we’re again trying to gauge the private market’s temperature. Let’s talk to some folks on the ground and hear what they are seeing.

Are crypto startups less risky now?

Coinbase’s direct listing floated a company that is worth more than all but two major blockchains, namely Ethereum and Bitcoin. Several other chains have aggregate coin values in the 11-figure range, but a 12-digit worth is still rare among crypto assets.

The scale of Coinbase’s valuation post-listing matters, according to Chainalysis Chief Economist Phillip Gradwell. Gradwell told The Exchange that “Coinbase’s $100 billion valuation today demonstrates that venture investors can make great returns from putting money into crypto companies, not just cryptocurrencies. That proof point is good for the entire ecosystem.”

More simply, it is now eminently reasonable to invest in the companies working in the crypto space instead of merely putting capital to work hard-buying coins themselves. The other way to consider the comment is to realize that Coinbase’s share price appreciation is steep enough since its 2012 founding to rival the returns of some coins over the same time frame.

Cleo Capital‘s Sarah Kunst expanded on the point, telling The Exchange in an email that “it’s now credible to say you’re a crypto startup and plan to IPO [versus] having acquisition or ICO be the only proven exit paths in the U.S.”

Hadrian is building the factories of the future for rocket ships and advanced manufacturing

By Jonathan Shieber

If the eight person team behind the new startup Hadrian has their way, they’ll have transformed the manufacturing industry within the next decade.

At least, that’s the goal for the new San Francisco-based startup, founded only last year, which has set its sights on building out a new model for advanced manufacturing to enable the satellite, space ship, and advanced energy technology companies to build the future they envision better and faster.

We view our job as to provide the world’s most efficient space and defense component factory,” said Hadrian founder, Chris Power.

Initially, the company is building factories to make the parts that go on rocket ships, according to Power, but the business has implications for any company that needs bespoke components to make their equipment.

“Let me tell you how bad it is at the moment and what’s going to happen over the next 20 years. Right now everyone in space and defense, [including] SpaceX and Lockheed Martin, outsources their parts and manufacturing to small factories across the country. They’re super expensive, they’re unreliable and they’re completely invisible to the customers,” said Power. “This causes big problems with space and defense manufacturers in the design phase, because the lead time is so long and the iteration time is super long. Imagine running software and being able to iterate on your product once every 20 days? If you can imagine a Gantt chart of how to build a rocket, about 60% of that is buffer time… A lot of the delays in launches and stuff like that happen because parts got delivered three months ago. It’d be like running a McDonalds and realizing that your fries and burger providers could not tell you when the food would arrive.”

It’s hard to overstate the strategic importance of the parts suppliers to the operations of aerospace, defense, and advanced machining companies. As no less an authority on manufacturing than Elon Musk noted in a tweet, “The factory is the product.” It’s also hard to overstate the geopolitical importance of re-establishing the U.S. as a center of manufacturing excellence, according to Hadrian’s investors Lux Capital, Founders Fund, and Construct Capital. Which is one reason why they’re investing $9.5 million into the very early stage business.

“America made massive strategic mistakes in the early 90s which have left our national manufacturing ecosystem completely dilapidated,” said Founders Fund principal Delian Asparouhov. “The only way to get out of this disaster is to re-invent the most basic input into our aerospace and defense supply chains, machining metal parts quickly and with high tolerance. Right now, America’s most innovative company, SpaceX, relies on a network of near-retired machinists to produce space-worthy metal parts, and no one in technology is. focused on solving this.”

 

The factory is the product

— Elon Musk (@elonmusk) January 11, 2021

Power got to understand the problem at his previous company, Ento, which sold workforce management software to blue collar customers. It was there he realized the issue of. the aging workforce and the need for manufacturers to upgrade almost every aspect of their own technology stack. “I realized that the right way to bring technology to the industrial space is not to sell software to these companies, it’s to build an industrial business from scratch with software.”

Initially, Hadrian is focusing all of its efforts on the space industry, where the component manufacturing problem is especially acute, but the manufacturing capabilities the company is building out have broad relevance across any industry that requires highly engineered components.

“The demand for manufacturing from both the large SpaceX and Blue Origin all the way to this growing long tail of companies from Anduril to Relativity to Varda,” said Lux Capital co-founder Josh Wolfe. “Most of these guys are using mom and pop machine shops… [and] those shops are horribly inefficient. They’re not consistent, and they’re not reliable. Between the software automation, the hardware, you can cut down on inefficiency every step of the process… I like to think of value creation as waste reduction… so mundane things like quoting, scheduling, bidding, and planning all the way to the programming of the manufacturing… every one of those things takes hours to tens of hours to days and weeks, so if you can do that in minutes, it’s just a no-brainer. [Hadrian] will be the cutting edge choice for all of the new and explicitly dedicated and focused aerospace and defense companies.”

Power envisions a network of manufacturing facilities that can initially cover roughly 65% of all space and defense components, and will eventually take that number up to 95% of components. Already several of the biggest launch vehicle and satellite manufacturers are in talks with the company to produce hundreds of units for them, Power said. Some of those companies just happen to be in the Construct, Lux, and Founders Fund portfolio.

And the company’s founder sees this as a new way to revitalize American manufacturing jobs as well. “Manufacturing jobs in space and defense can easily be as high paying as a software engineering job at Google,” he said. In an ideal world, Hadrian would like to offer an onramp to high paying manufacturing careers in the 21st century in the same way that automakers provided good union jobs in the twentieth.

“We haven’t built any of this. If you look at the sheer number of people that we need to train and hire on our new technology and new systems, that people problem and that training problem is part of growing our business.”

A render of Axiom’s future commercial space station design.

Tamika Butler, Remix’s Tiffany Chu and Revel’s Frank Reig to discuss how to balance equitability and profitability at TC Sessions Mobility

By Kirsten Korosec

The race among mobility startups to become profitable by controlling market share has produced a string of bad results for cities and the people living in the them.

City officials and agencies learned from those early deployments of ride-hailing and shared scooter services and have since pushed back with new rules and tighter control over which companies can operate. This correction has prompted established companies to change how they do business and fueled a new crop of startups, all promising a different approach.

But can mobility be accessible, equitable and profitable? And how?

TC Sessions: Mobility 2021, a virtual event scheduled for June 9, aims to dig into those questions. Luckily, we have three guests who are at the center of cities, equity and shared mobility: community organizer, transportation consultant and lawyer Tamika L. Butler, Remix co-founder and CEO Tiffany Chu and Revel co-founder and CEO Frank Reig.

Butler, a lawyer and founder and principal of her own consulting company, is well known for work in diversity and inclusion, equity, the built environment, community organizing and leading nonprofits. She was most recently the director of planning in California and the director of equity and inclusion at Toole Design. She previously served as the executive director of the Los Angeles Neighborhood Land Trust and was the executive director of the Los Angeles County Bicycle Coalition. Butler also sits on the board of Lacuna Technologies.

Chu is the CEO and co-founder of Remix, a startup that developed mapping software used by cities for transportation planning and street design. Remix was recently acquired by Via for $100 million and will continue to operate as a subsidiary of the company. Remix, which was backed by Sequoia Capital, Energy Impact Partners, Y Combinator, and Elemental Excelerator has been recognized as both a 2020 World Economic Forum Tech Pioneer and BloombergNEF Pioneer for its work in empowering cities to make transportation decisions with sustainability and equity at the forefront. Chu currently serves as Commissioner of the San Francisco Department of the Environment, and sits on the city’s Congestion Pricing Policy Advisory Committee. Previously, Tiffany was a Fellow at Code for America, the first UX hire at Zipcar and is an alum of Y Combinator. Tiffany has a background in architecture and urban planning from MIT.

Early Bird tickets to the show are now available — book today and save $100 before prices go up.

Reig is the co-founder and CEO of Revel, a transportation company that got its start launching a shared electric moped service in Brooklyn. The company, which launched in 2018, has since expanded its moped service to Queens, Manhattan, the Bronx, Washington, D.C., Miami, Oakland, Berkeley, and San Francisco. The company has since expanded its focus beyond moped and has started to build fast-charging EV Superhubs across New York City and launched an eBike subscription service in four NYC boroughs. Prior to Revel, Reig held senior roles in the energy and corporate sustainability sectors.

The trio will join other speakers TechCrunch has announced, a list that so far includes Joby Aviation founder and CEO JonBen Bevirt, investor and Linked founder Reid Hoffman, whose special purpose acquisition company just merged with Joby, as well as investors Clara Brenner of Urban Innovation Fund, Quin Garcia of Autotech Ventures and Rachel Holt of Construct Capital and Starship Technologies co-founder and CEO/CTO Ahti Heinla. Stay tuned for more announcements in the weeks leading up to the event.

Saltbox raises $10.6M to help booming e-commerce stores store their goods

By Mary Ann Azevedo

E-commerce is booming, but among the biggest challenges for entrepreneurs of online businesses are finding a place to store the items they are selling and dealing with the logistics of operating.

Tyler Scriven, Maxwell Bonnie and Paul D’Arrigo co-founded Saltbox in an effort to solve that problem.

The trio came up with a unique “co-warehousing” model that provides space for small businesses and e-commerce merchants to operate as well as store and ship goods, all under one roof. Beyond the physical offering, Saltbox offers integrated logistics services as well as amenities such as the rental of equipment and packing stations and access to items such as forklifts. There are no leases and tenants have the flexibility to scale up or down based on their needs.

“We’re in that sweet spot between co-working and raw warehouse space,” said CEO Scriven, a former Palantir executive and Techstars managing director.

Saltbox opened its first facility — a 27,000-square-foot location — in its home base of Atlanta in late 2019, filling it within two months. It recently opened its second facility, a 66,000-square-foot location, in the Dallas-Fort Worth area that is currently about 40% occupied. The company plans to end 2021 with eight locations, in particular eyeing the Denver, Seattle and Los Angeles markets. Saltbox has locations slated to come online as large as 110,000 square feet, according to Scriven.

The startup was founded on the premise that the need for “co-warehousing and SMB-centric logistics enablement solutions” has become a major problem for many new businesses that rely on online retail platforms to sell their goods, noted Scriven. Many of those companies are limited to self-storage and mini-warehouse facilities for storing their inventory, which can be expensive and inconvenient. 

Scriven personally met with challenges when starting his own e-commerce business, True Glory Brands, a retailer of multicultural hair and beauty products.

“We became aware of the lack of physical workspace for SMBs engaged in commerce,” Scriven told TechCrunch. “If you are in the market looking for 10,000 square feet of industrial warehouse space, you are effectively pushed to the fringes of the real estate ecosystem and then the entrepreneurial ecosystem at large. This is costing companies in significant but untold ways.”

Now, Saltbox has completed a $10.6 million Series A round of financing led by Palo Alto-based Playground Global that included participation from XYZ Venture Capital and proptech-focused Wilshire Lane Partners in addition to existing backers Village Capital and MetaProp. The company plans to use its new capital primarily to expand into new markets.

The company’s customers are typically SMB e-commerce merchants “generating anywhere from $50,000 to $10 million a year in revenue,” according to Scriven.

He emphasizes that the company’s value prop is “quite different” from a traditional flex office/co-working space.

“Our members are reliant upon us to support critical workflows,” Scriven said. 

Besides e-commerce occupants, many service-based businesses are users of Saltbox’s offering, he said, such as those providing janitorial services or that need space for physical equipment. The company offers all-inclusive pricing models that include access to loading docks and a photography studio, for example, in addition to utilities and Wi-Fi.

Image Credits: Saltbox

Image Credits: Saltbox

The company secures its properties with a mix of buying and leasing by partnering with institutional real estate investors.

“These partners are acquiring assets and in most cases, are funding the entirety of capital improvements by entering into management or revenue share agreements to operate those properties,” Scriven said. He said the model is intentionally different from that of “notable flex space operators.”

“We have obviously followed those stories very closely and done our best to learn from their experiences,” he added. 

Investor Adam Demuyakor, co-founder and managing partner of Wilshire Lane Partners, said his firm was impressed with the company’s ability to “structure excellent real estate deals” to help them continue to expand nationally.

He also believes Saltbox is “extremely well-positioned to help power and enable the next generation of great direct to consumer brands.”

Playground Global General Partner Laurie Yoler said the startup provides a “purpose-built alternative” for small businesses that have been fulfilling orders out of garages and self-storage units.

Saltbox recently hired Zubin Canteenwalla  to serve as its chief operating offer. He joined Saltbox from Industrious, an operator co-working spaces, where he was SVP of Real Estate. Prior to Industrious, he was EVP of Operations at Common, a flexible residential living brand, where he led the property management and community engagement teams.

Goldman Sachs leads $23M in funding for Brazilian e-commerce startup Olist

By Mary Ann Azevedo

Olist, a Brazilian e-commerce marketplace integrator, has raised $23 million in a Series D round extension led by new investor Goldman Sachs Asset Management that brings its total Series D financing to $80 million.

Existing backer Redpoint Ventures, which first put money in Olist in 2015, also participated in the latest round. With this latest infusion, Olist has now raised over $126 million since its 2015 inception. This round is reportedly its last before the company plans to go public, according to Bloomberg.

SoftBank led the first tranch of Olist’s Series D in November as well as the company’s $46 million Series C in 2019. Valor Capital, Velt Partners, FJ Labs, Península and angel Kevin Efrusy had previously invested in the first tranche of the Series D.

Olist connects small businesses to larger product marketplaces to help entrepreneurs sell their products to a larger customer base. The company was founded with the mission of helping small merchants gain market share across the country through a SaaS licensing model to small brick and mortar businesses.

As of October 2019, Olist had more than 7,000 customers and used a drop-shipping model to send products directly from stores to clients around the country, allowing them to grow with a capital-light model.

Today, Olist says its platform provides tools that support “all the stages of an e-commerce operation” with the goal of helping merchants see “rapid increases in sales volume.” It currently has about 25,000 merchants on its platform.

The startup is no doubt benefiting from the pandemic-fueled e-commerce boom taking place all over the world as more people have turned to online shopping. Latin America, in general, has been home to increased e-commerce adoption.

Olist says its revenue tripled to a record number in the first quarter of 2021 compared to the previous year, although it did not provide hard figures. It also reportedly doubled revenue in 2020, according to Bloomberg.

Olist Store, the company’s flagship product, gives merchants a way to manage product listings, logistics and store payments. It also offers “a unique sales experience” through channels such as Mercado Livre, B2W and Via Varejo. The product saw a record GMV in the first half of the year, which was up 2.5 times over the same period in the prior year, the company said.

Last year, Olist launched a new product, Olist Shops, giving users the ability to create a virtual showcase “in less than 3 minutes” that also offers payment checkout tools and integration with logistics operators. Shops has interfaces in Portuguese, English, and Spanish, and since its launch, it has attracted more than 200,000 users in 180 countries, according to Olist.

“The pandemic has accelerated digitalizing business processes around the world, thus spurring e-commerce growth in a surprising way,” said Tiago Dalvi, Olist’s founder and CEO, in a written statement. 

The company plans to use its new capital to invest in technology and products, pursuing new mergers and acquisitions and boosting its internationalization process. This is on top of two acquisitions Olist made last year — Clickspace and Pax Logistica, which gave Olist entry into the heated logistics space with more than 4,000 registered drivers.

Specifically, CFO Eduardo Ferraz said the company is in preliminary discussions with ERPs, retailers, and companies with complementary solutions to its own.

“That is why we also decided to expand the investment in our Series D and bring Goldman Sachs as another relevant investor to our cap table,” he said.

David Castelblanco, managing director and head of Latin America Corporate and Growth Equity Investing for the Goldman Sachs Asset Management, said his firm was impressed with how Olist empowers SMBs to generate more revenue.

“Tiago and the Olist team are incredibly customer oriented and have created an innovative technological solution for their e-commerce clients,” he added.

Olist is operating in an increasingly crowded space. In March, we covered São Paulo-based Nuvemshop’s $90 million raise that was led by Silicon Valley venture firm Accel. That company has developed an e-commerce platform that aims to allow SMBs and merchants to connect more directly with their consumers. 

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