Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
This week was a fun combination of early-stage and late-stage news, with companies as young as seed stage and as old as PE-worthy joining our list of topics.
Here’s what the team argued about this week:
Equity is nearly three years old, and we have some neat stuff coming up that you haven’t heard about yet. Stay tuned, and thank you for sticking with us for so long.
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For global venture capitalists still on the fence about entering Africa, a first move could be co-investing with a proven fund that’s already working in the region.
Africa’s startup scene is performance-light — one major IPO and a handful of exits — but there could be greater returns for investors who get in early. For funds from Silicon Valley to Tokyo, building a portfolio and experience on the continent with those who already have expertise could be the best start.
Africa has one of the fastest-growing tech sectors in the world, as ranked by startup origination and year-over-year increases in VC spending. There’s been a mass mobilization of capital toward African startups around a basic continent-wide value proposition for tech.
Significant economic growth and reform in the continent’s major commercial hubs of Nigeria, Kenya, Ghana and Ethiopia is driving the formalization of a number of informal sectors, such as logistics, finance, retail and mobility. Demographically, Africa has one of the world’s fastest-growing youth populations, and continues to register the fastest global growth in smartphone adoption and internet penetration.
Africa is becoming a startup continent with thousands of entrepreneurs and ventures who have descended on every problem and opportunity.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
This is the first Equity Shot in what feels like a long time, so, let me explain. Most of the time Equity comes out on Friday. It’s a mix of news and chat and venture happenings. It’s fun! But sometimes, a topic comes up that demands more immediate attention. That’s what happened today as we stared at Tesla’s share price wondering what in the hell was going on.
Shares of the electric car company are surging — again — today, pushing ever-closer to the $1,000 per-share mark. So, Danny, myself and Chris on the turntables got together to riff and chat about what is going on.
For those of you who want some links, here you go:
Today was all about fun. The main, more serious (kinda) show is back Friday. Stay cool!
Founders Fund, the investment firm led by its controversial co-founder Peter Thiel and partners Keith Rabois and Brian Singerman, has closed on $3 billion in new capital across two investment funds, TechCrunch confirmed.
News of the firm’s latest fundraising close was first reported in Axios.
The firm’s $1.2 billion Founders Fund VII closed in December and follows on the heels of a $1.3 billion Fund VI, which closed in 2016. The firm’s first growth fund, which raked in $1.5 billion, closed on Monday as well, according to a spokesperson for the investment firm. An additional $300 million in commitments is coming from the firm’s partnership to round out the $3 billion figure.
Fundraising for the new investment vehicles was first reported in The Wall Street Journal last October. And it follows the reunion earlier in 2019 of Rabois and Thiel — two of the most notorious members of the “PayPal mafia” that’s produced a number of billionaire entrepreneurs and investors.
The speed with which Founders Fund has been able to raise new capital is matched by the firm’s alacrity in deploying new dollars, according to industry watchers. Rabois in particular has made a splash at Founders Fund since joining the firm — investing large sums in competitive rounds, investors said.
But the firm’s success in fundraising is likely due to the returns it has been able to reap for its limited partners. For its 2011-vintage fund four, Founders Fund has more than quadrupled every dollar that the fund committed, to $4.60, according to a report in The Wall Street Journal (thanks to investments in Airbnb and Stripe Inc.). That figure compares favorably to the industry average of $2.11. Meanwhile, the firm’s third fund saw its returns increase to $3.80, 75 cents more than the industry average.
Founders Fund partner Cyan Banister described how the firm’s investment practices differ from other venture capital investors in a wide-ranging interview with TechCrunch last year:
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.”
At Axios, Dan Primack reported that the growth fund would write checks of $100 million at least. The firm’s investment decisions would be structured with any two investment team members agreeing to back deals under $1.5 million. Any deal above $1.5 million requires approval from one partner and a general partner; deals above $5 million require one partner and two general partners; and deals above $10 million require approvals from two partners and the unanimous approval of Singerman, Thiel and Rabois. Any deal requiring the approval of the general partners means that the startup that is pitching has to at least talk on the phone or meet in person with the general partners.
Update: This story has been updated to reflect that the firm’s Fund VII was $1.2 billion and its Growth Fund was $1.5 billion.
As cybercrime continues to evolve and expand, a startup that is building a business focused on endpoint security has raised a big round of funding. SentinelOne — which provides a machine learning-based solution for monitoring and securing laptops, phones, containerised applications and the many other devices and services connected to a network — has picked up $200 million, a Series E round of funding that it says catapults its valuation to $1.1 billion.
The funding is notable not just for its size but for its velocity: it comes just eight months after SentinelOne announced a Series D of $120 million, which at the time valued the company around $500 million. In other words, the company has more than doubled its valuation in less than a year — a sign of the cybersecurity times.
This latest round is being led by Insight Partners, with Tiger Global Management, Qualcomm Ventures LLC, Vista Public Strategies of Vista Equity Partners, Third Point Ventures, and other undisclosed previous investors all participating.
Tomer Weingarten, CEO and co-founder of the company, said in an interview that while this round gives SentinelOne the flexibility to remain in “startup” mode (privately funded) for some time — especially since it came so quickly on the heels of the previous large round — an IPO “would be the next logical step” for the company. “But we’re not in any rush,” he added. “We have one to two years of growth left as a private company.”
While cybercrime is proving to be a very expensive business (or very lucrative, I guess, depending on which side of the equation you sit on), it has also meant that the market for cybersecurity has significantly expanded.
Endpoint security, the area where SentinelOne concentrates its efforts, last year was estimated to be around an $8 billion market, and analysts project that it could be worth as much as $18.4 billion by 2024.
Driving it is the single biggest trend that has changed the world of work in the last decade. Everyone — whether a road warrior or a desk-based administrator or strategist, a contractor or full-time employee, a front-line sales assistant or back-end engineer or executive — is now connected to the company network, often with more than one device. And that’s before you consider the various other “endpoints” that might be connected to a network, including machines, containers and more. The result is a spaghetti of a problem. One survey from LogMeIn, disconcertingly, even found that some 30% of IT managers couldn’t identify just how many endpoints they managed.
“The proliferation of devices and the expanding network are the biggest issues today,” said Weingarten. “The landscape is expanding and it is getting very hard to monitor not just what your network looks like but what your attackers are looking for.”
This is where an AI-based solution like SentinelOne’s comes into play. The company has roots in the Israeli cyberintelligence community but is based out of Mountain View, and its platform is built around the idea of working automatically not just to detect endpoints and their vulnerabilities, but to apply behavioral models, and various modes of protection, detection and response in one go — in a product that it calls its Singularity Platform that works across the entire edge of the network.
“We are seeing more automated and real-time attacks that themselves are using more machine learning,” Weingarten said. “That translates to the fact that you need defence that moves in real time as with as much automation as possible.”
But nonetheless, its product has seen strong uptake to date. It currently has some 3,500 customers, including three of the biggest companies in the world, and “hundreds” from the global 2,000 enterprises, with what it says has been 113% year-on-year new bookings growth, revenue growth of 104% year-on-year, and 150% growth year-on-year in transactions over $2 million. It has 500 employees today and plans to hire up to 700 by the end of this year.
One of the key differentiators is the focus on using AI, and using it at scale to help mitigate an increasingly complex threat landscape, to take endpoint security to the next level.
“Competition in the endpoint market has cleared with a select few exhibiting the necessary vision and technology to flourish in an increasingly volatile threat landscape,” said Teddie Wardi, MD of Insight Partners, in a statement. “As evidenced by our ongoing financial commitment to SentinelOne along with the resources of Insight Onsite, our business strategy and ScaleUp division, we are confident that SentinelOne has an enormous opportunity to be a market leader in the cybersecurity space.”
Weingarten said that SentinelOne “gets approached every year” to be acquired, although he didn’t name any names. Nevertheless, that also points to the bigger consolidation trend that will be interesting to watch as the company grows. SentinelOne has never made an acquisition to date, but it’s hard to ignore that, as the company to expand its products and features, that it might tap into the wider market to bring in other kinds of technology into its stack.
“There are definitely a lot of security companies out there,” Weingarten noted. “Those that serve a very specific market are the targets for consolidation.”
Cape Town based startup Zindi has registered 10,000 data-scientists on its platform that uses AI and machine learning to crowdsolve complex problems in Africa.
Founded in 2018, the early-stage venture allows companies, NGOs or government institutions to host online competitions around data-oriented challenges.
Zindi opens the contests to the African data scientists on its site who can join a competition, submit solution sets, move up a leader board and win — for a cash prize payout.
The highest purse so far has been $12,000, according to Zindi co-founder Celina Lee. Competition hosts receive the results, which they can use to create new products or integrate into their existing systems and platforms.
It’s free for data scientists to create a profile on the site, but those who fund the competitions pay Zindi a fee, which is how the startup generates revenue.
The South African National Roads Agency sponsored a challenge in 2019 to reduce traffic fatalities in South Africa. The stated objective is “to build a machine learning model that accurately predicts when and where the next road incident will occur in Cape Town… to enable South African authorities… to put measures in place that will… ensure safety.”
Attaining 10,000 registered data-scientists represents a more than 100 percent increase for Zindi since August 2019, when TechCrunch last spoke to Lee.
The startup — which is in the process of raising a Series A funding round — plans to connect its larger roster to several new platform initiatives. Zindi will launch a university wide hack-competition, called UmojoHack Africa, across 10 countries in March.
“We’re also working on a section on our site that is specifically designed to run hackathons…something that organizations and universities could use to upskill their students or teams specifically,” Lee said.
Lee (who’s originally from San Francisco) co-founded Zindi with South African Megan Yates and Ghanaian Ekow Duker. They lead a team in the company’s Cape Town office.
For Lee, the startup is a merger of two facets of her experience.
“It all just came together. I have this math-y tech background, and I was working in non-profits and development, but I’d always been trying to join the two worlds,” she said.
That happened with Zindi, which is for-profit — though roughly 80% of the startup’s competitions have some social impact angle, according to Lee.
“In an African context, solving problems for for-profit companies can definitely have social impact as well,” she said.
With most of the continent’s VC focused on fintech or e-commerce startups, Zindi joins a unique group of ventures — such as Andela and Gebeya — that are building tech-talent in Africa’s data-scientist and software engineer space.
If Zindi can convene data-scientists to solve problems for companies and governments across the entire continent that could open up a vast addressable market.
It could also see the startup become an alternative to more expensive consulting firms operating in Africa’s large economies, such as South Africa, Nigeria and Kenya .
Good morning friends, and welcome back to TechCrunch’s Equity Monday, a short-form audio hit to kickstart your week. Regular Equity episodes still drop Friday morning, so if you’ve listened to the show over the years don’t worry — we’re not changing the main show.
Here’s last week’s episode with Danny Crichton and Bessemer’s Elliott Robinson which I really enjoyed. And, we just posted the video from that taping, in case you wanted to see what a podcast looks like IRL. Spoiler: It’s mostly a bunch of microphones and cables and nerds.
Turning to the news, global growth concerns stemming from the coronavirus outbreak are starting to come true, with Singapore changing its own forecasts. Singapore now expects either slower growth, or negative expansion in 2020. That’s bad news. And, Japan’s economy was on the ropes even before the virus really slowed things down. Expect more of this to keep happening.
Also this weekend there was yet another tech-media dustup. If you missed it, you didn’t miss much.
The week ahead looks pretty tame. No major earnings reports or IPOs are on our horizon, though Dropbox, Wix and Zscaler will report. If you are a SaaS person, that’s for you.
All that and we wrapped with Oyo’s most recently disclosed financial performance. Surprise, it contained a lot of growth and quickly expanding losses.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
After having a good time with NEA’s Rick Yang last week, we thought we’d bring on another venture capitalist. So this week Danny and I had Elliott Robinson from Bessemer swing over for the show. As it turned out, he was about as correct as guest as possible as not only did the topics of the week line up with where he invests, he’s also friends with some of the folks that we discussed on the show.
So what did we talk about? A whole host of things including two rounds:
Then we turned to two new funds, including Battery’s battery of new capital vehicles that add up to $2 billion. In this part of the discussion we also touched on capital velocity, and why some firms are writing the same number of checks, but still need more capital. On the other end of the capital spectrum, Equal Ventures put together its first fund, and we riffed on the health of the micro-fund ecosystem.
All that and we had to leave Lyft’s fascinating earnings and Uber’s profit promises alone as we ran a bit long with just that set of topics. A good week, and we’re back Monday morning!
Earlier this week, much was made of the e-commerce business Brandless deciding to shutter its doors. Industry observers found its fate particularly interesting, given that Brandless was only a few years old and had raised substantial funding, including $100 million from the SoftBank Vision Fund alone.
Still, Brandless is far from alone in having tried — and failed — to break away from its many rivals and become the kind of juggernaut that makes venture investors money. There are now thousands of venture-backed companies that once looked like bigger opportunities or whose growth has slowed, and which aren’t finding follow-on dollars.
Ravi Viswanathan of the venture firm NewView Capital sums up what’s happening out there this way: “Firms and funds are generally coming back to market faster with bigger funds, and they’e investing a lot more, so you’re seeing portfolio bloat across the industry. But [limited partners, the outfits and people supplying money to venture funds] are investing for you to make money, and that means spending time on the needle movers.”
So what’s a startup with dwindling attention from its investors to do? There are numerous options, some newer than others, and some more desirable than others.
Naturally some — maybe most — of these companies will eventually, like Brandless, close down. This is the least favorable scenario for everyone involved as it means lost jobs, lost dollars and often an uncertain future for the founders who’ve poured their heart and soul into the company.
Venture capitalists don’t love closing down companies, either, as it means writing down the holdings in their financial statements, something they’d rather put off as long as possible — though external events can also impact the timing.
As Jeff Clavier of the venture firm Uncork Capital explains it, “We maintain a company’s valuation on our books until we decide to impair it.” But if a venture firm has a “big gain [because another company sold or went public], we might as well take advantage and sell the shares for $1 or forego them altogether,” minimizing the firm’s overall tax bill in the process.
Other companies that have grown more self-sufficient might look to buy back their shares from investors at a discount. Joel Gascoigne, the founder of a now six-year-old social media management company called Buffer, publicly outlined his own process for saving up enough money to buy out the company’s main venture investors a couple of years ago.
It’s not easy to pull off. Gascoigne says it took more than a year to persuade the VCs to take the deal he was offering them, and their relationship suffered as result.
The reason, offers Clavier, is that in a buyback scenario, an “investor has to admit complete defeat, and that’s kind of the last stop on the road.” Unsurprisingly, Clavier suggests a far better strategy is to “get out sooner, when there’s more time for a proper exit.”
Says Clavier, “The best thing you can do is find a nice home” for the founders, including so they can “move on, get a new gig, join something, rather than toiling away for the next three to five years” on a company that might eventually fail anyway.
In some cases where the investors have essentially written the deal down to zero, they’ll let the founders retain their intellectual property.
“It’s worth something to him or her or them,” says Hunter Walk, co-founder of the venture firm Homebrew, “and it’s really not worth anything to the investors and maybe the founder wants to re-start it as a non-venture-backed company.”
But notably, says Walk, this “usually occurs when they haven’t raised too much money.”
It’s a different story for startups that have raised bigger rounds, as VCs need to wring what they can from a company to fulfill their firm’s fiduciary obligations. That means selling off assets, from office chairs to IP.
Thankfully, for startups going nowhere fast, there’s also a third option that’s picking up traction: private equity firms that have grown increasingly focused on tech. Think Francisco Partners, Permira, Silver Lake. Their terms might not always be ideal, but the founder gets to claim an “exit” while the private equity firm gets to roll up sub-scale properties or bolt a startup onto one of its core assets and re-sell the package to another buyer.
These deals can sometimes be a “bitter pill to swallow” for investors, notes Viswanathan, though the “sooner you do it, the faster you free up resources and show your LPs that you can manage your portfolio.” Sometimes, too, he notes, investors hang on to their stake, expecting the PE firm will produce a better outcome.
Just last month, for example, Insight Partners, the New York-based private equity and venture firm, paid cash for Armis Security, a five-year-old company whose tech helps businesses secure their connected devices. Though terms of the deal weren’t disclosed, a number of Armis investors rolled their stakes into the new, Insight-controlled company.
Options #3 and #4
What if such a deal never materializes? Well, there are other alternatives still for startups that are chugging along — just not as quickly as once expected.
One is to try debt lenders. Debt is always a gamble, but one that sometimes pays off.
Another is to use convertible notes if one’s investors (or even outsiders) are open to the idea. These notes are structured as debt that convert into equity upon a specific event like a certain date or the closing of a priced investment round.
The Hail Mary pass
There’s always the hope, too, that a venture investor will let a bet ride.
Jason Lemkin, a former entrepreneur who now runs the venture firm SaaStr fund, says he’s open to doing this when he can. “My view as a founder and investor has evolved over time, but if I think it’s a good team and the company is achieving a few million in revenue and doesn’t need to raise money and has high retention and recurring revenue but is no longer on a venture trajectory, I’ll wait,” says Lemkin. “I’ll wait because things can change.”
It’s true of SaaS startups in particular, he says, “because competitors get acquired, they quit, they take too much money and stumble.”
It can take some time, of course, but “if you’re the last man or woman standing,” he says, “if you’re still out there fighting, you can win.”
Good morning friends, and welcome back to TechCrunch’s Equity Monday, a short-form audio hit to kickstart your week. Regular Equity episodes still drop Friday morning, so if you’ve listened to the show over the years, don’t worry — we’re not changing it in the slightest. (Here’s last week’s episode, which included our first guest in a bit, NEA’s Rick Yang.)
We kicked off this morning with the latest economic news relating to the coronavirus outbreak in China, namely that a host of Chinese firms are looking for loans. Inside the group of companies seeking capital that Reuters reported are names that we know, like Didi and Meituan Dianping. At first it appeared that the coronavirus’ impact would be a bump in growth; now it appears to be a bit more serious.
It’s not just big companies that are impacted, mind. Small and private firms with supply chains in China are impacted as well, not to mention the country’s entire domestic startup scene.
Looking ahead, there are three key earnings reports on the horizon: Lyft, Alibaba and Shopify. Each matters for a different reason. Alibaba will provide a window into China, Shopify a look at how investors are valuing momentum plays and Lyft a health report for the on-demand world.
After Uber’s surprising results and ensuing adjusted profit promise (Q4 2020, not calendar 2021), Lyft is under fresh pressure to match the covenant. If it doesn’t change its profit forecasts, it could be punished. And that could shift the waters for smaller, private on-demand companies like DoorDash and Postmates, along with other mobility firms like Lime and Bird. On-demand companies have raised billions, so Lyft has more than its own investors riding shotgun for its Q4 2019 report.
There are no impending IPOs this week, but there were two rounds that we found interesting:
Finally, WeWork wants you to know that it is turning around. If that is the case is not clear, but its folks are back on CNBC to both beat back an activist attempt to push for change and talk up its own book. How close you think WeWork will end 2020 in the black is probably the next question to ask.
That’s it from us. Stay cool, and we will be back Friday morning with yet another guest from the venture capital world.
Fundraising is the single most important thing you can do for your business, but I know very few founders who enjoy the process.
It’s inherently stressful: you’re running out of capital, which is why you’re trying to get more of it. There’s also no clear roadmap to getting funding and almost every company goes through the process differently. I’ve talked a lot about what makes a successful early-stage pitch deck and what you can expect when you’re trying to close a funding round. But do those same best practices still apply when you’re fundraising outside of the United States?
Before we continue, the research project that we’ve completed is opt-in, and we don’t look at anyone’s data without their express permission. We take privacy very seriously, but we also work with an amazing group of founders who are willing to pass on what they’ve learned to the next generation of founders going through the process. If you want to be included in our next round of research, you can find the survey links at the bottom of this blog post.
So what can you expect while sending your pitch deck out to European VCs?
When DocSend conducted this study previously, we found that the average length of a Series seed or pre-seed was about 11-15 weeks. In fact, according to our research, if you’re in the United States and you’re sending your pitch deck to investors, you can expect about 50 percent of your views to come in just the first nine days. You’ll also hit 75 percent of your visits in just over a month, which is very much in line with the 11-15 week average window.
However, when we look outside of the U.S., the numbers change dramatically.
Sending out your pitch deck in Europe, you can expect to wait over two weeks (15 days) for the first 50 percent of your visits. And you’ll likely wait nearly two months (53 days) for 75 percent of your visits. There are a lot of reasons for the discrepancies. It could be that your potential investors are more spread out. We also don’t see the same level of urgency in EU funding rounds as we often see in the U.S. No matter the reason, you’re going to want to have enough runway to survive the fundraising gauntlet in your region. While I usually recommend having at least six months in the bank, you may want to look at having 9-12 months of runway so you’re not desperate by the end of your fundraising round.
However, your round speed will most likely vary depending on the type of company you are. There has been a trend in recent years of U.S. investors looking to make deals with European startups. We also know American investors are looking for 100x companies to make solid returns for their funds. There are only so many 100x-type companies in the U.S you can invest in, but Europe is an emerging market. But American VCs have a different pace and rounds for hot startups can last weeks, not months. So if you think you have a unicorn in the making (and are comfortable with a more aggressive growth plan and the burn rate that goes with it), you can use U.S. investors to help create a sense of urgency. But even if that’s your plan, I would still recommend having a healthy runway to get you through in case the round doesn’t go as you expect.
A clear indicator of VC interest is the amount of time they spend reading your deck before they request a meeting. Knowing how long they spend reading your deck and what pages they stop on (which isn’t necessarily a good thing) can help you gauge VC interest.
We’ve seen an interesting trend in Europe over the last few years. The average amount of time VCs are spending reading a deck has increased and not by a small amount. We’ve seen an increase of more than 20 seconds between 2018 and now, even while the length of the standard fundraising deck has stayed stable. It’s still within the industry average (both in and outside of the U.S.) of 19-20 pages. With page length staying stable, that extra time on a deck means VCs are willing to spend more time assessing an investment.
If you know your slides will be scrutinized, make sure you have content in each of the key sections VCs expect to see in your deck. Be very clear with the goal for each page and don’t include too much information. If your page is describing the problem your company is solving, you don’t need to add in your market size and the traction you’ve already gotten. Remember, the pitch deck is just there to get you the meeting; you don’t need to include every detail about your business. Your goal is to build an understandable narrative that will make a VC want to know more.
Investments are heating up outside of the U.S.
With fund sizes increasing, especially in the earlier rounds, there’s more money being invested. But with the continual focus on unicorns, that money is being concentrated in fewer companies. In fact, in the U.S., we’ve seen the number of decks with six or more views drop by nearly a full percentage point from 2018 to 2019. But the trend is the opposite in Europe. The number of pitch decks that are being viewed six or more times is actually on the rise.
We’ve also seen the number of pitch decks being viewed only once drop outside of the U.S. by 1.2 percent. This could be due to several factors. The number of VC firms in Europe viewing decks has grown by 56 percent on our platform in the last year. In the U.S., it’s only grown by 35 percent since 2018. Having more active VCs means there are more opportunities to pitch your company. But with a decrease in pitch decks that aren’t getting any action, it could be that the quality of startups is increasing, so VCs are saturated with opportunities. With well over 250 accelerators in Europe, it isn’t hard to imagine that with more and more resources available, startups are further along when looking for that initial investment than they were just a few years ago.
Raising a funding round is completely different in Europe than it is in the U.S.
Investors in Europe aren’t in a rush to view your deck, but when they do, they will likely spend more time reading it through and considering it. Combine that with the fact that the number of highly-viewed decks is increasing, and you have the makings for a long and potentially arduous round pitching to VCs who have multiple good investments on offer.
If your business will support a more aggressive growth plan and investment, it may be worth it to court outside investment. But if you’d like to play it safe, aiming for a U.S. VC may be a waste of time.
This week was something fun. First, we were back as a group in the San Francisco studio, which is always fun. Even better, we had NEA’s Rick Yang on hand to chat with Danny and Alex about the week. Yang, as old-school Equity listeners will recall, was on the show back in 2017. (Equity turns three soon, which is somewhat amazing.)
All that aside, let’s talk about what we talked about. As always, we kicked off with three rounds:
After that we chugged through a mountain of news. First up, the confirmation of a story that we mentioned on the show before, namely the existence of a new venture fund (angel pool, perhaps) from the CEO of email startup Superhuman Rahul Vora and Eventjoy founder Todd Goldberg. The $7 million vehicle is going to cut pre-seed sized checks ($75,000 to $200,000), which should make it a popular pit stop for pre-revenue companies.
What next? Well, Casper of course. The company’s IPO pricing and debut was this week, something that we’ve had something to say about. That, and the latest from One Medical’s strong post-IPO performance, and the news that Asana has filed privately to go public in a direct listing.
That last item was of particular interest, as the company hasn’t raised as much cash as other companies that we’ve seen direct list, the Spotifys and Slacks of the world. So has it raised capital that we haven’t heard about, or has it simply not spent the capital it has raised? If it had spent the money, then wouldn’t it want to raise some like with a traditional IPO? Mysteries! Riddles that will be solved when we get to see the damn filing.
Oh, and Spotify continues to pour money into podcasting. Which everyone ’round the table thought was pretty smart.
Forescout, the network security company that has been publicly traded since 2017, announced today it was going private again. Private equity firms Advent International and Crosspoint Capital are acquiring the company in an all-cash purchase of $1.9 billion.
The two private equity firms will pay $33 per share, which represented a premium of 30% over the company’s closing price of $25.45 on October 19, 2019. The stock hit $39.87 on October 4th before starting a precipitous drop later that month, dropping to $24.57 on October 10th.
Not coincidentally, that was the day the company reported its earnings and had a bad revenue miss. Projections had revenue in the $98.8 million – $101.8 million range. Actual reported revenue was far less at $91.6 million, according to data from the company.
In the earnings call that followed on November 7th, Forescout president and CEO Michael DeCesare tried to blame the bad results on extended sales, but it didn’t really help as private equity firms swooped in to make the deal. “We experienced extended sales cycles across several of our customers that pushed out deals and which did not become apparent until we entered the final days of the quarter. We do not believe that any of these deals have been lost to competitors,” he told analysts.
In a statement today, DeCesare tried to put a positive spin on the acquisition. “This transaction represents an exciting new phase in the evolution of Forescout. We are excited to be partnering with Advent International and Crosspoint Capital, premier firms with security DNA and track records of success in strengthening companies and supporting them through transitionary times.”
Forescout is not a young company, having launched way back in 2000. It raised almost $290 million, according to PitchBook data. It went public on October 26, 2017.
The deal is not finalized as of yet. The company has a go-shop provision in place until March 8th in which it can try to find a better deal, but that seems unlikely. Should they fail to find a better suitor, the deal is expected to close in the second quarter, at which point the company will cease to be publicly traded.
VC firm TLcom Capital has closed its Tide Africa Fund at $71 million with plans to make up to 12 startup investments over the next 18 months.
“We’re rather sector agnostic, but right now we are looking at companies that are more infrastructure type tech rather than super commoditized things like consumer lending,” he told TechCrunch on a call.
On geographic scope, TLcom Capital will focus primarily on startups in Africa’s big-three tech hubs — Nigeria, Kenya, South Africa — but is also eyeing rising markets, such as Ethiopia.
Part of the fund’s investment approach, according to Caio, is backing viable companies with strong founders and then staying out of the way.
“We are venture capitalists that believe in looking at Africa as an investment opportunity that empowers local entrepreneurs without…coming in and explaining what to do,” said Caio.
TLcom’s team includes Caio (who’s Italian), partners Ido Sum and Andreata Muforo (from Zimbabwe) and senior partner Omobola Johnson, the former Minister of Communication Technology in Nigeria.
Speaking at TechCrunch Disrupt Berlin in 2018, Johnson offered perspective on next startups in Africa that could reach billion-dollar valuations. “When I look at the African market I suspect it’s going to be a company that’s very much focused on business to business and business to very small business — a company that can that can solve their challenges,” she said.
TLcom’s current Africa portfolio reflects startups similar to what Johnson described. The fund has invested in Nigerian trucking logistics venture Kobo360, which is working to reduce business delivery costs in Africa.
Both of these companies have gone on to expand in Africa and receive subsequent investment by U.S. investment bank, Goldman Sachs .
The firm’s close of the $71 million Tide Africa Fund comes on the high-end of a several-year mobilization of capital for the continent’s startup scene. Investment shops specifically focused on Africa have been on the rise. A TechCrunch and Crunchbase study in 2018 tracked 51 viable Africa specific VC funds globally, TLcom included.
This trend has moved in tandem with a quadrupling of venture funding for the continent over the past six years. Accurately measuring VC for Africa is a work in progress, but one of the earlier reliable estimates placed it at just over $400 million in 2014. Recent stats released by Partech peg Africa focused VC funding at over $2 billion for 2019.
TLcom’s listed in a number of the larger rounds that made up Partech’s tally.
The fund’s latest $71 million raise, which included support from Sango Capital and IFC, reversed the roles a bit for TLcom founder Maurizio Caio.
The VC principal — who usually gets pitches from African startups — needed to sell the value of African tech to other investors.
“It’s been tough to raise the fund, there’s no doubt about it,” Caio said. TLcom highlighted its past exit record and the viability of the African market and founders to bring investors on board.
“We had the advantage of showing some good exits…The emphasis was also on the gigantic size of these markets that are underserved, the role that technology can play, and the fact that the entrepreneurs in Africa are just as good as anywhere else,” said Caio.
He also referenced African startups being constrained by the social impact factors often placed on them from outside investors.
“The equation is not just about ensuring employment and inclusion, but also about the fact that African entrepreneurs have to be in charge of their own destiny without instructions from the West,” he said.
For those startups who wish to pitch to TLcom Capital, Caio encouraged founders to contact one of the fund’s partners and share a value proposition. “If it’s something we find vaguely interesting, we’ll make a decision,” he said.
Life sciences is big business in venture capital land and firms are raising big dollars to find the companies that will lead the next healthcare revolution.
Chief among them is Andreessen Horowitz, which announced its third life sciences fund with a $750 million final close earlier today.
Andreessen went back to market less than than three years after closing its $450 million fund in 2017. The firm’s first, $200 million life sciences fund closed in 2015.
So far, the firm, which is one of the most successful new venture firms to come on the scene since its launch nearly 11 years ago, has only had one exit from its life science portfolio: the $65 million acquisition of Jungla by the genetics testing firm Invitae back in 2019.
Increasingly, there’s a view among investors that the life sciences and healthcare revolution borne on the back of computational biology and programmable genetics will usher in a wave innovation which will change more than just the healthcare industry.
As the firm wrote in its announcement of the new fund:
Bio is not the “next new thing”—it’s becoming everything. Software is now affecting not just how we do not just one thing—cloning DNA, or engineering genes—but how we do it all across the board, blurring lines, breaking down traditional silos, changing our processes and business models. In other words, technology today is enhancing all our existing tools and data, affecting every decision we make, from research to development to deployment—and how we access, pay for, and experience healthcare.
And it’s not just software. What is technology really? It’s principles and process. It’s a shift to an engineering mindset for relentless iteration and constant improvement; modular components that can be remixed and reused, and improvements that accrue and compound over time. Tech gives us tools beyond just software—continuous data streams to describe our health, circuits to program cells, scalpels to edit DNA, and the ability to create programmable, living medicines. Our focus is not just on the groundbreaking outputs of this shift, from novel gene and cell therapies to digital therapeutics and virtual care models, but on the underlying approach and drivers that created those breakthroughs. This is why it doesn’t work to simply tack on AI, or just insert tech into an established company. In order to re-program entire systems and re-imagine new approaches to massive challenges, whether those are biological, or man-made, you need to rethink the process from the ground up.
KKR, the multibillion-dollar multistrategy investment firm, is beefing up its technology practice with the appointment of Rob Salvagno as a co-head of its technology growth equity business in the U.S.
It’s a sign that KKR is taking the tech industry seriously as it looks for new acquisition and investment opportunities.
Salvagno, the former vice president of corporate development and head of Cisco Investments, was responsible for all mergers and acquisitions and venture capital investments at the company.
Over a twenty-year career Salvagno helped form and launch Decibel, the networking giant’s early stage, several hundred million dollar investment fund.
“Our business has evolved significantly since we first launched our technology growth equity strategy over five years ago with a small team of five. Since that time, the growth of our business and the number of compelling investments we’re seeing around the globe have allowed us to not only expand our team, but also our technology experience, network and geographic reach,” said Dave Welsh, KKR Partner and Head of Technology Growth Equity, in a statement. “With the addition of a tech industry veteran like Rob to our team, we’re excited to continue to build for the future and position ourselves well to capture the many investment opportunities we see ahead.”
To date, KKR has invested $2.7 billion in tech companies since 2014 and established itself as a player in late stage tech investment with a team of nineteen investment professionals. Earlier this month, the firm closed its $2.2 billion fund dedicated to growth technology investment in North America, Europe and Israel.
“Rob has an extensive background in security, [infrastructure] software and app dev and dev ops, a background which we believe will complement the existing teams’ skillset very well,” said Welsh in an email. “[And] our focus areas for our second firm will be similar to the prior fund, namely a heavy focus on software with some additional focus on consumer internet, fintech/insurtech and tech enabled services.”
Application development software and security technologies will also remain a core focus for the firm, according to Welsh.
“Additionally, we will be ramping up our time spent on infrastructure software (i.e. software used to run modern data center / cloud environments), application dev and development operations (i.e. app dev and dev ops solutions) as well as software solutions focused on certain vertical industries (such as real estate, legal, construction, hospitality),” the KKR co-head wrote in an email.
NASA is sending to orbit aboard a Maxar 1300-class satellite (whose primary mission is to provide commercial satellite communications for Intelsat customers) a payload that could help improve air quality forecasting, the agency announced today. NASA’s new air quality measurement tool is called “TEMPO,” which stands for Tropospheric Emissions: Monitoring of Pollution, and it’ll provide hourly measurements of the levels of gases in the atmosphere over North America, including ozone, nitrogen dioxide and aerosols. That’ll paint a picture of the relative air quality, and that info will be available publicly so that weather monitoring agencies and others can provide more accurate and up-to-date air quality information to people as part of their forecasts.
The TEMPO tool won’t launch until 2022, however, which is when the Maxar satellite, called Intelsat 40e, is set to be delivered to geostationary orbit. It’s not uncommon for NASA to host its scientific payloads on commercial communications satellites, providing an opportunity for NASA to effectively hitch a ride on a large geostationary satellite that’ll cover the territory it wants to cover, while offering significant cost savings versus putting up a dedicated spacecraft.
Ball Aerospace developed the TEMPO instrument for NASA, and it’ll be transported to Maxar’s Palo Alto-based satellite manufacturing facility for incorporation into the Intelsat 40e vehicle ahead of its scheduled launch. The instrument will also be used alongside other tools, including one from the European Space Agency, and South Korea’s Geostationary Environment Monitoring Spectrometer, which will all combine to provide a more comprehensive and detailed picture of air quality across the northern hemisphere.
NASA has already contributed to improved air quality index (AQI) information, boosting accuracy of the EPA’s daily AQI by as much as 38%, according to tests conducted in August after satellite data refreshed every three hours was incorporated into that index’s calculation. Continuing to improve the quality and accuracy of these and other measures of air quality could potentially have tremendous impact on the lives of us here on Earth as air quality worsens due to the impact people have on the environment and airborne pollutants.
TechCrunch is hosting its first-ever dedicated space event in 2020 — TechCrunch Sessions: Space, happening June 25 in LA. Get your tickets now!
Those looking outside of Silicon Valley as a potential hub for their startup might want to take a gander at Utah — at least that’s the kind of trend the new Silicon Slopes Venture Fund hopes to create.
The newly formed fund, put together by Qualtrics co-founder Ryan Smith, Omniture and Domo founder Josh James and Stance co-founder turned Pelion Venture Partners’ Jeff Kearl, pledges to invest solely in Utah-based startups. The goal? To become every bit as notable as a16z or Sequoia Capital.
Qualtrics co-founder Ryan Smith and Domo and Omniture founder Josh James onstage at the Silicon Slopes Tech Summit.
“I grew up in the Bay Area,” Kearl told TechCrunch of the energy he feels in the state. “This feels like the 1990s in the Bay Area. You can find hundreds of open jobs up and down the Wasatch Front.”
Utah has a reputation as a mostly religious, conservative and sleepy mountain region for outdoors enthusiasts but tech has fast become the leading job sector in the state, with some salaries from companies like Adobe and Qualtrics rivaling those in Silicon Valley. The state recently pledged a push to include at least one computer science course in every high school in the state by 2022 and also just hosted a massive, 25,000 person startup festival called the Silicon Slopes Tech Summit, where it held a Utah state governor’s debate and both Steve Case and Mark Zuckerberg spoke on stage.
It’s unclear how much the fund has set aside for its mission to help Utah become a full-fledged tech ecosystem rivaling Silicon Valley but one would imagine it would have a sizable sum to invest, if, as Smith tells TechCrunch, it is to help Utah’s up-and-coming startups go all the way from seed stage to IPO.
“I want to see companies get even bigger than Qualtrics…and do it in this state,” Smith said. Qualtrics sold to SAP in 2019 for $8 billion, notably the largest private enterprise software deal in tech history.
Silicon Slopes Tech Summit 2020 Gubernatorial Debate
One of the many issues tech hubs around the world face is both the networking capabilities and the ability to invest after the seed stage or Series A. Most startups throughout the globe still find the need to travel and make connections in Silicon Valley to get them through the next step of growth. This has been true for every billion-dollar startup idea in Utah as well so far. Both Smith and James took in Silicon Valley venture for their companies, as did unicorn turned public ed tech startup Pluralsight and the recently rebranded sales platform Xant (formerly InsideSales), before making it big.
However, this new fund represents the kind of push needed to create a strong innovation ecosystem in the future, as Steve Case mentioned on stage at the summit event this last week. “Venture capitalists must look at ‘what’s happening in the Silicon Slopes’ and make sure it ‘is happening other places’,” Utah newspaper Deseret News paraphrased the AOL founder as saying.
Pelion Venture Partners, which operates in both Utah and Southern California, will act as a support to Silicon Slopes Venture Fund, providing organizational overhead. Each partner will still keep their day job and donate most fees to support the ongoing operation of the non-profit tech organization, Silicon Slopes, which runs the annual tech summit of the same moniker. However, the Silicon Slopes Venture Fund will be an independent fund from Pelion, with the sole purpose of investing in deal flow the three partners find through their respective networks within the state.
“I used to hate the term ‘a rising tide lifts all boats’ because I want to be the only boat,” James told TechCrunch. “But I really think it applies here for what we are trying to do [in Utah].”
It was yet another jam-packed week full of big news, IPO happenings and venture activity. As always, we’ve done our best to deliver the gist on what’s been going on. We had Alex Wilhelm and Danny Crichton on hand to handle it all, which went medium-good. In other Equity news, we’re back with guests over the next few weeks, so if you miss us having a venture capitalist along for the ride, fear not, their return is just around the corner.
Up top this week was Jon Shieber’s report that Kleiner Perkins has rapidly deployed its most recent fund, a $600 million vehicle. While the news felt surprising, digging back through our archives we were reminded that the firm had indicated it might put its capital to work quickly. Still, as Danny pointed out, it’s rare that venture capitalists have to go out raising from LPs on an annual basis.
After that, we turned to some funding rounds that held our attention, including the Free Agency round that is working to bring talent management to the technology industry similar to the sports and entertainment worlds.
The concept makes some sense, as compensation packages for top talent in the industry can extend into the seven-figures (Free Agency takes a 5-10% cut of an employee’s income using the increasingly popular income-share agreements). Also, this round felt a bit like a reminder that the labor market is tight at the moment.
We then moved on to Josh Constine’s story about “Ring for enterprise” startup Verkada, which raised a massive $80 million round at a $1.6 billion valuation. That’s eye-popping, since the extremely small dilution implied with those numbers (5%) is very rare in the venture world.
After that we turned to a few rounds that Alex has had his eye on, namely the somewhat-recent Insurify round, the pretty-recent Gabi round and the most-recent Policygenius. All told, they sum to $150 million, which made us ask the question, why are venture capitalists so into insurance marketplace startups?
Finally, we touched on the latest from the intra-SoftBank delivery war between DoorDash and Uber Eats, including who is impacted, and what it means for future consolidation in the on-demand world. Or more precisely, why hasn’t there been more?