Ashmeet Sidana, a longtime VC who struck out on his own in 2015 to form Engineering Capital, just closed his third and newest fund with $60 million in capital commitments from a university endowment, a fund of funds, and three foundations.
Sidana — who previously spent nearly nine years with Foundation Capital and received one of his first limited partner agreements afterward from Foundation’s legendary founder, Kathryn Gould — says the fund came together despite the pandemic without too much pain.
That’s thanks in part to Sidana’s track record, including the sale of the cloud monitoring startup SignalFx to Splunk for $1 billion after it raised $179 million from VCs, and the sale of the cloud application monitoring startup Netsil by Nutanix for up for $74 million in stock after it raised just $5.7 million. (Engineering Capital was the first investor in both.)
Sidana’s day-to-day work in Palo Alto, Calif. –which centers on working with teams “that you can feed with two pizzas,” yet whose narrow technical insights can have broad applicability — was also an apparent draw. To learn more, we talked earlier today with Sidana, a self-described engineering nerd who studied computer science at Stanford about what “technical insights” have caught his attention most recently.
TC: You talk about pursuing founders with technical insights. Is that not true of most venture capitalists?
AS: No. Silicon Valley is a tech investing ecosystem, but most of its participants aren’t solving hard technical problems. They have market insights or consumer insights. It’s the difference between Google and Facebook. Google figured out how to index better, how to better prioritize a sorting problem. Facebook was started with the consumer insight that people want to be connected with each other. I focus on companies based on technical insights. Most VCs don’t.
TC: What are you looking for exactly?
AS: A team that’s using software or tech to solve a known problem that exists but for which there does not exist a solution. Many such problems exist. For example, we now the future will be multi cloud. Amazon has succeeded wildly with AWS. Microsoft is doing well with its cloud business. Google is catching up to them. Then you have the seven dwarves, including Digital Ocean. It’s a difficult way for enterprises to engage with infrastructure. Another technical problem is rooted in all of us wanting to give our infrastructure over to the cloud but not our data. How do we solve this? Some are solving it legally, some with publicity. But really, it’s a technical problem.
TC: What’s a recent bet you’ve made that has solved a technical problem?
AS: I’m the first investor in Baffle, which is a really interesting company that enables the user of a traditional relational database to see the data but not an administrator. [Editor’s note: the company says it enables the field level protection of data without requiring any application code changes.] Or Robust Intelligence is an even newer investment that’s solving the problem of data contamination in artificial intelligence.
TC: How so?
AS: When you run models and do machine learning, you do cybersecurity and protect them, but what about the data that the AI is working on? They have a killer demo that shows that when you deposit a check with your iPhone, your bank is of course using AI to recognize check and ensure the right amount goes into the proper account. [But a nefarious actor could] procure a small number of pixels that are invisible to the human eye in the photo of check and change the numbers and the routing number. What Robust does is protecting [both the bank and its customers] from that kind of data contamination.
TC: I know you tend to invest very early — often writing the first check. Are you hovering around Stanford all day? How do you find these nascent teams?
AS: I have good relationships with many schools, including [the University of] Michigan, Stanford, I’m involved with the University of Toronto’s Creative Destruction Lab; I keep active relationships with [schools in India]… I spend a lot of time with engineers in academia or industry.
TC: What size checks are you writing to get them started, and how much of their companies do you expect in return?
AS: Most people think investing in technical insights is expensive, but it can be very capital efficient if you are working with software. I’m also looking at companies where you can get to revenue with $1 million and $3 million and funding. That typically takes a small team of five to eight people who you can feed with two people. Linux was ultimately written by one person. VMWare was started by a technical insight addressed by two people. Google had its earlier stuff working with just Larry and Sergey.
As for ownership, my job is to buy low and sell high. I’m as greedy as the next VC and would love to have as much ownership as I can, but there is no formula.
TC: What’s a mistake you tend to see with new teams?
AS: Gluttony. Most think they have to go after a big market and solve a big problem, but the magic of doing a startup is to focus on an incredibly narrow problem that has broad application. As Steve Jobs used to say it is difficult to throw away features, not to add them.
The Colombian trucking and logistics services startup Liftit has raised $22.5 million in a new round of funding to capitalize on its newfound traction in markets across Latin America as responses to the COVID-19 epidemic bring changes to the industry across the region.
“We’re focusing on the five countries that we’re already in,” says Liftit chief executive Brian York.
The company recently hired a head of operations for Mexico and a head of operations for Brazil as it looks to double down on its success in both regions.
Funding for the round was led by Cambridge Capital and included investments from the new Latin American focused firm H20 Capital along with AC Ventures, the venture arm of the 2nd largest coca-cola bottler in Latam; 10x Capital, Banyan Tree Ventures, Alpha4 Ventures, the lingerie brand Leonisa; and Mexico’s largest long haul trucking company, Grupo Transportes Monterrey. Individual investor, Jason Radisson the former chief operating officer of the on-demand ride hailing startup 99, also invested.
The new capital comes on top of Liftit’s $14.3 million Series A from some of the region’s top local investors. Firms like Monashees, Jaguar Ventures and NXTP Ventures all joined the International Finance Corp. in financing the company previously and all returned to back the company again with its new funding.
Investors likely responded to the company’s strong performance in its core markets. Already profitable in Chile and Colombia, Liftit expects to reach profitability across all of its operations before the end of the year. That’s despite the global pandemic.
Of the 220 contracts the company had with shippers half of them went to zero and the other half spiked significantly, York said. While Liftit’s major Colombian customer stumbled, new business, like Walmart, saw huge spikes in deliveries and usage.
“Managing truck drivers is incredibly difficult, and trucking, in our opinion, is not on demand,” said York. “At the end of the day the trucking market in all of Latin America is a majority of independent owners. They’re not looking for on-demand work… they’re looking for full time work.”
Less than one percent of the company’s deliveries come from on-demand orders, instead, it’s a service comprised of scheduled shipments with optimized routes and efficiencies that are bringing customers to Liftit’s virtual door.
“We do scheduled trucking delivery so we integrate with existing systems that shippers have and start planning how many trucks they’re going to need and the routes they’re going to take and … tee it up exactly what is going to happen regardless what the traffic conditions are so we have been able to reduce the delivery times for the trucks,” said York.
If necessity is the mother of invention, then new business owners are getting very inventive in the ways in which they access cash. Relying on some long-tested and some new avenues to raise money, entrepreneurs are finding more ways to get public market cash faster than they would have in the past.
Whether it’s from Reg A crowdfunding dollars, Special Purpose Acquisition Companies (SPACs) or direct listings, these somewhat arcane and specialized financing vehicles are making a comeback alongside a rise in new funding mechanisms to get to market quickly and avoid the dilution that comes from private market rounds (especially since those rounds are likely to come at a reduced valuation given market conditions).
Some of these tools have existed for a while and are newly popular in an era where retail investors are driving much of the daily fluctuations of the public markets. Wall Street institutions are largely maintaining their conservative postures with regard to new offerings, so secondary market retail volume growth is outpacing institutional. Retail investors want into these new issues and are pouring into the markets, contributing to huge pops to new public offerings for companies like Lemonade this Thursday and creating an environment where SPACs and crowdfunding campaigns can flourish.
The rise of zero-commission brokerages and the popularization of fractional trading led by the startup Robinhood and adopted by every one of the major online brokers including Charles Schwab, TD Ameritrade, E-Trade and Interactive Brokers has created a stock market boom that defies the underlying market conditions in the U.S. and globally. For instance, daily trades on Robinhood are up 300% year-over-year as of March 2020.
According to data from the BATS exchange, the total trade count in the U.S. was up 71% and May trading was up more than 43% over 2019. Meanwhile, E-Trade daily average revenue trades posted a 244% increase in May over last year’s numbers.
The appetite for new issues is growing and if many of the largest venture-backed companies are holding off on going public, smaller names are using SPACs to access public capital and reach these new investors.
Teal, a platform that looks to help people land jobs that they love, has closed a $5 million seed round, which was led by Flybridge Capital, with participation from Lerer Hippeau, Corigin Ventures, Aleph, Oceans Ventures, Hight Output, AVG Basecamp, and Kairos Angels.
Teal launched in November of 2019 with a system that did all of the heavy lifting for people seeking jobs, including resume consultations, searching listings, and sending application information to the right people. Essentially, Teal handled everything but the interview.
Since launch, the company has made a slight pivot to a product that’s more scalable, called Career Assist.
Fano explained that, with the original product (called Career Agent), there was a group of people who were very clear on what they wanted and saw great success on the platform. But there was also a group of people who were unsure about their career path that Teal was spending a tremendous amount of time and energy on, and they still weren’t seeing success.
“There was something kind of flawed in this model in that the people that want us the most and will pay us for the longest are going to be the least satisfied,” said Fano, adding that Career Agent was built more for job-hopping than helping people who were unemployed find a job. “So we decided to take all the learnings we’ve gotten through Career Agent and understand where things repeat and where there are inefficiencies that don’t get identified on an individual basis. When you do that for many people, you can start to identify those patterns.”
Career Assist is a curriculum that allows cohorts (of 20-30 people) to learn the best possible process for finding and landing a job they want. It includes a four-week workshop (eight classes in total) guided by experts who lead live sessions around everything from writing a resume to how to send in that resume (to the right person) to interview skills.
According to cofounder and CEO Dave Fano, applying for a job through a website is one of the worst things you can do. Instead, applicants should find the head of recruiting or HR and send them a direct email. There are also plenty of tactics, gleaned from the sales playbook, that increase an applicant’s chances of hearing back on an email.
Teal looks not only to give job-seekers a better, more interactive playbook for landing a job, but also pairs its members with other members who are going through the same thing, to offer emotional support and empathy during a time where people desperately need it.
Career Assist was originally launched for free, but has since moved to a paid model, costing users $149 for full access to the four-week program. Since April, more than 200 people have landed new jobs after going through the course.
Fano, a serial entrepreneur who sold his first company, CASE, to WeWork, has a much broader vision for Teal than getting a job. There are many situations over the course of a person’s career where they can benefit from guidance and expertise, such as negotiating contracts, asking for a promotion or a raise, or resigning.
Teal wants to stay with workers throughout the entirety of their career to help them navigate these more challenging situations.
Teal plans on using the funding to continue growing the team, which is currently at 12 people, with a 50/50 split between men and women.
Fano says that one of the greatest challenges for the company is also one of its biggest opportunities. He explained that most people think they need an individual, bespoke career coach because of the general complexity of individual careers.
Fano believes that by combining resources that exist with data from its existing user base, Teal can cover a broader set of situations and circumstances for people than an individual coach may be able to while still being able to give specific advice from this collective data set.
“Building up that data set is one of the bigger challenges, and that’s why these things don’t exist,” said Fano. “But that’s also why we’re taking the approach that we are, focusing on things that don’t scale, and so far we’ve seen that people are very willing to interact with us because we’ve shown we’ve got their best interest at heart.”
He added that the company has no interest in becoming a B2B tool that sells into the HR department, but rather wants to focus on the end-consumer.
Growing up in the Philippines, Andreia Carrillo always liked the stars. It’s what brought her to the United States to study astronomy, and why she wants others to follow in her footsteps and study the stars.
“Though, we’ll see if that happens now,” Carrillo said.
Carrillo is one of the hundreds of thousands of students affected by a recent rule change, issued by U.S. Immigration and Customs Enforcement (ICE) to no longer allow international students from staying in the U.S. if their university moves classes fully online.
The rule change, published Monday, lands as the threat of the coronavirus pandemic grows across the country, forcing some universities to shift to digital-only operations for the fall.
News of the rule change caught immigration lawyers by surprise. The Trump administration said nothing more about the policy beyond a tweet from the president: “SCHOOLS MUST OPEN IN THE FALL!!!,” a decision over which the federal government has little authority. It’s a sharp reversal from the administration’s position in March — at the height of the pandemic’s spread in the U.S. — allowing students to retain their lawful immigration status even as in-person classes were suspended across the country.
SCHOOLS MUST OPEN IN THE FALL!!!
— Donald J. Trump (@realDonaldTrump) July 6, 2020
The sudden rule change puts universities in a difficult dynamic: administrators can let campuses stay open to keep international students in the country but run the risk of spreading the virus; or close up, maintain social distancing, and international students be damned.
But the knock-on effect will be felt across the U.S., not just by the students, the universities whose revenue largely depends on higher tuition fees from international students, or even the college towns whose economies rely on schools keeping their doors open. The rule change will also impact the fields that these students pursue, largely engineering, math, and computer science, and the rate of innovation that can be sustained in a country without the core, often invisible, talent behind it.
After all, one of the most popular destinations for international students is the state of California, the heart of Silicon Valley.
Eric Tarczynski, the founder of Contrary Capital, says that he’s seen “scores of entrepreneurial people come to universities from abroad explicitly because it’s their gateway to building a company in the United States.
“To some extent, it’s their Ellis Island, and we’ve funded several companies this way,” he said. He pointed to alternative programs, like Lambda School, will help the same talented students shift online.
New York University president Andrew Hamilton said in response to the government’s rule change that “requiring international students to maintain in person instruction or leave the country, irrespective of their own health issues or even a government mandated shutdown of New York City, is just plain wrong and needlessly rigid.”
“If there were a moment for flexibility in delivering education, this would be it,” he wrote..
NYU will join a chorus of other schools in reaching out to federal officials to ask them to revoke the rule change. Harvard and MIT have gone further by suing ICE to stop the rule change going into effect.
“The coronavirus has become a vehicle for the administration to continue in its advancement of anti-immigrant policies,” Tahmina Watson, an immigration lawyer, told TechCrunch. “With the election looming in a few months, the administration is looking for every possible angle to block immigration.”
“The invisible wall is real and gets higher every day,” said Watson.
One option for schools is going to the hybrid model route where some classes are taught live and others are taught online. Harvard, for example, said it will bring up to only 40% of undergraduates to campus this fall. Universities that go virtual may struggle to justify their traditionally exorbitant tuition fees.
The rule change touches on a nerve that has been agitated throughout the pandemic: how remote education shapes what we can learn, and more importantly, who can have the opportunity to learn. Some have noted that a remote shift might harshly impact international students who have spotty connections in other countries. Others say that higher education’s appeal in the U.S. is largely the network it provides.
In Carrillo’s case, there was no opportunity to study astronomy in the Philippines. She had to come to the U.S. if she wanted to pursue her dream career path.
The rule change is likely to face legal challenges. Watson noted that Monday’s policy has questionable legality. The administration referred to it as a “temporary final rule,” which she says essentially avoids the rule going through a more typical public comment period.
“I am sure schools, among others, would have a lot to say about this policy,” said Watson. “If the administration wants to change long standing policy, the Administrative Procedure Act should be followed at every step.”
The rule, thus, awaits more direction and clarity from the administration. Until then, it is up to colleges and students to figure out how to process the drastic step.
One international student who attends graduate school at University of Washington, who asked to remain anonymous fearing their visa status, said that the rule change puts their research and scholarship at risk if they are forced to go back to their home. If their school opts for a hybrid model, they worry about their health.
“I’ve never felt so disrespected in the United States,” the student said. “If only the international students are required to go back to class, and there is a chance of getting the virus, you’re risking the international students to get infected, they said.
When Carrillo heard the rule change, she said she panicked and emailed her department. To her relief, her current college — the University of Texas, Austin — will take a hybrid approach to classes in the fall. She can stay in the country, for now.
But the news isn’t a complete sigh of relief. International students, like Carrillo, are used to feeling a false sense of security under the Trump administration.
“I feel so shitty for wanting things to be hybrid,” she said. “Morally I want things to be safer and have things online, but then that would also mess up my stay here.”
Most sales teams earn a commission after a sale closes, but nothing prior to that. Yet there are a variety of signals along the way that indicate the sales process is progressing, and SetSail, a startup from some former Google engineers, is using machine learning to figure out what those signals are, and how to compensate salespeople as they move along the path to a sale, not just after they close the deal.
Today, the startup announced a $7 million investment led by Wing Venture Capital with help from Operator Collective and Team8. Under the terms of the deal, Leyla Seka from Operator will be joining the board. Today’s investment brings the total raised to $11 million, according to the company.
CEO and co-founder Haggai Levi says his company is based on the idea that commission alone is not a good way to measure sales success, and that it is in fact a lagging indicator. “We came up with a different approach. We use machine learning to create progress-based incentives,” Levi explained
To do that they rely on machine learning to discover the signals that are coming from the customer that indicate that the deal is moving forward, and using a points system, companies can begin compensating reps on hitting these milestones, even before the sale closes.
The seeds for the idea behind SetSail were planted years ago when the three founders were working at Google tinkering with ways to motivate sales reps beyond pure commission. From a behavioral perspective, Levi and his co-founders found that reps were taking fewer risks with a pure commission approach and they wanted to find a way to change that. The incremental compensation system achieves that.
“If I’m closing the deal, I’m getting my commission. If I’m not closing the deal, I’m getting nothing. That means from a behavioral point of view, I would take the shortest path to win a deal, and I would take the minimum risk possible. So if there’s a competitive situation I will try to avoid that,” he said.
They look at things like appointments, emails and call transcripts. The signals will vary by customer. One may find an appointment with CIO is a good signal a deal is on the right trajectory, but to avoid having reps gaming the system by filling the CRM with the kinds of positive signals the company is looking for, they only rely on objective data, rather than any kind of self-reporting information from reps themselves.
The team eventually built a system like this inside Google, and in 2018, left to build a solution for the rest of the world that does something similar.
As the company grows, Levi says he is building a diverse team, not only because it’s the right thing to do, but because it simply makes good business sense. “The reality is that we’re building a product for a diverse audience, and if we don’t have a diverse team we would never be able to build the right product,” he explained.
The company’s unique approach to sales compensation is resonating with customers like Dropbox, Lyft and Pendo, who are looking for new ways to motivate sales teams, especially during a pandemic when there may be a longer sales cycle. This kind of system provides a way to compensate sales teams more incrementally and reward positive approaches that have proven to result in sales.
Black Lives Matter may be the largest movement in U.S. history, according to four different polls cited recently by the New York Times that suggest anywhere from 15 million to 26 million people in the U.S. have participated in demonstrations over the death of George Floyd and others since Floyd’s death in late May.
Blavity, a six-year-old, L.A.-based media company that’s focused on Black culture, could hardly be better positioned to help outraged Americans better understand what’s really been going on. Blavity founder Morgan DeBaun says the outfit receives at least a handful of videos each week that feature egregious acts against Black Americans, and the same has been true since DeBaun, working at the time at Intuit, founded the company in 2014 after unarmed, 18-year-old Michael Brown was gunned down by a police office in her native Missouri.
Blavity tells the stories that the mainstream media has largely been missing, but that’s only part of the story. The company is also become a go-to destination for a growing number of Black millennials interested in fresh takes on culture and politics; in Black Hollywood and travel (via two other properties it runs); and in its sizable networking events, one of which attracted 10,000 people last year.
Last week, we talked with DeBaun about Blavity — which has raised a comparatively conservative $11 million to date, including from GV, Comcast Ventures, and Plexo Capital — to learn more about how the company seizes this moment, and whether investors see the opportunity. Our chat has been edited for length and clarity (you can hear the full discussion here).
TC: You started Blavity in part to address a need you were feeling to connect with others after Michael Brown’s death. What were you reading at the time?
MD: The unfortunate answer is I wasn’t reading anything. I hadn’t really felt the need to stay connected to local or regional or Black issues until I moved out of my community and found myself wondering [from California], what is going on.
Historically in the Black community, we’ve had our own networks and platforms and brands: the African American newspapers in various cities, Essence, Jet, Ebony, and more recently, The Root. [But] a significant amount of media publications are still focused on entertainment and Hollywood and not necessarily on news. And so there was a huge gap of information that I felt wanting to understand.
This was before Twitter really became a source of information and truth for so many people, so there was a gap of information from what I saw happening on the ground in St. Louis and in text messages and as part of an email list with friends who were on the ground, and what I saw in the mainstream media. And to me, that was a huge miss, because we needed to be connected at that point more than ever so we could help impact change.
TC: There’s a lot of social injustice covered by Blavity. Two of the most popular stories on the site as we speak are about Sacramento police officer who placed a plastic bag on a 12-year-old’s head, and a cop who was arrested and charged after tasing a pregnant woman on her stomach. Are these stories central to making Blavity a resource to its readers?
MD: We tend to be a reflection of the pulse of the reality and the Black experience, and we do share stories and news that people might not find other places. I get the question more recently about: Does this time feel different? Are we covering different things? And unfortunately, the answer is that we’ve been covering these stories weekly since Michael Brown happened. It’s been a critical part of our publication and ethos to ensure that we’re sharing the stories of our community and bringing light to the injustices that are happening.
We also share joy and happiness and celebrations and moments of great accomplishments and local stories of heroes. But certainly right now, we’re making sure that we’re doing our diligence and covering the stories that are very important for this moment in time.
TC: You recently told Forbes that advertisers and marketers do not want to spend money next to Black death and violence. You have to cover these stories because it’s core to what you do, but it’s a double-edged sword for you, it sounds like.
MD: Blavity as an organization has five different brands. So we have a diversified revenue stream where we don’t just rely on display advertising against our news business, because if we did, we would wind up very much similar to what we’ve seen happen [to other struggling media companies]. There was a time when our Facebook page was even blocked because [stories] have gotten flagged as being too violent. And it’s like, well yeah, violence against Black bodies is real. It’s the truth; it’s real news.
So we do have this weird kind of balance that we strike in terms of really making sure that we’re telling the truth and that we are pushing back against our clients, our advertisers, and even Facebook to ensure that Blavity can continue to distribute content. But overall, the news business isn’t our highest revenue-generating business. It’s our conference business and our display ads business across all of our brands, some of which are lifestyle brands.
We also have an ad network that we don’t advertise publicly much, but essentially, we run ads and sales operations for other publishers of color who maybe don’t have the scale to necessarily have their own sales team and ad tech and engineers and things of that nature. We’re fighting for deals against a Vice or a Refinery 29 that also have ad networks, so we wanted to make sure that we could also win those deals and we needed that huge inventory and [that business has] allowed us the flexibility to reinvest [in the rest of the business].
TC: I understand that you’re also starting a paid-for membership-only professional network.
MD: We have an exciting announcement that’ll come out in a few weeks about a new platform that will specifically be a place for young Black professionals to come together to have discussions to learn; to get jobs, because that’s one of our core competencies through [our conference business]; but most importantly, to have discussions around the issues and topics that are trending and that matter. We already do daily conversations through Facebook Live and YouTube and Instagram Live. So we’re trying to build a place where we can have a more private space for those conversations that feels safe and also is a place where people can connect on a deeper level.
TC: Have you noticed a real change in Silicon Valley in the last month or so among investors? Are you seeing interest from firms that previously hadn’t reached out to you?
MD: There are a lot of VCs that perhaps are paying attention, but the bias is so deep that I don’t even think they know how to get out. It.
Have I seen more requests for conversations? Yes. Do I think that that’s going to result in more investments and wires and checks? No. I’m very skeptical of this kind of like performative ‘we care’ flag. The most important metric of success for VCs are returns on their investments. [Venture money] is not a donation; it’s not charity. [VCs look for companies that] meet the metrics of success. And my metrics may be different because I’ve been chronically underfunded despite how much we’ve done.
TC: Can you elaborate?
I think the argument that [later-stage] investors make is, ‘Well, there are just not that many Series A Series B companies to invest in. [But] there are enough companies to invest in, that have your revenue criteria and your goal criteria in terms of a potential exit, but that may not call themselves startups. They may look different. And so you need to do more work to go get them.
There are certainly a lot more people raising funds and having really success in terms of raising their first fund, or that are now on their second fund as a result of this [focus on diversity] and that’s very encouraging and that’s really going to help the seed- and early-stage founders.
I wish I was a founder right now who was raising a seed [round], because I could raise $10 million, there’s so much money going around.
TC: It’s incredible that you could be at a disadvantage because you’re now running a real business with multiple properties, particularly given that you seem to have a huge opportunity ahead of you. As you’ve mentioned in the past, there will be a majority minority population in this country in 10 years or so. Are you developing products for other communities, including the Afro-Latino community?
MD: We’ve thought a lot about the sub communities that have huge audiences, are growing quickly, but perhaps don’t have a space or a place to connect. And originally, one of our ideas was to build out our tech platform, then change the UI to accommodate all these [ideas] and become a true house with brands that serve people and communities on a niche level — so Gen Z, Black, LGBT, Afro Latina, for the many Caribbean folks who are in the U.S. and Nigerian Americans; there are so many sub communities within the diaspora.
What we realized is that the overhead and operations of doing that over and over would not be a good idea and that we should figure out how to a build the operations side instead. That’s why we invested in our own ad network, because we can say, ‘Hey, creator in Brooklyn who’s amazing, you have a million monthly unique visitors, which is better than half the publications out there. You don’t have ad sales team. Let’s partner with each other.’ That was the first solution.
The second is this social networking platform that we’ve built. Part of the frustration and tension I felt when I started the company was feeling like there was no one like me. I couldn’t find other Black women who wanted to build a huge company and change the world and do it through tech. There was no one walking around Mountain View who looked like that, and I didn’t know where to go. We want to solve that through technology and through a platform that makes it easy for people to find each other. Hopefully then, once people are more connected, they can build their own companies and come up with their own organizations.
Kerry Washington’s fingerprints are all over Hollywood. The Emmy, SAG and Golden Globe nominated actor, director and producer has touched myriad projects, from her role as Olivia Pope on “Scandal” (where she was the first African-American woman since 1974 to headline a network drama) to her production of Hulu’s “Little Fires Everywhere” and Netflix’s AMERICAN SON (she starred in both, as well). And let’s not forget her many director credits, including on “SMILF”, “Scandal”, and “Insecure”.
But Washington is much, much more than a Hollywood superstar.
She’s gotten deeper into the tech realm over the past few years, and not only by writing a check.
Washington participated in the $75 million investment in The Wing, a members’ only coworking space for women. She also invested in Community, the platform that gives stars and celebrities a more direct connection with their fans (you can ‘text’ her using the number in her Twitter bio) and she invested in Byte, a D2C teeth-straightening platform (where she serves as Creative Ambassador).
Washington told TechCrunch in May that her portfolio is all about companies that she can be proud to be associated with.
“That pride comes from the quality of the product and how it improves the quality of people’s lives,” said Washington. “The idea of having a voice is really important.”
Whether it’s through creating space to come together, straightening a smile, or giving people a more direct connection to their icons, her portfolio is exclusive when it comes to empowering people to use their voices.
Washington is also an activist.
She was honored with the NAACP’s President’s Award in 2013, and received the GLAAD Media Vanguard Award in 2015, as well as the ACLU Bill of Rights Award in 2016. In 2018, when the world went through a huge change in the form of #MeToo, Washington joined Natalie Portman, America Ferrera, Reese Witherspoon and others as a leader of the Time’s Up movement within Hollywood.
She’s also the co-chair of Michelle Obama’s “When We All Vote” campaign and the founder of Influence Change 2020, an initiative that partners with non-profit organizations with the goal of increasing voter turnout.
It should go without saying, we’re absolutely thrilled to sit down for a conversation with Washington at Disrupt 2020.
We’ll ask her about her recent move towards tech investment and operations, and which sectors are most exciting to her as we head into the next couple years. We’ll also talk about the rapidly changing media landscape as platforms like Netflix, Hulu, Quibi, Disney+ and HBO take up more space in the ecosystem and networks look to evolve alongside the shift in user behavior.
As we head into a presidential election, in a year where the Black Lives Matter movement has risen to the forefront, we’ll also talk about her activism work and get her insights on where the tech world is falling short with regards to diversity, equity and inclusion, and how it can do better.
There will be no shortage of topics to cover with Washington and we’re very excited about this conversation.
Disrupt 2020 runs from September 14 – September 18 and will be virtual this year. Get your front row seat to see Kerry Washington speak with a Disrupt Digital Pro Pass or a Digital Startup Alley Exhibitor Package before prices increase in a few short weeks. Can’t wait to see you there!
Connect Ventures, the London-based seed-stage VC that was an early investor in Citymapper and Typeform announced a new $80 million fund last month to continue investing in “product-led” founders.
Launched back in 2012, when there was a shortage of institutional capital at seed stage in Europe and micro VC was a novelty in the region, Connect Ventures invests in B2B and consumer software across Europe, including SaaS, fintech, digital health and “future of work.”
Running throughout the firm’s investment thesis is a product focus, with the belief that product-led — or “product-first” — software entrepreneurs are the kinds of founders most likely to transform the way we live and work at scale.
Connect Ventures does fewer deals per year than many seed-stage firms, promising to place bets in a smaller number of early-stage companies. It recently backed scaling startups such as Curve and TrueLayer. Keeping a compact portfolio lets the shop throw more support behind its investments to help tip the scales toward success.
To learn more about Connect’s strategy going forward, I put questions to partners Sitar Teli, Pietro Bezza and Rory Stirling. We covered what makes a product-first founder, the upsides and downside of “conviction investing,” and the next digital product opportunities in fintech, health and the future of work.
TechCrunch: Connect Ventures positions itself as a pan-European VC investing in “product-led” founders at seed stage. Can you be more specific with regards to check size, geography and the types of startups you look for?
Sitar Teli: Of course, I know it can be hard to differentiate seed funds at first glance, so it’s worth digging in one layer down. Connect is a thesis-led, seed stage, product-centric fund that invests across Europe. I know we’re going to dive into some of those parts later, so I’ll focus on our investment strategy and what we look for. We lead seed rounds of £1-£2 million (sometimes less, sometimes more) and make 8-10 investments a year. Low volume, high conviction, high support is the investment strategy we’ve executed since we started eight years ago.
Business is the foundation, of, well, business. For startups, finding a working business model and honing it through decision-making, smart hires and relentless focus on the right metrics can be the difference between building a scalable company and collapsing into the next Luckin Coffee.
Given how important business performance and finance is, it’s not uncommon in the early days of a startup to hire an “outsourced CFO” — a part-time financial professional who helps with budgeting, basic forecasting and preparing reports for investors. Those reports, though, are static, and don’t lead to great conversations around how a business is performing, how it can change and what should happen next for all parties involved.
Quaestor wants to upend the static spreadsheets and PDFs sent to dozens if not hundreds of people on cap tables today with a software-first solution that allows executives and their investors to hold better, more intelligent conversations about business performance.
The idea for the company congealed in the offices of 8VC, where the firm’s partners like Joe Lonsdale and Alex Moore repeatedly watched companies struggling to present all of their business information to their investors in a time-efficient way. 8VC has a history of incubating projects just like Quaestor, such as CRM tool Affinity.
For Quaestor, the firm eventually brought together a trio of co-founders, with Lonsdale also officially co-founding the company. John Melas-Kyriazi is CEO, and formerly was with Spark Capital for five years as a VC. He left earlier this year, and is maintaining his board seats there. Kevin Hsu is head of product and was a product manager at cap table management startup Carta before joining 8VC as an EIR. Finally, Deny Khoung is head of operations and was formerly the director of design at 8VC.
The group has been riffing for months on the idea of improving collaboration around the fundamentals of startup metrics, but officially spun out of 8VC in March and raised $5.8 million, led by 8VC with participation from Melas-Kyriazi’s former firm Spark as well as Abstract Ventures, Riot Ventures, Fathom Ventures and GFC.
Let’s head back to the product though. Quaestor connects founders, company executives and investors all together to discuss a business and make sure everyone is on the same page regarding targets and metrics. “How do VCs and their companies interact around financial data, whether it’s documents like P&L / balance sheet / cash flow statement [or] individual financial KPIs like revenue, gross margin, net income, ARR, etc.?,” Melas-Kyriazi explained. “How do companies share that information with their investors to keep them updated? How do investors support their companies in understanding what goals they should be setting?”
The goal with the platform is two-fold. One is to ingest financial data and automatically prepare it so that all those annoying Excel mistakes disappear and everyone can read from one consistent set of metrics. The other is to help guide everyone to focus on the metrics that matter. “Most entrepreneurs come from a product background or engineering or sales and they might not necessarily have worked in finance before,” Melas-Kyriazi said. The goal with Quaestor is to help push them to think carefully about their finances.
Over time as cap tables get more complicated and more investors add their capital, the goal is that Quaestor can offer a single source of truth for all financial data, without requiring the CEO or an outsourced CFO to prepare individual reports for each firm.
Right now, the company is focusing its product on early-stage startups, but hopes to grow up with those companies as they scale, expanding its services to other types of companies over time. The company’s product has been in beta as it tests out its MVP.
Quaestor is now a team of eight, with several offer letters in motion (so that number is actively growing as I write this article). Melas-Kyriazi said that product development and early scaling are the key goals for the startup over the next year or two.
Since the killing of George Floyd at the hands of four police officers heightened awareness about racial justice, the experiences of Black people in tech — and the industry’s lack of racial diversity — are getting new attention.
In the tech ecosystem at large, the industry is still predominantly white and male, and venture capital is no different. Just 3% of investment partners are Black, according to a 2018 survey from by the National Venture Capital Association and Deloitte. Meanwhile, more than 80% of VC firms don’t have a single Black investor and just 1% of venture-backed startups have a Black founder, according to BLCK VC.
“Venture capital certainly plays a role,” GV Principal Terri Burns told TechCrunch about the overall lack of diversity in tech. “VC is a tool that can enable businesses to scale greatly and quickly, and historically, this tool hasn’t been equally distributed. For example, VC has traditionally focused on founders from a small number of institutions and pedigrees that are not particularly diverse (in 2016 we learned from Richard Kerby, general partner at Equal Ventures, that 40% of VCs went to either Harvard or Stanford). With more equal distribution of funds across backgrounds, underrepresented people will have a greater chance at success.”
Burns shared the above and more as part of our survey of a handful of Black VCs in tech. Burns, and others, described what they’re looking for in their next investment, identified overlooked opportunities that are ripe for innovation and offered advice for founders navigating COVID-19 amid this racial justice uprising.
“Both COVID-19 and the racial justice uprising have had really profound impacts on our society and the tech ecosystem,” Precursor Ventures Managing Partner Charles Hudson told TechCrunch. “For me, the main takeaway from COVID-19 is that planning in an uncertain environment is extremely stressful for founders. Advice that made sense in March and April might not apply in May and June. We went from a world where it felt like we might shelter-in-place through the fall to an attempted reopening of the economy. I think the racial justice uprising is a different thing. It’s bigger than technology, it’s about our society coming to grips with some really important, structural issues.
“While I think everyone is really struggling with the impacts of COVID-19, I think employees and founders of color are being particularly impacted by the racial justice issue and it is weighing heavily on the minds and hearts of many who are trying to process what’s happening while also trying to be productive and engaged at work. I think it’s important to be aware of that and do what you can to support folks who are struggling under the weight of this.”
Below, we’ve gathered insights from:
Image Credits: Photo by Kimberly White/Getty Images for TechCrunch)
What are the industries you’re most interested in right now?
I am into things that promote sustainability, that are clever. I like the senior care industry, but also pushing that a little further into senior activity and thriving entrepreneurship, et cetera. And media. I think media has a really interesting, exciting opportunity right now because of the way representation is so important, has always been, but it’s even more now. I’m seeing more and more interesting and unique media options rather than the status quo.
What are you looking for in your next investment?
I’m looking for people who can break down barriers within their industries, who can offer something exciting, and new, and innovative to their end user, and someone who is daring, and risk-taking, and not afraid to go against the grain. That’s really the main thing I’m looking for.
What are some overlooked opportunities that are ripe for innovation?
Again, I think senior care is something a lot of people are thinking about, thankfully. At the same time, we don’t spend a lot of time thinking about what value seniors can bring to the ecosystem, to even tech. I think you have millions and millions of people who have a gained experience that no one else has, that’s their junior, and you have all this technology at their fingertips. I’ve noticed that a lot of seniors I know have some sort of… it’s intuitive, some of this tech, like voice. They’re used to having to track down their children, and so they’re used to yelling out in the middle of an empty room, to be honest. I think that’s part of where it comes from.
They don’t have the same vanities that a lot of younger people have, and so they’re willing to take more risk when it comes to trying something new. It’s not necessarily something they want to be dangerous about because they are, by and large, taking care of themselves and caring about damage to their bodies, but they’re not afraid to look silly or to sound silly when they’re trying out a new device. I think that’s something that we can really tap into, because a lot of these people who are 70, 75, 80 years old, there’s still 20 years purchasing power there, at the least, and it’s just important that we don’t discard them and forget about them.
A few years back, startups focusing on artificial intelligence had a whiff of bullshit about them; venture capitalists became inured to young tech companies claiming that their new AI-powered product was going to change the world as hype exceeded product reality.
But in the time since, AI-powered startups have matured into real companies, with investors stepping up to fund their growth. In niches, from medical imaging, of course, to speech recognition, machine learning and deep learning and neural nets and everything else that one might scoop into the AI bucket has seemed to have grown neatly in recent quarters.
But AI is not the only startup niche appearing to enjoy tailwinds lately. No-code and low-code startups have also enjoyed increasing media recognition, and, as TechCrunch has covered, notable venture capital rounds.
Sitting in the middle of the two trends, a startup called MonkeyLearn wants to bring low-code AI to companies of all sizes. And the firm just raised $2.2 million. Let’s take a look.
Starting with the round, MonkeyLearn has raised $2.2 million in a round led by Uncork Capital and Bling Capital. Speaking with Raúl Garreta, a co-founder at the company and also its CEO, TechCrunch learned that MonkeyLearn started off as a more developer-focused service that provided machine learning tooling via an API. But after demand materialized from people who couldn’t code to use the company’s tech for text analysis, the company wound up heading in a slightly different direction.
Garreta gave TechCrunch a demo of the company’s service, which allows users to upload data — think rows of text in an Excel file, for example — and quickly train MonkeyLearn’s software to parse out what they are looking for. After the model is trained over the course of a few minutes, it can then be set to work on a full data set.
According to Garreta, text analysis has a lot of demand in corporate environments, from categories like support ticket sorting to sentiment analysis.
But MonkeyLearn’s product that TechCrunch saw is not the company’s final vision. Today the service focuses on data analysis. In time, Garreta wants it to do more with data visualization, providing graphing and other similar outputs to give more of a dashboard-feel to its product.
At the core of MonkeyLearn’s early market traction that helped it land its seed round is the ever-increasing need for non-developers to collect, parse, act on and share data inside of their workplace. If you’ve ever worked nearby to a startup’s marketing or customer success team, you understand this phenomenon. MonkeyLearn wants to give non-developer teams the tools they need to understand data sets without forcing them to go find the engineering team and argue for a spot on the roadmap.
“Our vision is to make AI approachable by providing a toolkit for teams to actually use AI in their daily operations,” Garreta said in a release. MonkeyLearn is theoretically well-situated in the market. Companies are increasingly data-driven at the same time as the market is strapped for employees who can make data sing.
The startup has a free tier, and a few paid tiers, along with add-ons and a one-off option. You can call that the “all of the above” pricing model, which is fine, given the youth of the company; startups are allowed to experiment.
After slower than anticipated early fundraising, MonkeyLearn told TechCrunch that it could have raised double in its seed round what it wound up accepting.
What plans does the company have for the new capital? A more aggressive go-to-market motion, and a more formal sales team, it said. As MonkeyLearn sells to to mid-market and enterprise firms, Garreta explained, a more formal sales team is needed, though he also emphasized that founders must start the selling process at a startup.
As with most seed companies that raise capital, there’s a lot to like with MonkeyLearn. Let’s see how well it executes and how fast it can get to a Series A.
Women start 40 percent of the businesses in the U.S., but they receive just 3% of venture funding. It doesn’t take a math whiz to recognize that such an extreme funding gap could spell opportunity, but it might help if you are math minded, a longtime investor, and happen to be woman and so conceivably understand certain products and pitches better than some men.
That was certainly the thinking of both Lori Cashman and Suzanne Norris, who came together in 2016 to form Boston-based Victress Capital, a consumer-focused, seed- and early-stage firm that just closed its second fund with nearly $22 million in funding to back gender diverse teams, meaning there is at least one woman on the founding team.
Cashman is a Duke grad who has spent her career as an investor, including previously cofounding a private equity firm, Linear Capital, to invest exclusively in owner-managed businesses. Norris, meanwhile, with two degrees Harvard, has been an investment banking analyst, a management consultant, and spent nearly four years as a VP focused on e-commerce with the company Kate Spade.
The two friendly acquaintances originally joined forces to enhance their “cognitive diversity,” says Cashman, scraping together a total of $2 million from friends and family so they could establish a track record.
Ultimately, they used that money to fund 14 startups by writing checks ranging from $100,000 to $150,000. A couple of them have already been acquired. Moxxly, which sold silent, wearable breast pumps, was acquired by Medela, a leading breast pump maker, in 2017. Last summer, it was shut down, but Cashman and Norris suggest that investors (another of whom was Randi Zuckerberg) got their money back and that they were happy to see it acquired by what seemed at the time like a strong strategic partner. A second portfolio company, Werk, more recently sold to a Chicago-based startup called The Mom Project for undisclosed terms.
Others of their bets include Daily Harvest, a direct-to-consumer organic food delivery business that has so far raised $43 million from investors, according to Crunchbase; Mented Cosmetics, a cosmetics company catering to women with darker skin tones that has raised $4 million to date; and Copper Cow Coffee, a young L.A.-based startup that makes organic Vietnamese coffee and has raised $3 million, per Crunchbase.
The idea all along was to raise a larger fund so that as Victress’s young portfolio matures, it can invest more into its breakout winners, as well as to fund other innovative young startups.
In fact, toward that end, Victress — whose newest fund came largely came from family offices — has added to its team in recent years. In February, it brought in Kate Castle, a longtime marketing partner at Flybridge Capital Partners who later cofounded XFactor Ventures as a partner. In 2018, it also hired HBS alum Madeline Keulen, who previously interned with Victress and is now a vice president. (Because of Norris’s background and network, Victress receives some of its deal flow from Harvard and HBS and typically brings in HBS students as interns.)
It wasn’t easy assembling its team — or its new fund. Norris half-kiddingly calls $20 million “no man’s land” in the eyes of institutional investors. Though they are just now closing the vehicle, they began assembling checks for it in late 2018 and have already funded seven startups that represent 25% of their new investing capital.
Still, they’re playing the long game and think the relationship-building they’ve done will pay off — both with institutional investors that will be tracking this second fund with an eye toward its third, and with venture firms around the country with whom they’ve syndicated deals and that now keep Victress in mind when meeting nascent startups with diverse founding teams.
A big win would help grow the outfit from here, too, of course. Only time will tell if they’ll have one, but Norris and Cashman talks enthusiastically about numerous portfolio companies, including Minneapolis-based Rae, which makes what it markets as libido-enhancing vegan vitamins. Rae sells its products directly to consumers but they’re also available at Target, a retail giant that, notably, has remained open throughout the pandemic.
Rae was able to secure such valuable real estate partly because its cofounder and CEO, Angie Tebbe, spent the previous 12 years as a senior director in merchandising at Target, where she oversaw the private label products in the chain’s beauty and wellness aisles. But Rae’s products are also priced affordably, with a 30-day supply of vitamins costing $14, compared with many alternatives that cost twice as much and more.
That’s partly what drew Victress to the company. Victress is focused on tech-enabled consumer services, marketplaces and digitally native brands. But if a startup in the last camp wants its attention, its products can’t be priced for the most affluent consumers with money to burn. Victress is far more interested in startups that aim to sell at an “authentic, accessible price point for the majority of America,” says Cashman.
Sequoia Capital India on Monday announced it has secured $1.35 billion from LPs for two new funds as the storied venture firm looks to ramp up its investments in the world’s second-largest internet market and Southeast Asia.
The two new funds — a $525 million venture fund and a $825 million growth fund — will help the VC firm, which operates in India and Southeast Asia through one arm, more comprehensively serve the startup ecosystem in the region, said Shailendra Singh, a managing director at Sequoia Capital India.
“A fundraise represents a massive responsibility to deliver attractive returns to Sequoia’s Limited Partners, the majority of which are nonprofits, foundations and charities. We do this by partnering with outstanding founders who are building category defining companies,” he said.
Sequoia Capital India, which roped in former Google India head Rajan Anandan and former Uber India head Amit Jain last year, made more than 50 investments in 2019, more than any other firm in the country.
Top VC firms in India last year based on the number of investments they made. Image Credits: InnoVen
The firm, which began investing in India 14 years ago, closed its last fund, of $695 million, for India and Southeast Asia in 2018. That was its sixth fund for the region.
The VC firm’s India and SEA arm has made several high-profile investments over the years, including in edtech giant Byju’s, which is now valued at $10.5 billion, ride-hailing giant GoJek, e-commerce platform Tokopedia, Singapore e-commerce startup Zilingo, and fintech startup PineLabs, online learning startup Unacademy, fintech firm RazorPay and Khatabook, which offers bookkeeping services to merchants. Last year, Sequoia Capital India sold most of its stake in budget hotel startup Oyo. It has backed 11 unicorns in India and Southeast Asia to date.
The new funds from Sequoia come at a time when several investors have lost appetite as the coronavirus pandemic disrupts businesses. The per capita income of Indians, which remains some of the lowest across the globe, has also not improved over the years.
“Due to frequent cycles of intense competition, startups in our region have struggled to grow rapidly with good unit economics, often posting very high losses for the scale of business. This has prevented very large profitable technology businesses in our region from emerging. To add to these challenges, startups in India do not have the benefit of a regulatory framework that allows listing on foreign exchanges like Nasdaq. In this market context, most startups have chosen to remain private, and raising capital has become a proxy for success,” said Sequoia’s Singh.
“We believe there is an opportunity to choose a different path. Our ecosystem has arrived at a fork in the road.”
Image Credits: Sequoia India
Last year Sequoia Capital India launched an accelerator program, called Surge, for early-stage startups. Since then about 50 startups have participated in Surge, which some analysts told TechCrunch has reduced Y Combinator’s appeal in the region.
Several venture firms have ramped up their efforts in India, where startups raised a record $14.5 billion last year. Much of the infrastructure is still being built in India, giving giants an opportunity to make early bets on what could become major firms in the future.
Tiger Global, which made an early investment in Flipkart, has written several checks in the past one year to Indian startups building business-to-business. So have General Atlantic, which recently made a sizeable bet on the nation’s top telecom operator Reliance Jio Platforms; Prosus Ventures, an early investor in top food delivery startup Swiggy; and Accel, which closed its sixth venture fund — of size $550 million — for India late last year.
That is great news for Indian startups that are currently facing challenges in raising capital from Chinese investors. Zomato, which counts Sequoia as an early investor, announced in January that it had raised $150 million in a new financing round from Ant Financial. The food delivery startup has yet to receive $100 million of that capital, Info Edge, another investor in Zomato, said in an earnings call two weeks ago.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.
This is Equity Monday, our week-starting primer in which we go over the latest news, dig into the week ahead, talk about some neat funding rounds and dive into the latest big news from the startup world. (You can follow the show on Twitter here, and myself here, if you are so inclined! Don’t forget to check out last Friday’s episode as well. All the cool kids are doing it.)
What a weekend! After some quiet, somewhat dull off-week periods, this weekend brought us twists and turns that were good fun. Most dealt with a possible Uber -Postmates tie up, so we wrote the show to talk about the transaction’s unconfirmed nature.
Then, it got confirmed. So, here’s the second edition of today’s Equity Monday, recast due to the deal’s official nature:
We wrapped this morning wondering if Postmates can provide a narrative boost to Uber, a company that isn’t going to have the best Q2 numbers in its history. With Postmates tucked under its arm going into the earnings call, Uber can double-down on its Uber Eats narrative, flash Postmates around the room and promise that Rides data will get better as well.
Perhaps that would be enough?
Indonesia is not only Southeast Asia’s most populated country, but also one of the world’s fastest-growing economies. But many people, especially outside of major cities, still lack access to basic financial services like bank accounts. Payfazz is one of several tech startups focused on solving that problem by finding innovative ways to give more Indonesians access to financial services. The company announced today that it has raised a $53 million Series B led by B Capital and Insignia Ventures Partners.
Previous investors, including Tiger Global, Y Combinator and ACE & Company, also returned for the round. New backers include strategic investor BRI Ventures, the venture arm of BRI, one of Indonesia’s largest banks. Payfazz’s last round of funding was a $21 million Series A announced in September 2018, led by Tiger Global. Its total raised to date is now more than $74 million.
Founded in 2016 by Hendra Kwik, Jefriyanto Winata and Ricky Winata, Payfazz is an alum of Y Combinator’s accelerator program.
There is a growing list of Indonesian financial tech startups, including Modalku, KoinWorks and Kredivo, that focus on consumer and small business financing, while larger and more diversified tech companies like Gojek and Grab are working their own online payment tools and other services. Payfazz differentiates with a portfolio of mobile services that make it easier for Indonesians to handle routine financial tasks, including bill payments and loans, even if they live in rural areas without banks. The company says it currently serves 10 million monthly active users, and plans to expand its offerings to include more digital financial products.
The company uses a network of financial agents to reach customers because many banks don’t open branches in rural areas, Kwik told TechCrunch. “Due to high fixed costs, traditional banks find it economical to operate only in cities and urban areas with high density and foot traffic,” he said. “This leaves a huge unfulfilled and underserved banking need in rural areas where banking access is very difficult.”
Payfazz’s network currently includes about 250,000 agents, most of whom are located in small stores. Users deposit cash with the agents, who serve as go-betweens with banks. This allows Payfazz’s users to have a balance they can use to pay phone, electricity and other bills. Payfazz also recently launched loans and payments for offline retailers.
Kwik said Payfazz built an agent network because even though smartphone penetration is high in Indonesia, many people haven’t used direct digital banking services before, so talking to a Payfazz agent helps familiarize them with the process. Because most of its agents are based out of warung or kirana stores, or neighborhood shops that sell food and other necessities, they are easier for people in rural areas and small towns to access than banks, ATM machines or convenience store chains.
“Our agents are small businesses and people who have lots of traffic from rural areas’ populations in their places. It can be warung and kirana stores, telco stores, small restaurants or even someone’s house,” Kwik said. “They are the perfect profile to become our agents because they’re ubiquitously distributed and have high coverage in rural areas.”
He added that Payfazz also gives agents an opportunity to earn extra income. Payfazz takes a 0.5% to 1% commission on every transaction, and agents are allowed to set the margins they charge customers for transactions, usually between 5% to 9%. Before signing on an agent, Payfazz screens them using KYC (“know your customer”) and verification technology to gauge trustworthiness, traffic and sales potential.
While Grab Financial and other Southeast Asian fintech companies may eventually become Payfazz’s competitors, Kwik said he currently sees them as potential partners.
“The reason is simply because most of these providers still focus their market and resources in the cities and urban areas, like many of the traditional banks. Meanwhile, Payfazz focuses all its market and resources in rural areas,” he added. “Payfazz can help other banks and financial service providers to expand their reach to rural areas and capture hundreds of millions of users and billions of dollars of revenue opportunity there.”
In a statement about the funding, Insignia Ventures founding managing partner Yinglan Tan said, “We have been privileged to have supported Payfazz since their early days. We believe that this path to taking their fintech ecosystem from Indonesia to the rest of the region will meet the pressing needs of many more of Southeast Asia’s digital consumers, and are excited to see how Hendra and the Payfazz team will build on top of the portfolio of services that millions of Indonesians are already using.”
Earlier this week, GGV Capital’s Jeff Richards and Hans Tung joined TechCrunch for an Extra Crunch Live session. During our hour-long chat, we touched on startup profitability, the global venture capital scene, why GGV doesn’t have an office in Europe, how the venture industry is responding to its stark lack of diversity and other issues.
When it comes to useful bits of information, this was perhaps the most useful Extra Crunch Live discussion in which I’ve participated. One moment that stood out came early in the chat when we were talking about COVID-19-driven headwinds and tailwinds and how many startups might be in trouble. Richards said the following (emphasis via TechCrunch):
“You know, the one thing that’s been remarkable for me — I was in Silicon Valley as an entrepreneur in the ’99, 2000 dot-com bubble, and 9/11. I was here in ’08, ’09 — I think there is a level of resiliency in Silicon Valley that we did not have 10 years ago and 20 years ago. I don’t have data to point to that. But we have been saying now for a few months that we’ve been blown away at the level of maturity, calmness, perseverance [and] resiliency that our companies and the founders and management teams have. On an emotional level, it’s been very heartwarming, because you hope to back the kind of people that are building real companies that can withstand challenges.
I think the corollary to that is you’ve seen companies that raised a ton of money and were burning a ton of cash and weren’t building very good businesses, a lot of those frankly went under in Q1 or are going under now. They haven’t been able to raise more cash and they’re just kind of dead.”
Both Richards and Tung were positive about their own portfolio companies’ recent performance and financial health (cash position, really). But it appears that not only are their portfolios doing well, but other startups are a bit more solid than in previous downturns.
On the flip side, however, there is a separate cohort of startups that were running inefficiently before and are now perhaps unfundable. Reading both points in unison, it appears that the startup market is bifurcating between the companies that will come out of the COVID-19 era unwounded, and those that are suffering. And the companies that weren’t the most cash hungry probably have the highest chance of being in the first bucket.
There’s a lot more to get to. So hit the jump for the full video and audio, and a few more of the best bits from the transcript. (You can snag a cheap Extra Crunch trial here if you need one.)
Oh, and don’t forget to stay up to date on coming chats. There’s still a lot to do.
Here’s the full video rewind. Our favorite bits of the transcript follow:
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
Before we dive in, don’t forget that the show is on Twitter now, so follow us there if you want to see discarded headline ideas, outtakes from the that got cut, and more. It’s fun!
Back to task, listen, we’re tired too. But we didn’t let that stop us from packing this week’s Equity to the very gills with news and notes and jokes and fun. Hopefully you can chuckle along with myself and Natasha and Danny and Chris on the dials as we riffed through all of this:
Right, that’s our ep. Hugs from the team and have a lovely weekend. You are all tremendous and we appreciate you spending part of your day with the four of us.
For two months, the people of Hong Kong waited in suspense after China’s legislature approved a new national security law. The legislation’s details were finally made public yesterday and almost immediately went into effect. As many Hong Kong residents feared, the broadly written new law gives Beijing extensive authority over the Special Administrative Region and has the potential to sharply curtail civil liberties.
In response, the United States began the first measures to end the special status it gives to Hong Kong, with the Commerce and State Departments suspending export license exceptions for sensitive U.S. technology and blocking the export of defense equipment.
Much remains uncertain. Hong Kong had also previously enjoyed many freedoms that do not exist in mainland China, under the “one country, two systems” principle put into place after the United Kingdom returned control to China. After announcing the new policies, the U.S. government said further restrictions are being considered. Under special status, Hong Kong had privileges including lower trade tariffs and a separate customs and immigration designation from mainland China, but now the future of those is unclear.
Equally opaque is how the erosion of special status and the new national security law will impact Hong Kong’s startups in the future. In conversations with TechCrunch, investors and founders said they believe the region’s ecosystem is resilient, partly because many companies offer online services — especially financial services — and have already established operations in other markets. But they are also keeping an eye on further developments and preparing for the possibility that key talent will want to relocate to other countries.
Intel said on Friday it will invest $253.5 million in Jio Platforms, joining a roster of high-profile investors including Facebook and Silver Lake that have backed India’s top telecom operator at the height of a global pandemic.
The chipmaker’s investment arm said it is acquiring a 0.39% stake in Jio Platforms, giving the Indian firm a valuation of $65 billion. Intel is the 12th investor to buy a stake in Jio Platforms, which has raised nearly $15.5 billion by selling 25% stake since April this year.
“Jio Platforms’ focus on applying its impressive engineering capabilities to bring the power of low-cost digital services to India aligns with Intel’s purpose of delivering breakthrough technology that enriches lives. We believe digital access and data can transform business and society for the better. Through this investment, we are excited to help fuel digital transformation in India, where Intel maintains an important presence,” said Wendell Brooks, Intel Capital President, in a statement.
More to follow…