Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world. Last week, we looked at how Alibaba and Tencent fared in the last quarter; the talk in Silicon Valley and Beijing this week is on Y Combinator’s sudden retreat from China. We will also discuss the enduring food delivery war in the country later.
The storied Silicon Valley accelerator Y Combinator announced the closure of its China unit just a little over a year after it entered the country. In a vague statement posted on its official blog, the organization said the decision came amid a change in leadership. Sam Altman, its former president who hired legendary artificial intelligence scientist Lu Qi to initiate the China operation, recently left his high-profile role to join research outfit OpenAI. With that, YC has since refocused its energy to support “local and international startups from our headquarters in Silicon Valley.”
What was untold is the insurmountable challenge that multinationals face in their attempt to win in a wildly different market. Lu Qi, who wore management hats at Baidu and Microsoft before joining YC, was clearly aware of the obstacles when he said in an interview (in Chinese) in May that “multinational corporations in China have almost been wiped out. They almost never successfully land in China.” The prescription, he believes, is to build a local team that’s given full autonomy to make decisions around products, operations, and the business.
A former executive at an American company’s China branch, who asked to remain anonymous, argued that Lu Qi’s one-man effort can’t be enough to beat the curse of multinationals’ path in China. “All I can say is: Lu has taken a detour. Going independent is the best decision. When it comes to whether Chinese startups are suited for mentorship, or whether incubators bring value to China, these are separate questions.”
What’s curious is that YC China seemed to have been given a meaningful level of freedom before the split. “Thanks to Sam Altman and the U.S. team, who agreed with my view and supported with much preparation, YC China is not only able to enjoy key resources from YC U.S. but can also operate at a completely independent capacity,” Lu said in the May interview.
Moving on, the old YC China team will join Lu Qi to fund new companies under a newly minted program, MiraclePlus, announced YC China via a Wechat post (in Chinese). The initiative has set up its own fund, team, entity and operational team. The deep ties that Lu has fostered with YC will continue to benefit his new portfolio, which will receive “support” from the YC headquarters, though neither party elaborated on what that means.
The food delivery war in China is still dragging on two years after the major consolidation that left the market with two major players. Meituan, the local services company backed by Tencent, has managed to attain an expanding share against Alibaba-owned Ele.me. According to third-party data (in Chinese) provided by Trustdata, Meituan accounted for 65.1% of China’s overall food delivery orders during the second quarter, steadily rising from just under 60% a year ago. Ele.me, on the other hand, has lost nearly 10% of the market, slumping to 27.4% from 36% a year ago.
In terms of monetization, Meituan generated 15.6 billion yuan ($2.2 billion) in revenue from its food delivery segment in the quarter ended September 30. That dwarfs Ele.me, which racked up 6.8 billion yuan ($970 million) during the same period. Both are growing north of 30% year-over-year.
This may not be all that surprising given Alibaba has arguably more imminent battles to fight. The e-commerce leader has been consumed by the rise of Pinduoduo, which has launched an assault on China’s low-tier cities with its ultra-cheap products and social-driven online shopping experience. Meituan, on the other hand, is fixated on beefing up its main turf of on-demand neighborhood services after divesting its costly bike-sharing endeavor.
When both contestants have the capital to burn through — as they have demonstrated through heavily subsidizing customers and restaurants — the race comes down to which has greater control of user traffic. Meituan holds a competitive edge thanks to its merger with Dianping, a leading restaurant review app akin to Yelp, back in 2015. Dianping today operates as a standalone brand but its food app is deeply integrated with Meituan’s delivery services. For example, hundreds of millions of users are able to place Meituan-powered food delivery orders straight from Dianping.
Alibaba and Meituan used to be on more friendly terms just a few years ago. In 2011, the e-commerce giant participated in Meituan’s $50 million Series B financing. Before long, the two clashed over control of the company. Alibaba is known to impose a heavy hand on its portfolio companies by taking up majority stakes and reshuffling the company with new executives. That’s because Alibaba believes that “only when you operate can you generate synergies and really create exponential value,” said vice chairman Joe Tsai in an interview. “Whereas if you just make a financial investment, you’re counting an internal rate of return. You’re not creating real value.”
Ele.me lived through that transformation. As of September, Alibaba has reportedly (in Chinese) completed replacing Ele.me’s management with its pool of appointed personnel. Ele.me’s founder Zhang Xuhao left the company with billions of yuan in cash and joined a venture capital firm (in Chinese).
Meituan’s founder Wang Xing had more unfettered pursuits. In a later financing round, he refused to accept Alibaba’s condition for portfolio companies to eschew Tencent investments, a strategy of the giant to hobble its archrival. That botched the partnership and Alibaba has since been gradually offloading its Meituan shares but still held onto small amounts, according to Wang in 2017, “to create trouble” for Meituan going forward.
Last week, at a StrictlyVC event in San Francisco, we sat down with Maryanna Saenko and Steve Jurvetson, investors who came together to create the investment outfit Future Ventures roughly one year ago. It was their first public appearance together since announcing their $200 million fund, and we started by asking Jurvetson about his high-profile transition out of his old firm DFJ. (He said of the experience that “sometimes life forces a dislocation in what you’re doing, and it got me to become an entrepreneur for the first time in a long time.”)
We also talked about how the two came together and where they’re shopping, as they have fewer constraints than most firms. It was a wide-ranging chat that covered SpaceX and to a lesser extent Tesla, whose boards of directors Jurvetson sits on. We also talked about The Boring Company, in which Future Ventures has a stake, the profound dangers of the AI race between companies (and countries), and whether the powerful psychedelic ayahuasca — or something like it — might represent an investment opportunity. Included in the mix was what Jurvetson described as potentially the “biggest money-making opportunity” he has “ever seen.”
Read on to learn more. Our conversation has been edited lightly for length.
You’ve come together to build this new fund that has a 15-year investing horizon. Your interests overlap quite a bit. Maryanna, you’re a robotics expert with degrees from Carnegie Mellon; you were with Airbus Ventures before joining DFJ then heading later to Khosla Ventures. Who is better at what?
SJ: She’s better at everything, is the answer, but I think we’re better as a pair. The beauty of small team is you’re better than you would be on your own. I knew when I set off that I didn’t want to do it alone. I know that the people I’ve worked with over the last 20 years have made me better. The best investments I did at DFJ I largely attribute to the junior partner I was working with at the time, and I might not have done those best deals if I was on my own.
There’s something about the dialectic, the discussion, the debates with someone you respect whose opinion is valuable, so rather than thinking, ‘You handle this, I’ll handle that’ and partitioning it, it’s more of a [back and forth]. So we have partner meetings all the time, just not any scheduled meetings.
Certainly, Maryanna’s deep background in robotics is a vein of interest, as is all the aerospace stuff. But just a reminder, when I first interviewed her [Jurvetson originally hired her at DFJ], I was blown away that she had already invested in several of the quirky sectors from quantum computer to phasor antennas for satellites to [inaudible but relating to space].
Of course you would be investing [in this thing I’ve never heard of before].
MS: It’s going to become relevant, I promise.
Speaking of aerospace, you two have invested in SpaceX, a company that DFJ had also backed. Is this company ever going to go public?
SJ: I think the official last tweet on this matter was that the company will go public after there are regularly scheduled flights to Mars.
Which is when?
SJ: It might not be that far off. Probably within the 15-year [investing] cycle that we have now. Clearly the business is much more dramatic than just that. That’s the big storm on the horizon [that captures a lot of interest] but in the near term, there are multiple billions of dollars in revenue. They’re a profitable business. And frankly, they’re about to launch what may be the biggest money-making opportunity I’ve ever seen in my life, which is the broadband satellite data business [Starlink, which is a constellation being constructed by SpaceX to provide satellite Internet access].
So there’s plenty of good stuff happening before we get to Mars. That was just a way to put all the investment bankers off. They’re continuously hounding the company, ‘When are you going public? When are you going public?’
It is 17 years old. Have you made money off it [as an investor] thus far?
SJ: Oh, yeah, at our prior firm, they’ve [enjoyed] well over $1 billion in profit [through secondary sales].
What do you think of scientists’ concerns that these satellites going to ruin astronomy because they’re so bright? I know SpaceX has tried to paint them. I also know SpaceX isn’t alone and that Amazon is also trying to put up a constellation, for example. But you’re a mission-driven firm. Should we be worried that we’re littering the sky with these things?
MS: One of the fundamental questions when you invest in technology is what are the second-order effects that we’re aware of and what are the second-order effects that we’re not clever enough to foresee ahead of time [and] to look holistically at these problems.
So first and foremost, right, it’s not just Space X. Many companies these days are trying to put up a constellation whether in [Low Earth Orbit] or [Medium Earth Orbit] or increasingly in [Geostationary Orbit]. We need to think mindfully and work with the scientific communities and say, ‘What are the needs?’ Because the reality is that the communication is going to go up, and if it’s not from U.S. companies, it’ll be from European or from Asian companies. So I think the scientific community needs to wake up, unfortunately, to the reality that the Luddite form of saying, ‘Technology isn’t going up to space’ . . . and they should say say, ‘Here’s a set of metrics that we’d like to continue moving forward with.’
Ideally we can design to those specs. Beyond that, I fundamentally believe we’ll find ways to shine brighter lights and move further [out]. Honestly, most of the interesting imaging happens well past [Low Earth Orbit] and I think when we start building a lunar base, we’ll solve a lot of these problems.
At StrictlyVC’s last event, we played host to a supersonic jet company called Boom. There are a handful of companies with which it competes, too–
MS: Oh, more than [a handful]. If you count just pure electric aircraft companies, I’ve met with 55 of, I would guess, around 200 or 300. Within that, supersonic is smaller, but it’s still in the dozens.
Whoa, that many? Does the world need supersonic jets — again?
MS: [As a] recovering engineer and scientist, the way that I look at the space is does the business model fundamentally [make more sense] than when we tried this the last time in the ’80s. If the answer is, ‘This time, we’re a bunch of clever software kids building an aerospace device and don’t worry about it, we’ll figure out how to build an aircraft,’ I’m going to tell you all the reasons that isn’t necessarily going to work.
I think on the electric aircraft side, we have a bunch of questions to answer about what is the timeline of battery density versus what is a mission profile for these flights that actually makes sense. On the long-range side, we can look at what SpaceX might do with point-to-point capsules. [At the intermediate stage, hypersonic fight], I have not yet seen an engineering trajectory matched with a business model that I think closes in this space, at all, so I’m not sure what the bankers are doing,
SJ: Also, the FAA regulatory cycle is very long. But [in addition to these reasons], our life becomes very simple the moment we know there are 55 to maybe 200 companies in a sector, and this is true for small sat launch or eVTOL aircraft — huge swaths of the landscape. Whenever there’s more than one or two [companies in a space], we don’t even want to meet unless we’re just trying to understand what’s going on. Why would anyone invest in the 130th small sat launch company? We try to look for companies that are unlike anything that’s been seen before at the time.
On that note, there’s only one new company that I know of that’s digging tunnels, Boring Company. It’s another investment of Future Ventures . Did it come with a board seat?
SJ: No. We’re in the first round of investment.
Is this a real company? I’ve read it takes $1 billion to tunnel through a mile.
SJ: It depends where you’re digging. That’s the worst case, but it can be up there, like when Boring Company won this contract in Las Vegas for a very short segment, the competition was bidding like $400 million for just a mile. It was like, really?
If you think about the pattern across aerospace with SpaceX, [the motor] issue with Tesla, and now potentially in construction, fintech, and agriculture, there are industries that haven’t [seen major innovation] in a long time. So the top four companies in America that are digging tunnels all started in the 1800s. That’s an especially long time ago. And the whole point, too, with Boring is switching diesel to electric, to do continuous digging, to reengineer the entire thing with a software and simulation mindset, to dramatically increase the speed and lower the cost. Think two orders of magnitude cheaper at least.
Steve, you’d said once before that in most of the deals you’ve funded across your career, yours was the only check, that there just wasn’t any competition. But more people are focused on the ‘future’ as an investment theme now. Is it harder to find those outliers?
SJ: It’s a little harder. We usually use that as a signal to look to a new market whenever there are multiple checks, When it’s a category, when there are conferences about it, when other venture firms are talking about it, that’s usually a sure-enough sign that we already should have moved on to something else.
MS: The simple reality, too, is the industry is focused on a handful of sectors — enterprise software, consumer internet, and the like — and often there are fantastic funds with one or two edge-case investments, and that’s great, because we love those funds and we want to work with them. But there are very few funds where that trajectory is the straight and narrow of their fundamental thesis.
You raised $200 million for this fund from tech CEOs and hedge funds and VCs; do you have the same constraints that other firms have?
MS: I don’t think we have particularly fine constraints on anything, but we do have the constraint of our own conviction, our word and the quality of our characters, so one of the theses when we raised the fund was that we don’t prey on human frailty, so no addictive substances, no [social media influencers] — and not just because we’re bad at being cool hunters. But that’s not our intention; that’s not what we’re trying to create in the world.
I know you’re interested in AI. What does that mean? Are you funding drug development?
SJ: What have you heard? That’s a really good guess.
There are so many companies — hundreds of them — using AI to try and uncover drug candidates, but they don’t seem to be getting very far or maybe they’re aren’t getting far enough along as fast as I’d expected.
SJ: [We have a related deal in process]. Interestingly, we’ve done ten deals that have closed; we have three more that are in the process, two in the signed term sheet phase. Four are in the area of edge intelligence . . .
MS: I’ll often come at things from how would I build this robot in the world to do some critical task and Steve often looks at it more from the chip and power and processing and how you lay the algorithm onto the silicon. And between those two, we arrive at a really interesting thesis up and down the stack. So we’ve done Mythic, an edge intelligence chip company, but we’ve also looked at this idea that we’re going to send out these AIs into the world but we basically bake them into these edge devices that are terrible [because they don’t work well].
The real issue is an AI that’s getting trained somewhere in some cloud then getting pushed to your edge device and then good luck. But increasingly [we’re thinking] about continuous improvement of those AIs as they’re running in real time and be mindful of how we shuttle the data back to the mother ship data centers to enable that continuous improvement and acceleration of that learning and we have a number of portfolio companies up and down that stack that I’m incredibly excited about.
That all sounds comfortably pedestrian compared to the very big picture, wherein a small group of companies is amassing all the richest data to train AI and are growing more powerful by the day. Steve, you’ve talked about this before, about your concerns that one day there could be very few companies, which would exacerbate income inequality. You said this could be a bigger threat to society than climate change. Do you think these companies — Facebook, Amazon, Google — should be broken up?
SJ: No, I don’t think they should be broken up, but I do think it’s an inexorable trend in the the technology business that there are power laws within firms and between firms . . . If you want to maintain capitalism and democracy, it’s not self-rectifying and it’s only going to get worse. Compared to when we last spoke about this [in 2015], it’s gotten a lot worse. The data concentration, the usage of it.
Think, for example, of SenseTime in China . . . it recognizes faces better than any other algorithm on earth right now . . . So you have the U.S. power laws and power laws between countries as well. That’s just one new pejoration as AI and quantum computing escalates.
So everyone in technology and who invests in it should be thoughtful about what this means and think about entrepreneurial paths to the future we want to live in . . . how we get from here to there is not obvious. The markets [will handle some but not all of these things]. So it’s very worrisome and when I said it’s worst than climate change, I meant it will have more impact on whether humanity makes it through the next 20 years. Climate change [may do us in] 200 years from now but there’s some serious pressing issues over the next 20 years.
And breaking up these companies isn’t part of the solution.
It’s almost like this notion of controlling an AI that’s greater than human intelligence. How would you ever imagine you would control such a thing? How would you even imagine understanding its inner workings? So the notion that through regulation you could break up a natural monopoly when everything that fixes the industry creates a natural monopoly, it’d be like whack-a-mole.
What’s the answer? Looking around the corner, what are you funding that’s going to blow people’s minds? Ayahuasca? Is there a market for that? I know it’s everywhere.
SJ: [Looking shocked.] There are two companies, one we wired funds earlier today and the other is a signed term sheet and they relate to your questions.
MS: We should check if the office is bugged [laughs].
SJ: There’s a lot going on. Curing mental illness. Alternative modalities.
MS: The largest rising global epidemic is depression. Adolescent suicide rates are up 300 percent in the U.S. in the last 10 years. And we don’t have the resources, the skills, the technologies and the licensed therapists available. We know there are medicinal compounds, often from plant vines, that have shown incredible value in addressing treatment-resistant depressions and addiction and abusive substances. And often participation in those things is is a privilege of particular groups in society and so how do we democratize access to mental health.
Wait, I can’t believe I guessed it. You’re investing in an ayahuasca-related startup!?
SJ: It’s close, not exactly. [Laughs.]
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
We have something a bit different for you this week. Equity co-host Kate Clark recently sat down with Manish Chandra, the co-founder and chief executive officer of Poshmark, and one of his earliest investors, NFX managing partner James Currier.
If you haven’t heard of Poshmark, it’s an online platform for buying and selling clothes. Basically, it’s the thrift shop of the 21st century. We asked Chandra how he and co-founders Tracy Sun, Gautam Golwala and Chetan Pungaliya cooked up the idea for Poshmark, what bumps they faced along the way, how they raised venture capital and, of course, what details of their upcoming initial public offering he could share with us. Meanwhile, Currier dished about the company’s early days, when the Poshmark team worked hard on the floor of Currier’s office.
Unfortunately, neither Chandra or Currier were willing to share deets about Poshmark’s IPO, reportedly expected soon. But they both shared interesting insights into building a successful venture-backed company, battling competition and putting your best foot forward.
Glad you guys came back for another episode, we’ll see you soon.
Morgan Stanley has served as the lead underwriter for Facebook, Spotify and Slack. Grimes, a banker for 32 years — 25 of them with Morgan Stanley — has also played a role in the IPOs of Salesforce, LinkedIn, Workday and hundreds of other companies.
Because some of these offerings have gone better than others, buzzy startups and their investors are asking Morgan Stanley and other investment banks to embrace more direct listings, a maneuver pioneered by Spotify and copied by Slack — rather than sell a percentage of shares to the public in a fundraising event, companies essentially move all their stock from the private markets to public ones in one fell swoop.
In a rare public appearance last week, Grimes told us why he supports direct listings and answered questions about other offerings in which Morgan Stanley has been involved, including as a lead underwriter for both Uber and Google. (He was less talkative about WeWork, a company that Morgan Stanley managed to distance itself from at exactly the right time.) If you care about how the process of taking private companies public may be changing, it’s worth the time. Our conversation has been edited lightly for length.
TechCrunch: Tell us about yourself. You were born in East L.A.; you studied computer programming and electrical engineering at UC Berkeley, then you became a banker, and you’ve remained one. Did you always want to be a banker?
Michael Grimes: I’ve only ever done this since i was 20. I’d joined Solomon Brothers, which later became part of Citigroup. They had a tech group where they wanted somebody in tech. I didn’t know banking or business or finance, because I had studied engineering and that made me not well-suited, to some degree, [for a bank] other than for a tech bank. Mary Meeker also started in ’87 at Solomon and [we then worked together for 20 years at Morgan Stanley until she left].
The work you’ve done with a lot of these amazing companies that you’ve helped take public has earned you a lot of nicknames — the ‘Teflon banker,’ the ‘kingpin’ banker. How do you feel when you see yourself described in those terms?
It may sound boring but may be similar to the way venture capitalist serve founders. Besides capital, they’re giving advice. We think of it as giving advice: that decision to file, do you or don’t you, how will it be received. That decision may work out for the best. There’s a lot of volatility in the market and it may not. But we want to stick with clients through thick and thin and help them navigate really volatile markets.
When a company is [at an] emerging growth [phase] but hasn’t reached a mature business model, you can have a really wide variety of fair cases for, is this going to be worth $30 billion in five years? $3 billion? $200 billion? Those could are all possible if something is growing 100 percent per year and the margins are increasing and you can do the math. [Remember that] Google has gone from $30 billion when we took it public to $800 billion or $900 billion or whatever is it [now]. So is this going to be that, or is this going to grow and peak and recede? There’s a huge amount of volatility inherent in tech investing, and that kind of comes with the territory in our business.
People seem to speak in hushed tones about you the way they earlier spoke about [earlier Silicon Valley banker] Frank Quattrone, but Frank Quattrone had a reputation for taking on deals that others wouldn’t take; you have a reputation for saying no to deals when they don’t feel right. When is a company in shape to go public?
We try to predict the receptivity of the public markets, which does change. There were times in 1999, 2007, maybe 2015 until recently, where institutional investors were taking more risk, then there are other times when they’re taking less risk: 2001, 2002, maybe now to an extent; they’re taking less risk than they were a year ago.
The institutional investors are the price setters; if they’re eager to invest in a company, then we try to predict that and get behind the companies that we think will work well there, or [else] give the company advice that this maybe isn’t the right time or maybe this won’t be well-received. We aren’t perfect at this but we kind of obsess about it.
You’ve told me that you think the more established the company, the more observable its metrics, the less volatile the offering in all likelihood. But can a company stay private too long?
It depends on what you mean by “too long.” If they run out of capital because they aren’t financeable, you could argue that’s probably a good thing that they never went public, because investor protection matters. Healthy markets depend upon investors, on balance, earning a return — not just institutions but retail investors, the ordinary investor. So if it turns out it’s a company that thrives but went public later, there’s no real harm there… I haven’t really bought into the theory of companies waiting too long to go public. That’s their choice. They have to decide based on their capital. Going back to the late ’80s or ’90s, I’ve worked with companies that have gone out with $300 million, $400 million, $500 million valuations; I’ve worked with ones that have gone out at $30 billion, $40 billion, $100 billion valuations. In all cases, it really depends on the company’s fundamentals and performance as opposed to its stage.
You mention companies that aren’t financeable. It brings to mind WeWork. Obviously its S-1 was disaster, but it also really needed the money from an offering. Could things have gone another way for the company? Was there a way for it to go public?
We weren’t involved in that filing so I’m probably not the right guy to opine on that situation.
Do you think JPMorgan deserves all the heat it’s gotten for that situation?
Software will eat the world, as the saying goes, but in doing so, some developers are likely to get a little indigestion. That is to say, building products requires working with disparate and distributed teams, and while developers may have an ever-growing array of algorithms, APIs and technology at their disposal to do this, ironically the platforms to track it all haven’t evolved with the times. Now three developers have taken their own experience of that disconnect to create a new kind of platform, Linear, which they believe addresses the needs of software developers better by being faster and more intuitive. It’s bug tracking you actually want to use.
Today, Linear is announcing a seed round of $4.2 million led by Sequoia, with participation also from Index Ventures and a number of investors, startup founders and others that will also advise Linear as it grows. They include Dylan Field (Founder and CEO, Figma), Emily Choi (COO, Coinbase), Charlie Cheever (Co-Founder of Expo & Quora), Gustaf Alströmer (Partner, Y Combinator), Tikhon Berstram (Co-Founder, Parse), Larry Gadea (CEO, Envoy), Jude Gomila (CEO, Golden), James Smith (CEO, Bugsnag), Fred Stevens-Smith (CEO, Rainforest), Bobby Goodlatte, Marc McGabe, Julia DeWahl and others.
Cofounders Karri Saarinen, Tuomas Artman, and Jori Lallo — all Finnish but now based in the Bay Area — know something first-hand about software development and the trials and tribulations of working with disparate and distributed teams. Saarinen was previously the principal designer of Airbnb, as well as the first designer of Coinbase; Artman had been staff engineer and architect at Uber; and Lallo also had been at Coinbase as a senior engineer building its API and front end.
“When we worked at many startups and growth companies we felt that the tools weren’t matching the way we’re thinking or operating,” Saarinen said in an email interview. “It also seemed that no-one had took a fresh look at this as a design problem. We believe there is a much better, modern workflow waiting to be discovered. We believe creators should focus on the work they create, not tracking or reporting what they are doing. Managers should spend their time prioritizing and giving direction, not bugging their teams for updates. Running the process shouldn’t sap your team’s energy and come in the way of creating.”
Linear cofounders (from left): KarriSaarinen, Jori Lallo, and Tuomas Artma
All of that translates to, first and foremost, speed and a platform whose main purpose is to help you work faster. “While some say speed is not really a feature, we believe it’s the core foundation for tools you use daily,” Saarinen noted.
A ⌘K command calls up a menu of shortcuts to edit an issue’s status, assign a task, and more so that everything can be handled with keyboard shortcuts. Pages load quickly and synchronise in real time (and search updates alongside that). Users can work offline if they need to. And of course there is also a dark mode for night owls.
The platform is still very much in its early stages. It currently has three integrations based on some of the most common tools used by developers — GitHub (where you can link Pull Requests and close Linear issues on merge), Figma designs (where you can get image previews and embeds of Figma designs), and Slack (you can create issues from Slack and then get notifications on updates). There are plans to add more over time.
“We started solving the problem from the end-user perspective, the contributor, like an engineer or a designer and starting to address things that are important for them, can help them and their teams,” Saarinen said. “We aim to also bring clarity for the teams by making the concepts simple, clear but powerful. For example, instead of talking about epics, we have Projects that help track larger feature work or tracks of work.”
Indeed, speed is not the only aim with Linear. Saarinen also said another area they hope to address is general work practices, with a take that seems to echo a turn away from time spent on manual management and more focus on automating that process.
“Right now at many companies you have to manually move things around, schedule sprints, and all kinds of other minor things,” he said. “We think that next generation tools should have built in automated workflows that help teams and companies operate much more effectively. Teams shouldn’t spend a third or more of their time a week just for running the process.”
The last objective Linear is hoping to tackle is one that we’re often sorely lacking in the wider world, too: context.
“Companies are setting their high-level goals, roadmaps and teams work on projects,” he said. “Often leadership doesn’t have good visibility into what is actually happening and how projects are tracking. Teams and contributors don’t always have the context or understanding of why they are working on the things, since you cannot follow the chain from your task to the company goal. We think that there are ways to build Linear to be a real-time picture of what is happening in the company when it comes to building products, and give the necessary context to everyone.”
Linear is a late entrant in a world filled with collaboration apps, and specifically workflow and collaboration apps targeting the developer community. These include not just Slack and GitHub, but Atlassian’s Trello and Jira, as well as Asana, Basecamp and many more.
Saarinen would not be drawn out on which of these (or others) that it sees as direct competition, noting that none are addressing developer issues of speed, ease of use and context as well as Linear is.
“There are many tools in the market and many companies are talking about making ‘work better,'” he said. “And while there are many issue tracking and project management tools, they are not supporting the workflow of the individual and team. A lot of the value these tools sell is around tracking work that happens, not actually helping people to be more effective. Since our focus is on the individual contributor and intelligent integration with their workflow, we can support them better and as a side effect makes the information in the system more up to date.”
Stephanie Zhan, the partner at Sequoia whose speciality is seed and Series A investments and who has led this round, said that Linear first came on her radar when it first launched its private beta (it’s still in private beta and has been running a waitlist to bring on new users. In that time it’s picked up hundreds of companies, including Pitch, Render, Albert, Curology, Spoke, Compound and YC startups including Middesk, Catch and Visly). The company had also been flagged by one of Sequoia’s Scouts, who invested earlier this year
Although Linear is based out of San Francisco, it’s interesting that the three founders’ roots are in Finland (with Saarinen in Helsinki this week to speak at the Slush event), and brings up an emerging trend of Silicon Valley VCs looking at founders from further afield than just their own back yard.
“The interesting thing about Linear is that as they’re building a software company around the future of work, they’re also building a remote and distributed team themselves,” Zahn said. The company currently has only four employees.
In that vein, we (and others, it seems) had heard that Sequoia — which today invests in several Europe-based startups, including Tessian, Graphcore, Klarna, Tourlane, Evervault and CEGX — has been considering establishing a more permanent presence in this part of the world, specifically in London.
Sources familiar with the firm, however, tell us that while it has been sounding out VCs at other firms, saying a London office is on the horizon might be premature, as there are as yet no plans to set up shop here. However, with more companies and European founders entering its portfolio, and as more conversations with VCs turn into decisions to make the leap to help Sequoia source more startups, we could see this strategy turning around quickly.
Kleiner Perkins has joined a $25.5 million Series A funding round for Bison Trails, a provider of blockchain protocols, which was led by Blockchain Capital to develop the firm’s infrastructure services.
Other participants included Coinbase Ventures, ConsenSys, A Capital, Collaborative Fund and Sound Ventures as new investors. Galaxy Digital and Initialized, as early backers, joined this latest round after participating in a $5.25 million seed round in March.
Bison Trails became one of the 21 founding members for Facebook’s Libra Association in October, boosting its somewhat flagging reputation as a global infrastructure service provider after high profile players like PayPal pulled out.
That makes Bison Trails the only blockchain infrastructure firm in the Libra project.
The New York-based startup helps customers deploy the participation nodes on any blockchain, without having to develop their own supporting technologies such as security, and serves more than 20 protocol projects.
In a statement, Kleiner Perkins investing partner Monica Desai said: “Bison Trails realized early that node infrastructure would become a bottleneck to blockchain adoption, which is why they created a decentralized, user-friendly solution.”
“When we started building Bison Trails, we wanted to bring transparency and ease to entrepreneurs bold enough to build in a decentralized ecosystem, investors wise enough to back a nascent market, and enterprises courageous enough to commit to a technological inevitability like blockchain technology and cryptocurrency,” said Joe Lallouz, CEO of Bison Trails. “We have become the easiest way to run infrastructure on multiple blockchains. And have helped the world’s leading protocols, companies and builders launch and manage secure, highly-available and geographically distributed nodes on blockchain networks.”
Article updated with correct total funding amount.
A little over a year after the dissolution of the once high-flying blood testing startup Theranos, another startup has raised over $27 million to breathe new life into the vision of bringing low-cost blood tests to point-of-care medical facilities.
Unlike Theranos, Truvian Sciences is not claiming that most of its blood tests do not need clearance from the U.S. Food and Drug Administration, and is, in fact, raising the money to proceed with a year-long process to refine its technology and submit it to the FDA for approval.
“More and more consumers are refusing to accept the status quo of healthcare and are saying no to expensive tests, inconvenient appointments and little to no access to their own test results,” said Jeff Hawkins, the president and chief executive of Truvian, in a statement. “In parallel, retail pharmacies are rising to fill demand, becoming affordable health access points. By bringing accurate, on-site blood testing to convenient sites, we will give consumers a more seamless experience and enable them to act on the vast medical insights that come with regular blood tests.”
Hawkins, the former vice president and general manager of reproductive and genetic health business at Illumina, is joined by a seasoned executive team of life sciences professionals including Dr. Dena Marrinucci, the former co-founder of Epic Sciences, who serves as the company’s senior vice president of corporate development and is a co-founder of the company.
Image courtesy of Flickr/Mate Marschalko
As part of today’s announcement, the company said it was adding Katherine Atkinson, a former executive at Epic Sciences and Illumina, as its new chief commercial officer, and has brought on the former chairman of the Thermo Fisher Scientific board of directors, Paul Meister, as a new director.
The ultimate goal, according to Hawkins, is to develop a system that can be installed in labs and can provide accurate results in 20 minutes for a battery of health tests from a small sample of blood for as low as $50. Typically, these tests can cost anywhere from several hundred to several thousand dollars — depending on the testing facility, says Hawkins.
Using new automation and sensing technologies, Truvian is aiming to combine chemistries, immunoassays and hematology assays into a single device that can perform standard assessment blood tests like lipid panels, metabolic panels, blood cell counts, and tests of thyroid, kidney and liver functions.
The company’s system includes remote monitoring and serviceability, according to a statement from Truvian. Its dry reagent technology allows materials to be stored at room temperature, removing the need for cold chain or refrigerated storage. According to a statement, the company is working to receive a CE Mark in the European Economic Area and submitted to the FDA for 510(k) clearance along with a “clinical laboratory improvement amendments” waiver application to let the devices be used in a retail setting or doctor’s office.
“We don’t believe that single drop of blood from a finger stick can do everything,” says Hawkins (in opposition to Theranos). “Fundamentally as a company we have built the company with seasoned healthcare leaders.”
As the company brings its testing technology to market, it’s also looking to compliment the diagnostics toolkit with a consumer-facing app that would provide a direct line of communication between the company and the patients receiving the results of its tests.
Truvian’s data will integrate with both Apple and Google’s health apps as well as reside on the company’s own consumer-facing app, according to Hawkins.
“At the end of the day precision medicine is going to come from integrating these data sources,” says Hawkins. “I think if we pull off what we want we should be able to make your routine blood testing far more accessible.”
The future of the connected home, connected car and connected everything will have a lot of imaging technology at the center of it: sensors to track the movement of people and things will be a critical way for AI brains to figure out what to do next. Now, with a large swing toward more data protection — in part a reaction to the realization of just how much information about us is being picked up — we’re starting to see some interesting solutions emerge that can still provide that imaging piece, but with privacy in mind. Today one of the startups building such solutions is announcing a big round of funding.
Vayyar, an Israeli startup that builds radar-imaging chips and sensors, as well as the software that reads and interprets the resulting images used in automotive and IoT applications (among others) — providing accurate information about what is going on a specific place, even if it’s behind a wall or another object, but without the kind of granular detail that would actually be able to personally identify someone — has picked up a Series D of $109 million, money it will use to expand the range of applications it can cover and to double down on key markets like the U.S. and China.
From what I understand from sources close to the deal, this round is being done at a valuation “north” of $600 million, which is a big step up on the company’s valuation in its C-round in 2017, which was at around $245 million post-money, according to PitchBook data.
Part of the reason for the big multiple is because the company already has a number of big customers on its books, including the giant automotive supplier Valeo and what Raviv Melamed — Vayyar’s co-founder, CEO and chairman — described to me as a “major Silicon Valley company” working on using Vayyar’s technology in its smart home business.
I was going to write that the funding is notable for the large size, but it feels these days that $100 million is the new $50 million (which is to say, it’s becoming a lot more common to raise so much). What’s perhaps more distinctive is the source of the funding. This Series D is being led by Koch Disruptive Technologies, with Regal Four (an investment partner of KDT) and existing investors including Battery Ventures, Bessemer Ventures, ICV, ITI, WRVI Capital, Claltech all also participating. The total raised by the startup now stands at $188 million.
Koch Disruptive Technologies is the venture arm of Koch Industries, the multinational giant that works across a range of oil and gas, manufacturing, ranching and other industries. It’s founded by Fred Koch, the father of the Koch brothers, Charles and the late David, the longtime owners who are mostly known in popular culture for their strong support of right-wing politicians, businesses and causes. It’s an image that hasn’t really helped the VC arm and its partners seem to be trying to downplay it these days.
Putting that to one side, the Vayyar investment has a lot of potential applicability across the many industries where Koch has holdings.
“Advancements in imaging sensors are vital as technology continues to disrupt all aspects of society,” said Chase Koch, president of Koch Disruptive Technologies. “We see incredible potential in combining Vayyar’s innovative technology and principled leadership team with Koch’s global reach and capabilities to create breakthroughs in a wide range of industries.”
Over the last several years, the startup has indeed been working on a number of ways of applying its technology on behalf of clients, who in turn develop ways of productising it. There are a few exceptions where Vayyar itself has built ways of using its tech in direct consumer products: for example, the Walabot, a hand-held sensor that works in conjunction with a normal smartphone to give people the ability to, say, detect if a pipe is leaking behind a wall.
But for the most part, Melamed says that its focus has been on building technology for others to use. These have, for example, included in-car imaging sensors that can detect who is sitting where and what is going on inside the vehicle, useful for example for making sure that no one is dangerously blocking an airbag, or accidentally setting off a seatbelt alarm when not actually in a seat, or (in the case of a sleeping baby) being left behind on accident creating potentially dire outcomes.
Regulations will make having better safety detection a must over time, Melamed noted, and more immediately, “By 2022-2023 it will be a must for all new cars to be able to detect [the presence of babies getting left behind when you leave the car] if you want to have a five-star safety rating.”
The focus (no pun intended) on privacy is a somewhat secondary side-effect of what Vayyar has built to date, but that same swing of regulation is likely to continue to put it into the fore, and make it as much of a feature as the imaging detection itself.
Vayyar is not the only company using radar to build up better imaging intelligence: Entropix, Photonic Vision, Noitom Technology and Aquifi and ADI are among the many companies also building imaging solutions based on the same kind of technology. Melamed says that this is where the company’s software and algorithms help it to stand out.
“I think when you look at what we have developed for example for cars, these guys are far behind and it will take some time to close the gap,” he added.
Founders First Capital Partners, an accelerator and investment firm which provides revenue-based financing to businesses led by “underrepresented entrepreneurs” operating in underserved markets, has received a $100 million commitment to expand its operations.
The San Diego-based investor raised the debt financing from Community Investment Management, a large debt-focused impact investment fund.
The revenue-based financing model is a new one that several startups are beginning to explore as a way to take non-dilutive capital for early stage businesses that might not qualify for traditional bank loans.
Companies like the new media startup, The Prepared, which offers tips on disaster preparedness, used revenue financing as a way to get its own business off the ground. And other companies are turning to the financing method too, according to investors from Lighter Capital.
At Founders First Capital Partners, the new financing will expand its lending operations to companies that are already generating between $1 million and $5 million in annual revenue.
The new program is set to launch in January 2020, expanding the firm’s footprint as a financial services firm for minority and other underrepresented founders, the company said in a statement.
The firm focuses on businesses led by people of color, women, and military veterans and concentrates on entrepreneurs whose business operate in low and middle-income communities outside of the traditional funding networks of Silicon Valley and New York, the company said.
It also operates an accelerator program for entrepreneurs that meet the same criteria.
“Founders First is very pleased to have secured such significant funding that allows us to expand our efforts to businesses that are led by underrepresented founders or those that serve underrepresented communities,” said Kim Folsom, co-founder and chief executive of Founders First, in a statement.
Revenue-based financing can in some cases be a better option for service-based, social impact companies, according to Jacob Haar, a managing partner with CIM, who previously worked at Minlam Investment Managemet, a hedge fund working in the micro-finance space.
Both microfinance and revenue-based financing come with risks — particularly around the rates that these lenders can charge for their financing.
But it is a unique opportunity to open up founders to additional types of financing models.
“CIM is excited to partner with Founders First to expand revenue-based financing to support underserved and underrepresented small business founders, including people of color, women, LGBTQ, and military veterans as well as small businesses located in low to moderate income areas,” Haar said in a statement. “We have found revenue-based financing to be a compelling alternative to venture capital and fixed payment loans as a forward-looking and structurally flexible investment to support business growth. We believe that Founders First’s unique advisory and revenue-based investment platform enables underrepresented small businesses to overcome systematic bias and achieve their potential.”
With Jinx, three former members of the Casper team are looking to bring what CEO Terri Rockovich called “the Casper playbook” to selling dog food.
The startup has raised $5.65 million from an all-star list of investors including Alexis Ohanian of Initialized Capital, Align Ventures, Brand Foundry, Wheelhouse Group, Will Smith and his family, the rapper Nas, singer Halsey, YouTube star/late night host Lilly Singh and TV personality/former NFL star Michael Strahan.
Rockovich previously served as vice president of acquisition and retention marketing at Casper, where she met her co-founders Sameer Mehta and Michael Kim. She said all three of them are “dog obsessives” who have experience trying to feed “picky eaters.” And they wer “hungry for a brand that is skinned in a way that is a lot more relatable to millennial consumer.”
It’s not just about taking regular dog food and selling it in a new way, either. Rockovich noted that an estimated 56% of dogs in the United States are overweight or obese. So Jinx’s staff nutritionist — working with a larger nutrition council — has developed a line of kibble and treats that she said is “packed with organic proteins, diversified proteins and easy-to-process carbohydrates for a moderately active animal.”
Jinx plans to start selling its first products in January. Rockovich said it will target pet owners with a certain set of “lifestyle attributes” — like living in an apartment, hiring dog walkers and owning dogs who sleep in their beds — and educate them so they actually examine the ingredients of their dog food, whether they buy it from Jinx or someone else.
“We understand the serious nature of creating something that goes into a body and kind of powers a lifestyle,” she said. “We’ve been so conscious of that. Frankly, it’s delayed our timeline — we know we have to get it right.”
As for how much this will cost, Rockovich said Jinx will “fall in the premium category.” (If you’re familiar with premium dog food brands, she said Jinx pricing be somewhere between Blue Buffalo and Orijen.) And while the company start off by selling directly to consumers through its website, Rockovich said her Casper experience has taught her the importance of having “some IRL presence, specifically in retail.”
Last Monday a group of millionaires and billionaires took a trip to an industrial site in Lancaster, Calif. to witness the achievement of what could represent a giant leap forward in the effort to decarbonize some of the world’s most carbon intensive industries.
For Bill Gross, the founder of Idealab and brains behind the excursion, the unveiling was simply the latest in a string of demonstrations for new technologies commercialized by his nearly three-decade old startup company incubator. However, it may be the most significant.
What Gross is pursuing with his new company, Heliogen, offers a way forward for renewable energy to be applied to manufacturing processes for cement, lime, coke, and steel — some of the most energy intensive and polluting industries that exist in the world today.
“Today, industrial processes like those used to make cement, steel, and other materials are responsible for more than a fifth of all emissions,” said Bill Gates, a Heliogen backer who has committed millions of dollars to the development of new renewable energy technologies. “These materials are everywhere in our lives but we don’t have any proven breakthroughs that will give us affordable, zero-carbon versions of them. If we’re going to get to zero carbon emissions overall, we have a lot of inventing to do. I’m pleased to have been an early backer of Bill Gross’s novel solar concentration technology. Its capacity to achieve the high temperatures required for these processes is a promising development in the quest to one day replace fossil fuel.”
According to Gross, Kittu Kollaru, an investor in Heliogen who is also backing another of Idealab’s incubated companies working on developing an energy storage technology, Energy Vault, said after seeing the demonstration, “Bill… this is even bigger.”
At its core, Heliogen is taking a well-known technology called concentrated solar power, and improving its ability to generate heat with new computer vision, sensing and control technologies, says Gross. \
Four high resolution cameras capture real time video of a field of mirrors that are controlled by sensors to focus the sun’s energy on a particular spot. That spot, either at a transmission pipe used to transport gas, or a tower, is heated to over 1,000 degrees Celsius. Previous commercial concentrating solar thermal systems could only reach temperatures of 565 degrees Celsius, the company said. That’s useful for generating power, but can’t meet the needs of industrial processes.
Achieving temperatures above 1,000 degrees Celsius gives manufacturing facilities the opportunity to replace the use of fossil fuels in a significant portion of their operations.
A facility hoping to install Heliogen’s technology (Image courtesy of Heliogen)
“They already have a power source/burner that is variable, based on the flow rate of materials, and is servo controlled to have the correct air flow exit temperature,” says Gross of many existing industrial operations. “So when we add heat (when the sun is out) the fossil fuel burner just automatically gets scaled back like a thermostat on a room heater (albeit at much higher temperature). So it’s a seamless control integration.”
A plant could still operate on a 24-hour production schedule, and could still use fossil fuels, says Gross. But by deploying the Heliogen system, companies could reduce their fossil fuel consumption by up to 60%, according to the serial entrepreneur and investor. Gross believes that Heliogen’s systems will pay for themselves in a two-to-three year timeframe if companies buy the system outright, or Heliogen could manage the installation for a manufacturer and just charge them for the cost of the power.
Gross has been testing smaller versions of Heliogen’s industrial heating technology at a field with an array of 70 mirrors to prove that the super-concentrating technology could work. A full scale facility covers roughly two acres of land with mirrors and a tower where the rays are concentrated. “It’s like a death ray,” Gross said of the concentrated solar beams.
While initial applications for Heliogen’s technology will concentrate on industrial applications, longer term, Gross sees an opportunity to drive down the cost of Hydrogen production at an industrial scale. Long believed to be one of the keys to global decarbonization, Hydrogen’s use as a fuel source has been limited because it’s difficult to make without using fossil fuels.
Hydrogen’s importance to a carbon-free energy future can’t be overstated, according to energy advocates and longtime renewable energy entrepreneurs and investors like Jigar Shah. The founder and former chief executive of solar installation company, SunRun, Shah now invests in renewabel energy projects.
“As we move closer to 100% clean electricity grids, it will be necessary to not just store excess electricity production from the spring and fall, but to turn all of this excess electricity to valuable commodities that can help decarbonize other sectors outside of electricity — transportation, industrial heat, and chemicals,” Shah wrote in an article on LinkedIn. “That’s where hydrogen comes into play.”
Investors in Heliogen include venture capital firm Neotribe and Dr. Patrick Soon-Shiong, the billionaire Los Angeles-based investor and entrepreneur, who owns the Los Angeles Times and an investment conglomerate. THe investmente was made through Dr. Soon-Shiong’s investment firm, Nant Capital.
“For the sake of our future generations we must address the existential danger of climate change with an extreme sense of urgency,” said Dr. Soon-Shiong, in a statement. “I am committed to using my resources to invest in innovative technologies that harness the power of nature and the sun. By significantly reducing greenhouse gas emissions and generating a pure source of energy, Heliogen’s brilliant technology will help us achieve this mission and also meaningfully improve the world we leave our children.”
In 2016, we profiled a then-24-year-old named Jeremy Fiance who had managed to pool together $6 million for a fund focused on his alma mater, UC Berkeley, where as a student he’d brought to campus Kairos Society, an organization for budding entrepreneurs, as well as created a student accelerator called Free Ventures.
Fiance wasn’t waiting on someone to give him a job in venture; he wanted to create his own vehicle — dubbed The House Fund — with the support of the school to invest in its talented students, alums and professors, and eventually channel some of its gains back into the university system. To his mind, regional VCs were too focused on Stanford, creating a funding vacuum — and an opportunity. Why not address it himself?
Fast-forward two years and it’s apparent that investors give Fiance high marks. To wit, The House Fund is today announcing a second fund with $44 million in capital commitments, including backing from University of California (which oversees a $126 billion endowment) and the Berkeley Endowment Management Company, which provides stewardship of endowment gifts given expressly to UC Berkeley. Other investors include funds of funds, including Ahoy Capital; unnamed family offices; Berkeley alums; and tech execs.
The specific pitch these investors are buying ties partly to the school’s size, says Fiance. UC Berkeley has 500,000 alums in the world and another 60,000 students on campus. Some of those graduates have also built some very valuable, still-private companies, including Flexport, Nextdoor, Warby Parker, Databricks and DoorDash (all are so-called “unicorn” companies). Others have taken their companies public (think Redfin, Coupa and Cloudera, among others). Naturally, some percentage of UC Berkeley alums have also sold their companies, including Caviar, which was acquired by Square (and then by DoorDash), and PillPack, which sold to Amazon.
Investors are also betting on Fiance’s developing track record. Though The House Fund’s debut vehicle was relatively small, it managed to get checks into the logistics firm Flexport, the email service Superhuman, the teen app Tbh (acquired by Facebook) and Dyndrite, a maker of additive manufacturing software that we first encountered back in April. The House Fund’s second fund already holds some promising stakes, too. Among its bets so far is the blockchain gaming company Forte, founded by esports veteran Kevin Chou, who previously founded (and sold) Kabam; Oasis Labs, a cryptographic project whose founder previously sold an earlier startup, Ensighta, to FireEye; and Placement.com, a seven-month-old company that aims to help people find better jobs in new cities. (Its co-founders, Sean Linehan and Katie Kent, came out of Flexport.)
Most of all, perhaps, they’re counting on Fiance’s ability to continue growing a network that has already allowed The House Fund to meet with more than 3,000 startups with ties to UC Berkeley. (It has funded 50 in total.)
He has help. Though The House Fund remains a capital pool with just one general partner, Fiance is quick to acknowledge the team he has built. Among these members is Cameron Baradar, who was the third engineer at the mapping visualization startup Mapsense before it was acquired by Apple and who is now a partner at the firm; Brett Wilson, who founded the ad tech startup TubeMogul and sold it to Adobe in 2017 and is a venture partner; Annie Tsai, a former CMO at the marketing automation company Demandforce who is a part-time partner; and Arjun Arora, who founded and sold an ad tech startup, worked as an investor for both Expa and 500 Startups, and is now also a part-time partner.
As for the size checks the team is writing, Fiance says the firm “sized the fund in such a way that we were right-sizing to the opportunity in front of us.” What that means: while The House Fund once wrote checks of $50,000 to $100,000, it’s now investing up to $1 million in seed rounds, with an undisclosed amount of money targeted for reserves.
It also dives in before a lot of venture funds will, insists Fiance. “There are actually very few funds that are willing to take a first leap,” he says. But we put together pre-seed syndicates. We help companies fundraise by putting together a personalized demo day for them with 20 to 30 investors” who might conceivably be interested in the startup.
“We have a very strong sense of the market and other funds and where and how they’re investing,” adds Fiance. The suggestion, seemingly, is that like the university on which it’s so focused, The House Fund does its research.
Since the election of president Emmanuel Macron in 2017, Paris has experienced a surge of momentum as a startup hub. Investor interest had been building for years, but Macron’s government has aggressively focused on adopting more business-friendly regulations and heavily courted the startup and VC community. In September, he announced a €5 billion initiative to bring more late-stage VC capital into the market.
To get a sense of where France’s investor community sees startup opportunities, I surveyed 10 leading VCs who focus on the Paris ecosystem and asked them to share some of their current interests:
Here are their responses:
Privacy is a trend I am really excited about. After the years of deployment of the web through different platforms (browser, mobile, TV, objects…) where personal data was just gathered and used in a ruthless way, I believe end users and companies are getting more conscious of the value (and not only the financial value) of their data.
This is creating the emergence of different tools around personal data management: from personal data platform, synthetic data to anonymization tool and encryption there is a wide range of new kind of businesses that could emerge. I believe that the future always emerge from tension between two trends. The web has been all around transparency and data deluge it is maybe time for the opposite trends to build its momentum.
We’re still big on deeptech startups because we are deeply convinced that France is a great place to start them (not unlike Israel) and there are still huge fields like healthcare, infrastructure and fashion where you can develop relevant and persistent value.
We are more and more focused on positive investing, which is much more than a buzzword: the current generation of entrepreneurs (and returning entrepreneurs as well!) want to dedicate their time to a worthy cause with social and societal impact. At Serena, we already invested in several companies with strong missions such as Lifen for instance (mission: reduce medical errors), Inato (decrease R&D cost of new medicine) or Accenta (reduce carbon footprint), and can see first hand the appeal they have towards tier one talent.
A new strong focus for us is also the gaming and entertainment industry, which will take a larger share of our lives thanks to all the existing solutions already optimizing our work time and our daily mobility.
The good news: even if you have a small company and can’t afford a banker, you can synthetically and cheaply replicate one. That’s part of the value proposition of an institutional VC; I have been the (unpaid) investment banker for many of my portfolio companies.
If you don’t have relationships with potential investors, here’s how to replicate a banker:
Her job is to lead a professional outreach campaign to investors, writing highly customized emails to each based on your agreed-upon template. If you don’t have a pre-existing relationship, it is critical that you write emails which are palpably customized and of course well written, or else you’re just spamming.
The person doing outreach should have a title as senior as possible, e.g., “acting COO.” The higher the title, the higher the response rate she will generate. Any good business school will have dozens of current students who fit these criteria. She will get a lower response rate than you (with the CEO title), but likely a higher response rate than an outside banker who does not have an established relationship with the investor you are targeting. You can also have her impersonate you via email, although there’s always a risk of that ending in embarrassment if she is not highly responsible and trustworthy.
Raising capital is a time-consuming, arduous, complex task and you will be living with the consequences of your actions for decades. I recommend hiring a professional to help you, if you can afford it. I also recommend doing thorough research before hiring a banker. The wrong decision can cost you millions of dollars, in the form of a broken deal process, a suboptimal valuation, or inappropriate investors.
Venture capitalists often mutter, “I haven’t seen anything I like lately”. Founders frequently complain that “investors are back-seat drivers who won’t get their hands dirty.” A $55 million fund with a fresh approach is aiming to address both those issues.
Steve Jang and Kanyi Maqubela are two exceedingly smart and sweet guys who couldn’t help but come up with ideas for startups. Jang co-founded music apps Imeem and Soundtracking, meanwhile serving as an early Uber advisor and angel investor in Coinbase. Maqubela worked in operations at career network Doostang (acquired by Universum Global) and solar startup One Block Off The Grid (acquired by NRG) before rising to general partner at Collaborative Fund.
Today the pair officially launch Kindred Ventures to form startups as well as fund them.
“We don’t want to wait for people to come around and solve the problems we think matter” says Jang. “We’d rather proactively assemble an amazing team to go tackle that problem” Maqubela follows up. But Kindred Ventures will also step up and lead seed rounds, then help startups orchestrate their follow-on fundraises.
Kindred Ventures partner and co-founder Steve Jang
“The ethos is empathy — to take a very adaptive coaching and mentorship model” Jang tells me. That means partnering with startups, not merely offering arms-length investing. By keeping the portfolio size low, Jang and Maqubela plan to turn concentrated conviction and outsized, hands-on effort into big stakes in tomorrow’s top companies.
“I originally wanted to call the fund Kindred Spirits, but it sounds a little too woo-woo” Jang says with a laugh. From multiple interviews with the team and its portfolio, though, that’s really the vibe Kindred Ventures is going for — to be the first people founders call when they’re in crisis…whether they need answers or just some cheering up.
Beyond the warm smiles, Kindred already has a strong track record from its prototype phase under Jang’s solo operation since 2014. He’d made a reputation for himself as a fixer through his advising work during Uber’s scrappy early years starting in 2009. It began with Jang writing Garrett Camp a check for his side-project. As the company blossomed without full-time employees, Jang pitched in wherever he could.
After Imeem’s sale to Myspace and later Soundtracking’s acquisition by Rhapsody, Jang made about 50 angel investments of around $25,000 to $250,000 in companies like Coinbase, Blue Bottle Coffee, Postmates, and Zymergen under the name Kindred Ventures. Instead of just throwing money around, “I’d help a co-founder — sit down and work with them on product, their presentation for seed funding, hiring their first employees, finding a co-founder — it was quite different from how VCs operate.” Still, he wanted to lead more investments like his favorite seed funds First Round and True Ventures while remaining a thick-or-thin squire to his startups.
But to pour that kind of sweat into the portfolio, Jang needed the help of someone who could dig deep and become an ally to founders in any vertical. He needed someone like Kanyi.
After his stints in operations, Maqubela went on to work at Collaborative Fund for seven years, rising to partner at the firm looking for the intersection of positive impact and profit. He tells me developed a thesis about “what does it mean to be a techno-optimist: to believe that technology is a amoral but can be oriented towards good.”
Maqubela’s super-power is learning. I knew him from Stanford and now the same reputation precedes him through his portfolio of angel investments like Earnest and Buffer. He’ll immerse himself in any topic or industry, read and call people until he truly gets it, and then wedge his entrepreneurial skillset into the cracks to firm up an idea. Still, relatively new to venture, Maqubela was seeking someone with a well-worn process for investing and a big heart for what founders go through. He was looking for Steve.
Kindred Ventures partner and co-founder Kanyi Maqubela
The coincidental co-investors became friends, then deliberately funded startups side by side, and now are taking the leap as Kindred Ventures. Together they want to redefine “What does it mean to invest at t=0?. What do they really need?” Maqubela says.
The plan is to fund about twenty-five companies through pre-seed and seed per fund, which they’ll raise every two to three years. Kindred is vertical agnostic, but it has a soft spot for the future of cities, work, and living. It also keen on marketplaces, material science, food innovation, deep tech, enterprise SAAS, and developer tools.
Jang and Maqubela are learning from each other day by day, at home and in the office. They’ve each got their own toddler son to juggle alongside Kindred. The added responsibility seems to make both of them conscious of how each minute counts.
So far Kindred Ventures has funded nine startups from its $55 million initial fund. It’s helped form two companies and hopes to do four to eight per fund. But Kindred won’t be taking founder-level equity in those. Instead it just wants the opportunity to lead the seed round and own 10% to 20% by the time of the Series A.
That makes Kindred Ventures distinct from most startup studios like Atomic that aim for bigger ~30% stakes. “The Studios are creating whole platform teams, services teams, only work on their own ideas, and own a considerable amount of equity” Jang notes. By leaving more shares for the real CEO, “We’d be able to work with a stronger profile of founders” while avoiding spending so much time per company that the model becomes unscalable.
Kindred’s two formations come from the disparate medicine and blockchain worlds. Maqubela became an expert in cardiology to help start Heartbeat, which does in-person and remote heart health diagnostics. “I have a clear bullshit meter for when non-healthtech people try to get into it” but Maqubela really figured it out, Heartbeat CEO Jeff Wessler, MD tells me.
On his experience with Kindred, “It’s ‘we’re there for you when you need us’ rather than ‘we’re there for you when we fund you and then we move on'” Wessler says. “Very quickly this evolved into Steve and Kanyi being my absolute numbers 1 and 2.” The investors gave Wessler entrepreneurship 101 coaching, provided Heartbeat’s first funding, and helped it build a team. With their help, the first-time founder has sidestepped common pitfalls and is already turning patients into customers.
Bitski, a blockchain app login platform, has quickly leveraged Kindred’s support with formation into big funding from top investors. “In the early days, Steve would be in the office with us, late night jamming on ideas around the evolution of the blockchain space, fundamental products that needed to exist, early use cases etc. There’s a lot of money available for seed stage projects, but it can be difficult to find an investor willing to grind with the team through the days of pre product-market fit.”
Bitski actually started as collaborative video production app Riff. But Jang and Maqubela’s advice helped it solidy a pivot into developer tools for decentralized apps. It’s since gone on to raise $3.5 million from SV Angel, Coinbase, Galaxy Digital, and the Winklevoss twins. “The collaborative tone of the relationship really stands out” says Dinch of Kindred. “Obviously, operating with a high-touch model can take more of the partners’ time, but we haven’t noticed any drop in availability or support.”
Plenty of funds talk a lot about getting their hands dirty. Often that means hiring big teams they can assign to help founders, though, while the partners focus elsewhere. With just two support staff, Jang and Maqubela don’t have that luxury. They’re in constant contact with their investments by WhatsApp, phone, and email to work through snags directly.
“They’re always super responsive” says Michael Karnjarnaaprakorn, co-founder of collectibles investing startup Otis that was backed by Kindred’s prototype fund. He cites three big value-adds. Strategy: “Anytime I’m thinking through a big decision, I call them to help me think through it” including fundraising and product launches. Network: “They have an extremely strong network and are usually one to two degrees away from anyone.” And “everything else”, from mentorship on founder psychology to company building.
Undertaking such intense involvement in their whole portfolio would likely surface concerns about a green VC. But “Steve has essentially been doing this for a decade or so not formalized, so I don’t see any reason it can’t work” says one of Kindred’s stealth startup founders Brian Norgard. “As companies begin to scale, my sense is they will be less effective because that’s a different game that’s more on the operations side. Still, I see a lot of value that can be created in the early innings.”
“Kindred had a sort of grit and passion for early stage founders and teams that we thought would give us an edge as we started to grow quickly” says health insurance company Catch‘s co-founder Kristen Tyrrell. “They have been genuinely interested in our mental health. Having Steve fly in to take us to dinner and tell us we’re doing ok is surprisingly meaningful when you’re fighting on every side.”
NEW YORK, NY – MAY 10: Kanyi Maqubela of Collaborative Fund speaks onstage during TechCrunch Disrupt NY 2016 at Brooklyn Cruise Terminal on May 10, 2016 in New York City. (Photo by Noam Galai/Getty Images for TechCrunch)
But being high-touch and concerned with entrepreneurs’ well-being doesn’t mean becoming a push-over yes-man. “Founder empathy is not always founder friendly” says Maqubela. “It’s being able to disagree with founders, even very passionately, and still constructively working together. To be able to tell them they’re wrong but come out the other side.”
That means Kindred Ventures isn’t for every founder. Those who want their investors firmly belted in the backseat or locked in the trunk may want to look elsewhere for cash. Smart founders will take all the help they can get, and Kindred strives to give the most per dollar. Jang concludes that “The idea may come from them or come from us, but we want to back amazing founders on a mission. It’s scratching both itches for us.”
The world has gotten so much faster. Amazon has made two-day shipping the standard and same- or next-day shipping commonplace. And that doesn’t even include the collection of on-demand players who can get us everything from groceries to alcohol to services like concierge storage and in-home cleaning with the press of a button.
But the logistics around same- or next-day delivery are incredibly complicated, which usually means that only the biggest, most successful brands and platforms can pull it off.
Ohi was founded last year by Ben Jones, with a mission to democratize e-commerce by offering Amazon-level speed to smaller brands. The company today announced the close of a $2.75 million seed round led by Flybridge Capital Partners .
Ohi partners with landlords to turn what would normally be leased as commercial retail property or office space into micro-warehouses within major cities. The company then offers those warehouses on flexible leases that can be as short as three months, which help D2C brands distribute their inventory and power same- or next-day delivery of their products. Ohi employs 1099 workers to handle pick and pack at warehouses, and partners with Postmates and Doordash for last-mile courier services.
Eventually, Ohi has plans to turn this into a full-fledged platform, paying landlords based on volume. For now, however, the startup is doing traditional leases with landlords, taking on more of a financial risk with the spaces, as it scales up the brand side of the platform.
Ohi charges brands a fixed monthly access fee to the platform, which starts at $750/month. More expensive tiers unlock premium intelligence features around matching inventory to warehouse location, as well as access to more spaces. At the transaction level, Ohi asks for a fee of $2.50 for pick and pack.
Jones says that delivery is actually a higher cost for brands than storage, and that same-day shipping can cost upwards of $50/package for a brand, with same-day pick and pack costing about $10/item. The hope is that Ohi can bring down the price of same-day and next-day delivery by using this Ohi network of commercial space, pick and pack, and courier services to compete with Amazon.
Moreover, Ohi believes that the platform can go well beyond bringing down the price of same-day delivery. The company says it’s brands are also seeing a decrease in cart abandonment when customers see that same-day or next-day delivery option.
Plus, through the data it collects by handling fulfillment for brands, Ohi expects to be able to use its tech to predict demand based on geography and category, helping brands understand their own customers and customers shopping in their particular category.
“There is a lot of positive momentum behind what we’re doing,” said Jones. “Every brand we talk to knows this is the future.”
Jones came up with the idea for Ohi after suffering a serious back injury that left him unable to get around easily or carry things for more than a year. This forced him into a situation where ecommerce was his only option for just about everything. Many of the orders he placed offered three- to five-day shipping, leaving him waiting for what he needed.
He started to investigate how a service could democratize the convenience of same-day and next-day delivery for brands and their customers. And Ohi was born.
Ohi currently offers its service in Manhattan and Brooklyn in New York City, and is launching in Los Angeles this week.
“The greatest challenge we face is how to scale quickly without making mistakes,” said Jones. “It’s not quite as simple as a piece of software that has one-to-many distribution. We’re actually holding brands’ inventory and there’s a physical aspect to this business that makes it more complex. Making sure we can scale that efficiently without making mistakes is going to be one of the biggest challenges.”
MMC Ventures, the London-based VC that typically invests at seed and Series A via the various funds it manages, has launched a new £100 million “Scale Up” fund to provide expansion capital to its later-stage portfolio companies.
This is a move we are seeing a number of early-stage European VCs make, such as LocalGlobe with its “Latitude” fund, as they look to double-down on existing investments at Series B and beyond.
The motivation is obvious: As European tech continues to grow, becoming increasingly ambitious and global, investors don’t want to get diluted too much and too early. Meanwhile, although arguably there is an abundance of early-stage capital floating around, there are fewer European funds as you move to later stage.
MMC Ventures says its Scale Up Fund will provide primary capital to current portfolio companies that have grown beyond the mandate of MMC Ventures’ existing funds. Notably, however, MMC’s Scale Up Fund is also permitted to participate in secondary transactions.
In a call with MMC’s Bruce Macfarlane (managing partner) and Simon Menashy (partner), the pair explained that this means that MMC can offer liquidity to early MMC and third-party investors that wish to exit from one of MMC’s portfolio companies early.
In this way, capital can be recycled within the early-stage funding ecosystem, whereby, for example, angel investors can go again by backing newly formed companies, while MMC maintains a longer-term outlook.
However, despite the launch of a later-stage fund, Macfarlane says MMC’s core specialism remains as a Series A investor.
Meanwhile, MMC has already made investments from the Scale Up Fund into a number of portfolio companies. They are Safeguard Global (alongside Accel-KKR), Masabi (alongside Smedvig Capital) and Interactive Investor.
The Scale Up Fund rounds off a number of new funds managed by MMC. The firm recently outed a new £52 million seed fund in partnership with the mayor of London. And combined with its annual EIS fundraise, the VC has added £200 million to its coffers in the last 12 months.
Over the last year, MMC has invested more than £85 million across the pre-seed, seed, series A and later stages in amounts ranging from £100,000 to £25 million. The firm also moved into new larger offices in Holborn, in Central London, which Macfarlane tells me is a sign of how bullish MMC remains with regards to U.K. tech and in spite of Brexit.
“2019 has been a big year for our firm, and the launch of our new Scale Up Fund represents a scale up moment for MMC as well as a significant innovation in the U.K. venture market,” adds Macfarlane in a statement. “This Fund allows us to double down on our most successful businesses while enabling our investors, and others, to take full or partial exits from early investments.”
Africa-focused fintech startup OPay has raised a $120 million Series B round backed by Chinese investors.
Located in Lagos and founded by consumer internet company Opera, OPay will use the funds to scale in Nigeria and expand its payments product to Kenya, Ghana and South Africa — Opera’s CFO Frode Jacobsen confirmed to TechCrunch.
OPay’s $120 million round comes after the startup raised $50 million in June. It also follows Visa’s $200 million investment in Nigerian fintech company Interswitch and a $40 million raise by Lagos-based payments startup PalmPay — led by China’s Transsion.
There are a couple of quick takeaways. Nigeria has become the epicenter for fintech VC and expansion in Africa. And Chinese investors have made an unmistakable pivot to African tech.
Opera’s activity on the continent represents both trends. The Norway-based, Chinese-owned (majority) company founded OPay in 2018 on the popularity of its internet search engine.
Opera’s web-browser has ranked No. 2 in usage in Africa, after Chrome, the last four years.
The company has built a hefty suite of internet-based commercial products in Nigeria around OPay’s financial utility. These include motorcycle ride-hail app ORide, OFood delivery service and OLeads SME marketing and advertising vertical.
“OPay will facilitate the people in Nigeria, Ghana, South Africa, Kenya and other African countries with the best fintech ecosystem. We see ourselves as a key contributor to…helping local businesses…thrive from…digital business models,” Opera CEO and OPay Chairman Yahui Zhou, said in a statement.
Opera CFO Frode Jacobsen shed additional light on how OPay will deploy the $120 million across Opera’s Africa network. OPay looks to capture volume around bill payments and airtime purchases, but not necessarily as priority. “That’s not something you do every day. We want to focus our services on things that have high-frequency usage,” said Jacobsen.
Those include transportation services, food services and other types of daily activities, he explained. Jacobsen also noted OPay will use the $120 million to enter more countries in Africa than those disclosed.
Since its Series A raise, OPay in Nigeria has scaled to 140,000 active agents and $10 million in daily transaction volume, according to company stats.
Beyond standing out as another huge funding round, OPay’s $120 million VC raise has significance for Africa’s tech ecosystem on multiple levels.
It marks 2019 as the year Chinese investors went all in on the continent’s startup scene. OPay, PalmPay and East African trucking logistics company Lori Systems have raised a combined $240 million from 15 different Chinese actors in a span of months.
OPay’s funding and expansion plans are also a harbinger for fierce, cross-border fintech competition in Africa’s digital finance space. Parallel events to watch for include Interswitch’s imminent IPO, e-commerce venture Jumia’s shift to digital finance and WhatsApp’s likely entry in African payments.
The continent’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population — which makes fintech Africa’s most promising digital sector. But it’s becoming a notably crowded sector, where startup attrition and failure will certainly come into play.
And not to be overlooked is how OPay’s capital raise moves Opera toward becoming a multi-service commercial internet platform in Africa.
This places OPay and its Opera-supported suite of products on a competitive footing with other ride-hail, food delivery and payments startups across the continent. That means inevitable competition between Opera and Africa’s largest multi-service internet company, Jumia.
Cyan Banister is an American success story. A homeless teenager who originally supported herself by making hemp necklaces, then silk-screen T-shirts, she went on to become a self-taught engineer and to later hold several management roles at the security startup IronPort. It was a life-changing experience for her. She made an early fortune when it sold to Cisco for $830 million in 2007. She also met her husband, Scott Banister, who co-founded the company, and the two together and separately began writing seed-stage checks, including to SpaceX, Uber and a long list of companies that are now household names.
When seed-stage valuations began soaring to levels that gave them both pause, they hit the brakes, and Banister, a self-described workaholic, headed over to AngelList as an “ev-angel-list” to help recruit people like herself to its platform. Soon after, Peter Thiel’s Founders Fund reached out to her and invited her to become a partner.
In a wide-ranging conversation at a San Francisco event on Wednesday, we talked with Banister about that path, along with her investing style, which still sees her make angel investments of $1.5 million or less in companies that are often ambitiously futuristic or boringly practical and very much needed. (She kidded that they balance out one another.)
We also chatted about Founders Fund, which has changed considerably since its 2005 founding yet maintained its reputation as a top fund — and we discussed why she thinks many of its original partners no longer live in San Francisco.
Among the things we learned: that Founders Fund doesn’t have Monday morning partner meetings, as do many firms. It doesn’t even have weekly meetings, with Banister instead describing a highly decentralized operation. “We have very few meetings, actually,” she said. “We have a brunch every two or three weeks that’s an hour, hour-and-a-half long. We submit the agenda over Slack; sometimes, we have nothing to talk about and it’s very short. You literally get a plate of food, talk about the one or two items, and you’re done.”
Founders Fund also has quarterly off-sites, typically at a partner’s house, and these are “all day affairs,” she said, adding that the team “doesn’t talk about specific deals. We talk about the future, about what’s exciting to all of us, what our different strategies might be.”
As for how decisions get made, Banister explained that the voting structure is dependent on the size of the check. “So you’d meet with one or two or three or four partners, depending on your [investing] stage,” she told attendees. Because she’s looking at very early-stage startups, for example, she doesn’t have to meet with many people to make a decision. As “dollar amounts gets larger,” she continued, “you’re looking at full GP oversight,” including the involvement of senior members like Brian Singerman and Keith Rabois, and “that can a little more difficult.”
Asked how involved Thiel himself is in these decisions, Banister said that there’s a certain threshold above which he is always involved. Pressed on what that number is, Banister smiled, adding, “Let’s just say it’s a lot.”
Pointing to the other senior members of the team, she offered that the partnership doesn’t “need Peter’s advice all the time, but there’s a certain point where he has to get involved and meet the founders. Ideally, it’s a company that we brought in at its early stages and has grown with us and he has already developed a relationship with [its founders]. We also do an off-site once a year, which is a great opportunity for him” to see everyone involved in the firm’s portfolio. “But he’s pretty involved,” she said. “He comes to these brunches and [quarterly] off-sites. We see him more now [since he called it quits in San Francisco and moved to LA] than we did when he lived next door because he’s stuck. If he comes to San Francisco, where’s he going to go? He has to stay in his office,” she joked.
Banister declined to confirm or comment on a recent WSJ report that Founders Fund is in the process of closing on $3 billion in capital commitments across two funds — a flagship fund and an opportunity type of fund to support its companies as they remain private ever longer.
But before we let her go, we asked Banister about turnover at the firm. Specifically, we noted, while Founders Fund was formed by Thiel, along with co-founders Ken Howery, Luke Nosek and Sean Parker, Howery is now the U.S. ambassador to Sweden, Nosek runs a separate fund in Austin called Gigafund and Parker is off doing a variety of other things, many of them also in LA.
She explained that everyone is encouraged to do what they want. For instance, she said, “Ken was encouraged to pursue his political aspirations; that’s something he has always wanted to do.”
But she also acknowledged that San Francisco itself might be a common thread. “It’s too expensive here. That’s the problem. We need to build more housing. We can’t afford people to even serve us in this town, they come in from other cities, they can’t even live here. And that’s a huge problem when you’re investing and your thesis is to invest only in Silicon Valley and the surrounding area.” In fact, Founders Fund is “already starting to look elsewhere [for startups], including in the Midwest,” she said.
As for whether San Francisco is doing enough for founders — or founders enough for San Francisco — Banister suggested both are coming up far short, saying of the city that “it should be the most technologically advanced” in the world. “There’s no reason we shouldn’t be like Tokyo . . . when we gave birth to Airbnb and Uber, and yet our city looks the way it does and operates the way it does and it’s a disaster.”
Tech founders and employees are in a particularly “weird situation” where on the one side a “large part of this city hates technology and hates all of us,” and on the other are people like Salesforce founder Marc Benioff who are funneling money into the city but whose efforts don’t appear to her to be making a difference. “I’ve yet to see a dent” in homelessness, she said as an example. In the meantime, “crime is going up and we now have a district attorney who won’t prosecute crimes that have to do with any sort of quality-of-life [issue]. [San Francisco is] going to start something instead where if your [car] window is broken, they’ll replace it with some kind of window Uber app at a discounted rate.”
The crowd laughed. Some attendees thought she was joking about the window replacement service. She wasn’t. “This is a really bad direction [we’re headed in],” she said. “We need diversity of thinking here, and we don’t have it on the political level, and we all need to get more involved.”
Silicon is apparently the new gold these days, or so VCs hope.
What was once a no-go zone for venture investors, who feared the long development lead times and high technical risk required for new entrants in the semiconductor field, has now turned into one of the hottest investment areas for enterprise and data VCs. Startups like Graphcore have reached unicorn status (after its $200 million series D a year ago) while Groq closed $52M from the likes of Chamath Palihapitiya of Social Capital fame and Cerebras raised $112 million in investment from Benchmark and others while announcing that it had produced the first trillion transistor chip (and who I profiled a bit this summer).
Today, we have another entrant with another great technical team at the helm, this time with a Santa Clara, CA-based startup called NUVIA. The company announced this morning that it has raised a $53 million series A venture round co-led by Capricorn Investment Group, Dell Technologies Capital, Mayfield, and WRVI Capital, with participation from Nepenthe LLC.
Despite only getting started earlier this year, the company currently has roughly 60 employees, 30 more at various stages of accepted offers, and the company may even crack 100 employees before the end of the year.
What’s happening here is a combination of trends in the compute industry. There has been an explosion in data and by extension, the data centers required to store all of that information, just as we have exponentially expanded our appetite for complex machine learning algorithms to crunch through all of those bits. Unfortunately, the growth in computation power is not keeping pace with our demands as Moore’s Law slows. Companies like Intel are hitting the limits of physics and our current know-how to continue to improve computational densities, opening the ground for new entrants and new approaches to the field.
There are two halves to the NUVIA story. First is the story of the company’s founders, which include John Bruno, Manu Gulati, and Gerard Williams III, who will be CEO. The three overlapped for a number of years at Apple, where they brought their diverse chip skillsets together to lead a variety of initiatives including Apple’s A-series of chips that power the iPhone and iPad. According to a press statement from the company, the founders have worked on a combined 20 chips across their careers and have received more than 100 patents for their work in silicon.
Gulati joined Apple in 2009 as a micro architect (or SoC architect) after a career at Broadcom, and a few months later, Williams joined the team as well. Gulati explained to me in an interview that, “So my job was kind of putting the chip together; his job was delivering the most important piece of IT that went into it, which is the CPU.” A few years later in around 2012, Bruno was poached from AMD and brought to Apple as well.
Gulati said that when Bruno joined, it was expected he would be a “silicon person” but his role quickly broadened to think more strategically about what the chipset of the iPhone and iPad should deliver to end users. “He really got into this realm of system-level stuff and competitive analysis and how do we stack up against other people and what’s happening in the industry,” he said. “So three very different technical backgrounds, but all three of us are very, very hands-on and, you know, just engineers at heart.”
Gulati would take an opportunity at Google in 2017 aimed broadly around the company’s mobile hardware, and he eventually pulled over Bruno from Apple to join him. The two eventually left Google earlier this year in a report first covered by The Information in May. For his part, Williams stayed at Apple for nearly a decade before leaving earlier this year in March.
The company is being stealthy about exactly what it is working on, which is typical in the silicon space because it can take years to design, manufacture, and get a product into market. That said, what’s interesting is that while the troika of founders all have a background in mobile chipsets, they are indeed focused on the data center broadly conceived (i.e. cloud computing), and specifically reading between the lines, to finding more energy-efficient ways that can combat the rising climate cost of machine learning workflows and computation-intensive processing.
Gulati told me that “for us, energy efficiency is kind of built into the way we think.”
The company’s CMO did tell me that the startup is building “a custom clean sheet designed from the ground up” and isn’t encumbered by legacy designs. In other words, the company isn’t building on top of ARM or other existing chip architectures.
Outside of the founders, the other half of this NUVIA story is the collective of investors sitting around the table, all of whom not only have deep technical backgrounds, but also deep pockets who can handle the technical risk that comes with new silicon startups.
Capricorn specifically invested out of what it calls its Technology Impact Fund, which focuses on funding startups that use technology to make a positive impact on the world. Its portfolio according to a statement includes Tesla, Planet Labs, and Helion Energy.
Meanwhile, DTC is the venture wing of Dell Technologies and its associated companies, and brings a deep background in enterprise and data centers, particularly from the group’s server business like Dell EMC. Scott Darling, who leads DTC, is joining NUVIA’s board, although the company is not disclosing the board composition at this time. Navin Chaddha, an electrical engineer by training who leads Mayfield, has invested in companies like HashiCorp, Akamai, and SolarCity. Finally, WRVI has a long background in enterprise and semiconductor companies.
I chatted a bit with Darling of DTC about what he saw in this particular team and their vision for the data center. In addition to liking each founder individually, Darling felt the team as a whole was just very strong. “What’s most impressive is that if you look at them collectively, they have a skillset and breadth that’s also stunning,” he said.
He confirmed that the company is broadly working on data center products, but said the company is going to lie low on its specific strategy during product development. “No point in being specific, it just engenders immune reactions from other players so we’re just going to be a little quiet for a while,” he said.
He apologized for “sounding incredibly cryptic” but said that the investment thesis from his perspective for the product was that “the data center market is going to be receptive to technology evolutions that have occurred in places outside of the data center that’s going to allow us to deliver great products to the data center.”
Interpolating that statement a bit with the mobile chip backgrounds of the founders at Google and Apple, it seems evident that the extreme energy-to-performance constraints of mobile might find some use in the data center, particularly given the heightened concerns about power consumption and climate change among data center owners.
DTC has been a frequent investor in next-generation silicon, including joining the series A investment of Graphcore back in 2016. I asked Darling whether the firm was investing aggressively in the space or sort of taking a wait-and-see attitude, and he explained that the firm tries to keep a consistent volume of investments at the silicon level. “My philosophy on that is, it’s kind of an inverted pyramid. No, I’m not gonna do a ton of silicon plays. If you look at it, I’ve got five or six. I think of them as the foundations on which a bunch of other stuff gets built on top,” he explained. He noted that each investment in the space is “expensive” given the work required to design and field a product, and so these investments have to be carefully made with the intention of supporting the companies for the long haul.
That explanation was echoed by Gulati when I asked how he and his co-founders came to closing on this investor syndicate. Given the reputations of the three, they would have had easy access to any VC in the Valley. He said about the final investors:
They understood that putting something together like this is not going to be easy and it’s not for everybody … I think everybody understands that there’s an opportunity here. Actually capitalizing upon it and then building a team and executing on it is not something that just anybody could possibly take on. And similarly, it is not something that every investor could just possibly take on in my opinion. They themselves need to have a vision on their side and not just believe our story. And they need to strategically be willing to help and put in the money and be there for the long haul.
It may be a long haul, but Gulati noted that “on a day-to-day basis, it’s really awesome to have mostly friends you work with.” With perhaps 100 employees by the end of the year and tens of millions of dollars already in the bank, they have their war chest and their army ready to go. Now comes the fun (and hard) part as we learn how the chips fall.