This year has shaken up venture capital, turning a hot early start to 2020 into a glacial period permeated with fear during the early days of COVID-19. That ice quickly melted as venture capitalists discovered that demand for software and other services that startups provide was accelerating, pushing many young tech companies back into growth mode, and investors back into the check-writing arena.
Boston has been an exemplar of the trend, with early pandemic caution dissolving into rapid-fire dealmaking as summer rolled into fall.
We collated new data that underscores the trend, showing that Boston’s third quarter looks very solid compared to its peer groups, and leads greater New England’s share of American venture capital higher during the three-month period.
For our October look at Boston and its startup scene, let’s get into the data and then understand how a new cohort of founders is cropping up among the city’s educational network.
Boston’s third quarter was strong, effectively matching the capital raised in New York City during the three-month period. As we head into the fourth quarter, it appears that the silver medal in American startup ecosystems is up for grabs based on what happens in Q4.
Boston could start 2021 as the number-two place to raise venture capital in the country. Or New York City could pip it at the finish line. Let’s check the numbers.
According to PitchBook data shared with TechCrunch, the metro Boston area raised $4.34 billion in venture capital during the third quarter. New York City and its metro area managed $4.45 billion during the same time period, an effective tie. Los Angeles and its own metro area managed just $3.90 billion.
In 2020 the numbers tilt in Boston’s favor, with the city and surrounding area collecting $12.83 billion in venture capital. New York City came in second through Q3, with $12.30 billion in venture capital. Los Angeles was a distant third at $8.66 billion for the year through Q3.
The economic impact of the COVID-19 pandemic adversely affected the financial outlook for millions of people, and continues to cause significant fiscal distress to millions more, but such challenging times have also wrought a more resilient and resourceful financial system.
With the ingenuity of crowdfunding, considered to be one of the last decade’s greatest “success stories,” and such desperate times calling for bold new ways to finance a wide variety of COVID-19 relief efforts, we are now seeing an excellent opportunity for banks and other financial institutions to partner with crowdfunding platforms and campaigns, bolstering their efforts and impact.
Before considering how financial institutions can assist with crowdfunding campaigns, we must first look at the diverse array of impressive results from this financing option during the pandemic. As people choose between paying the rent or buying groceries, and countless other despairing circumstances, we must look to some of the more inventive ways businesses, entrepreneurs and people in general are using crowdfunding to provide the COVID-19 relief that cash-strapped consumers with maxed-out or poor credit do not have access to or the government has not provided.
Some great examples of COVID-19 crowdfunding at its best include the following:
The possibilities presented by crowdfunding in this age of the coronavirus are endless, and financial institutions can certainly lend their assistance. Here is how.
Crowdfunding is a substantial and ever-so relevant means of financing all sorts of businesses, people and products. Denying its substantive contribution to the economy, especially in digital finance during this pandemic, is akin to wearing a monocle when you actually need glasses for both of your eyes. Do not be shortsighted on this. Crowdfunding is here to stay. In fact, countless crowdfunding businesses and platforms continue to make major moves within the markets globally. For example, Parpera from Australia, in coordination with the equity-crowdfunding platforms, hopes to rival the likes of GoFundMe, Kickstarter and Indiegogo.
This might seem contrary to the original purpose of these campaigns, but the right amount of seed-cash infusions to campaigns that are aligned with your goals as a company is a win-win for both you and the entrepreneurs or causes, especially now in such desperate times of need.
This means that small businesses and medium-sized businesses within your institution’s community could use your help. Consider investing in crowdfunding campaigns similar to the ones mentioned earlier. Better yet, bridge the gaps between financial institutions and crowdfunding platforms and campaigns so that smaller businesses get the opportunities they need to survive through these difficult times.
Last month, the United Nations Development Program released a report proclaiming that digital finance is now allowing people from all over the world to customize and personalize their money-management experiences such that their financial needs have the potential to be more readily and sufficiently met. Financial institutions willing to work as a partner with crowdfunding platforms and campaigns will further these goals and set society up for a more robust rebound from any possible detrimental effects of the COVID-19 recession.
Other countries are already beginning to figure out better ways to regulate the crowdfunding financing industry, such as the recent updates to the European Union’s handling of crowdfunding regulations, set to take effect this fall. Well-established financial institutions can lend their support in defining the policies and standard operating procedures for crowdfunding even during such a chaotic time as the COVID-19 pandemic. Doing so will ensure fair and equitable financing for all, at least, in theory.
While originally born out of either philanthropy or early-adopting innovation, depending on the situation, person or product, crowdfunding has become an increasingly reliable means of providing COVID-19 economic relief when other organizations, including the government and some banks, cannot provide sufficient assistance. Financial institutions must lend their vast expertise, knowledge and resources to these worthy causes; after all, we are all in this together.
Earlier this week I asked startups to share their Q3 growth metrics and whether they were performing ahead of behind of their yearly goals.
Lots of companies responded. More than I could have anticipated, frankly. Instead of merely giving me a few data points to learn from, The Exchange wound up collecting sheafs of interesting data from upstart companies with big Q3 performance.
Naturally, the startups that reached out were the companies doing the best. I did not receive a single reply that described no growth, though a handful of respondents noted that they were behind in their plans.
Regardless, the dataset that came together felt worthy of sharing for its specificity and breadth. And so other startup founders can learn from how some of their peer group are performing. (Kidding.)
Let’s get into the data, which has been segmented into buckets covering fintech, software and SaaS, startups focused on developers or security and a final group that includes D2C and fertility startups, among others.
Obviously, some of the following startups could land in several different groups. Don’t worry about it! The categories are relaxed. We’re here to have fun, not split hairs!
Lunar, the Nordic challenger bank that started out life as a personal finance manager app (PFM) but acquired a full banking license in 2019, has raised €40 million in Series C funding from existing investors.
The injection of capital follows a €20 million Series B disclosed in April this year and comes on the back of Lunar rolling out Pro paid-for subscriptions — similar to a number of other challenger banks in Europe — personal consumer loans, and the launch of business bank accounts in August.
The latter appears to have been an instant success, perhaps proof there is — like in the U.K. — pent up demand for more accessible banking for sole traders. Just months since launching in Denmark, Lunar Business claims to have signed up more than 50% of all newly founded sole trader businesses in the country.
I’m also told that Lunar has seen “best-in-class” user engagement with users spending €1,100 per month versus what the bank says is a €212 EU average for card transactions. Overall, the bank has 5,000 business users and 200,000 private users across Denmark, Sweden and Norway.
Meanwhile — and most noteworthy — after launching its first consumer lending products on its own balance sheet, Lunar has set its sights on the “buy now, pay later” market, therefore theoretically encroaching on $10.65 billion valued Klarna, and Affirm in the U.S. which just filed to go public. Other giants in the BNPL space also include PayPal.
Lunar founder and CEO Ken Villum Klausen says the “schizophrenic” Nordic banking market is the reason why the challenger is launching BNPL. “It’s the most profitable banking landscape in the world, but also the most defensive, with least competition from the outside,” he says. “This means that the traditional banking customer is buying all their financial products from their bank”.
It is within this context that Lunar’s BNPL products are built as “post-purchase,” where Lunar will prompt its users after they have bought something (not dissimilar to Curve’s planned credit offering). For example, if you were to buy a new television, the app will ask if you want to split the purchase into instalments. “This does not require merchant agreements etc, and will work on all transactions both retail and e-commerce,” explains Klausen.
“We do not view Klarna as a direct competitor as they are not in the Nordic clearing system,” he adds. “Hence, you cannot pay your bills, get your salary and use it for daily banking. Klarna is enormous in Sweden, but relatively small in Denmark, Norway and Finland”.
In total, Lunar has raised €104 million from investors including Seed Capital, Greyhound Capital, Socii Capital and Chr. Augustinus Fabrikker. The challenger has offices in Aarhus, Copenhagen, Stockholm and Oslo, with a headcount of more than 180 employees. It plans to launch its banking app in Finland in the first half of 2021.
Now, what did we get to? Aside from a little of everything, we ran through:
Whew! It was a lot, but also very good fun. Look for clips on YouTube if you’d like, and we’ll chat you all next Monday.
Render, the winner of our Disrupt SF 2019 Startup Battlefield, today announced that it has added another $4.5 million onto its existing seed funding round, bringing total investment into the company to $6.75 million.
The round was led by General Catalyst, with participation from previous investors South Park Commons Fund and a group of angels that includes Lee Fixel, Elad Gil and GitHub CTO (and former VP of Engineering at Heroku) Jason Warner.
The company, which describes itself as a “Zero DevOps alternative to AWS, Azure and Google Cloud,” originally raised a $2.25 million seed round in April 2019, but it got a lot of inbound interest after winning the Disrupt Battlefield. In the end, though, the team decided to simply raise more money from its existing investors.
“We spoke to a bunch of people after Disrupt, including Ashton Kutcher’s firm, because he was one of the judges,” Render co-founder and CEO Anurag Goel explained. “In the end, we decided that we would just raise more money from our existing investors because we like them and it helped us get a better deal from our existing investors. And they were all super interested in continuing to invest.”
What makes Render stand out is that it fulfills many of the promises of Heroku and maybe Google Cloud’s App Engine. You simply tell it what kind of service you are going to deploy and it handles the deployment and manages the infrastructure for you.
“Our customers are all people who are writing code. And they just want to deploy this code really easily without having to worry about servers, or maintenance, or depending on DevOps teams — or, in many cases, hiring DevOps teams,” Goel said. “DevOps engineers are extremely expensive to hire and extremely hard to find, especially good ones. Our goal is to eliminate all of that work that DevOps people do at every company, because it’s very similar at every company.”
One new feature the company is launching today is preview environments. You can think of them as disposable staging or development environments that developers can spin up to test their code — and Render promises that the testing environment will look the same as your production environment (or you can specify changes, too). Developers can then test their updates collaboratively with QA or their product and sales teams in this environment.
Development teams on Render specify their infrastructure environments in a YAML file and turning on these new preview environments is as easy as setting a flag in that file.
“Once they do that, then for every pull request — because we’re integrated with GitHub and GitLab — we automatically spin up a copy of that environment. That can include anything you have in production, or things like a Redis instance, or managed Postgres database, or Elasticsearch instance, or obviously APIs and web services and static sites,” Goel said. Every time you push a change to that branch or pull request, the environment is automatically updated, too. Once the pull request is closed or merged, Render destroys the environment automatically.
The company will use the new funding to grow its team and build out its service. The plan, Goel tells me, is to raise a larger Series A round next year.
The venture capital industry’s comeback from fear in Q1 and parts of Q2 to Q3 greed is worth understanding. To get our hands around what happened to private capital in 2020, we’ve taken looks into both the United States’ VC scene and the global picture this week.
Catching you up, there was lots of private money available for startups in the third quarter, with the money tilting toward later-stage rounds.
Late-stage rounds are bigger than early-stage rounds, so they take up more dollars individually. But Q3 2020 was a standout period for how high late-stage money stacked up compared to cash available to younger startups.
For example, according to CB Insights data, 54% of all venture capital money invested in the United States in the third quarter was part of rounds that were $100 million or more. That worked out to 88 rounds — a historical record — worth $19.8 billion.
The other 1,373 venture capital deals in the United States during Q3 had to split the remaining 46% of the money.
While the broader domestic and global venture capital scenes showed signs of life — dollars invested in Europe and Asia rose, American seed deal volume perked back up, that sort of thing — it’s the late-stage data that I can’t shake.
To my non-American friends, the data we have available is focused on the United States, so we’ll have to examine the late-stage dollar boom through a domestic lens. The general points should apply broadly, and we’ll always do our best to keep our perspective broad.
Yuanfudao, a homework tutoring-app founded in 2012, has raised $2.2 billion from investors, surpassing Byju’s as the most valuable edtech company in the world. The Beijing-based company is now worth $15.5 billion dollars, almost double its valuation set in March.
The company views the new capital as two separate extension rounds of its March raise, a $1 billion Series G financing event. The G1 round was led by Tencent with participation from Hillhouse Capital, Boyu Capital and IDG Capital. The G2 financing was led by DST Global, with participation from CITICPE, GIC, Temasek, TBP, DCP, Ocean Link, Greenwoods and Danhe Capital.
The money will be used to develop curriculum and expand Yuanfudao’s online educational service, amid a larger boom in remote learning. In 2018, the company told TechCrunch that a majority of its revenue came from selling live courses. Its goal then was to fund and bring more AI into its products, and improve its user experience.
In the two years since, Yuanfudao has doubled its total users to 400 million students across China. Today’s funding suggests that it will push more live, online coursework and broaden out its closed loop system of learning.
Currently, Yuanfudao offers a variety of products: live tutoring, online Q&A arm, and math problem checking arm.
Yuanfudao’s physical footprint, which includes 30,000 employees in teaching centers across China, could fuel its online services. In 2014, it set up an AI Research Institute and technology laboratory with elite schools including Tsinghua University, Peking University, Chinese Academy of Sciences and Microsoft. The goal? To bring insights from that institute directly into the app. The company sees AI as an opportunity to see what student weaknesses look like, which it can then address in teacher curriculum and product design.
Asia more broadly has a stronger education market because of consumer spending and a cultural focus on outcomes in education. Thus, the shift to digital learning has poured fuel on an already booming education market. One report says that the education economy in China alone could be worth $81 billion in two years.
As my colleague Rita Liao pointed out, Yuanfudao is nowhere near alone in the race to win the tutoring market. Other well-funded companies include Zuoyebang, a Beijing-based startup that focuses on online learning and last raised $750 million in June; and Yiqizuoye, which has Singapore sovereign fund Temasek as an investor.
The startup, founded by CEO Lilac Bar David and CTO Liran Zelkha, is creating a bank account and associated products designed for freelancers, with features like early access to direct deposit payments and the ability to set aside a percentage of income for taxes.
The account (and associated Visa debit card) is free of overdraft fees or minimum balance requirements; Bar David said the company only makes money from card processing fees.
She also said that the platform has seen rapid growth this year, with transactions up 700% since the beginning of the pandemic and nearly 100,000 accounts opened since the launch in 2019.
Bar David suggested that the economic turmoil caused by COVID-19 has prompted (or forced) more skilled workers — such as programmers and digital marketers — to turn to freelancing. Meanwhile, she’s also seen “a big shift from part-time freelance to full-time freelance.”
Lili CEO Lilac Bar David
Bar David predicted that the recent growth of the freelance economy won’t simply disappear once the pandemic is over, because workers are discovering the benefits of freelancing.
“If you have a 9-to-5 job, you’re dependent on one employer,” she said. “If something happens you’re out of a job … If you’ve got a diversified customer base, you’re not dependent on just one source of income.”
In recent months, Lili has added new features like automatically generated quarterly income and expense reports, a digital debit card (which customers can use before the physical card arrives in the mail) and the ability to send and receive money via Google Pay (Lili already supported Cash App and Venmo).
Bar David said the startup decided to raise more funding to expand its engineering team and further accelerate its growth. Apparently she was preparing for a traditional Series A fundraising process (albeit one that was conducted in the middle of a pandemic), but “our current investors were so tremendously impressed by the product-market fit and the growth” that they were willing to fund almost all of the new round.
So the Series A was led by previous investor Group 11, with participation from Foundation Capital, AltaIR Capital, Primary Venture Partners and Torch Capital — along with new backer Zeev Ventures.
“As the global workforce evolves at a rapid pace, we are excited to lead another round of funding to help Lili capitalize on unprecedented demand and offer an entirely new solution to help freelancers seamlessly save time and money,” said Group 11’s Dovi Frances in a statement.
Buildings are the bedrocks of civilization — places to live, places to work (well, normally, in a non-COVID-19 world) and places to play. Yet how we conceive buildings, architect them for their uses, and ultimately construct them on a site has changed remarkably little over the past few decades. Housing and building costs continue to rise, and there remains a slow linear process from conception to construction for most projects. Why can’t the whole process be more flexible and faster?
Well, a trio of engineers and architects out of MIT and Georgia Tech are exploring that exact question.
MIT’s former treasurer Israel Ruiz along with architects Anton Garcia-Abril of MIT and Debora Mesa of Georgia Tech have joined together on a startup called WoHo (short for “World Home”) that’s trying to rethink how to construct a modern building by creating more flexible “components” that can be connected together to create a structure.
WoHo’s Israel Ruiz, Debora Mesa, and Anton Garcia-Abril. Photo by Tony Luong via WoHo.
By creating components that are usable in a wide variety of types of buildings and making them easy to construct in a factory, the goal of WoHo is to lower construction costs, maximize flexibility for architects, and deliver compelling spaces for end users, all while making projects greener in a climate unfriendly world.
The team’s ideas caught the attention of Katie Rae, CEO and managing partner of The Engine, a special fund that spun out of MIT that is notable for its lengthy time horizons for VC investments. The fund is backing WoHo with $4.5 million in seed capital.
Ruiz spent the last decade overseeing MIT’s capital construction program, including the further buildout of Kendall Square, a neighborhood next to MIT that has become a major hub for biotech innovation. Through that process, he saw the challenges of construction, particularly for the kinds of unique spaces required for innovative companies. Over the years, he also built friendships with Garcia-Abril and Mesa, the duo behind Ensamble Studio, an architecture firm.
With WoHo, “it is the integration of the process from the design and concept in architecture all the way through the assembly and construction of that project,” Ruiz explained. “Our technology is suitable for low-to-high rise, but in particularly it provides the best outcomes for mid-to-high rise.”
So what exactly are these WoHo components? Think of them as well-designed and reusable blocks that can be plugged together in order to create a structure. These blocks are consistent and are designed to be easily manufactured and transported. One key innovation is around an improved reinforced cement that allows for better building quality at lower environmental cost.
Conception of a WoHo component under construction. Photo via WoHo
We have seen modular buildings before, typically apartment buildings where each apartment is a single block that can be plugged into a constructed structure (take for example this project in Sacramento). WoHo, though, wants to go further in having components that offer more flexibility and arrangements, and also act as the structure themselves. That gives architects far more flexibility.
It’s still early days, but the group has already gotten some traction in the market, inking a partnership with Swiss concrete and building materials company LafargeHolcim to bring their ideas to market. The company is building a demonstration project in Madrid, and targeting a second project in Boston for next year.
The pre-launch company has spent the last two years building what it describes as a “cloud-native” online card processor that directly connects to card networks. The aim is to offer a modern replacement for the 20 to 40-year-old payments card processing tech that is mostly in use today.
Backing Silverflow’s €2.6 million seed round is U.K.-based VC Crane Venture Partners, with participation from Inkef Capital and unnamed angel investors and industry leaders from Pay.On, First Data, Booking.com and Adyen. It brings the fintech startup’s total funding to date to ~€3 million.
Bootstrapped while in development and launching in 2021, Silverflow’s founders are CEO Anne-Willem de Vries (who was focused on card acquiring and processing at Adyen), CBDO Robert Kraal (former Adyen COO and EVP global card acquiring & processing of Adyen) and CTO Paul Buying (founder of acquired translation startup Livewords).
“The payments tech stack needs an upgrade,” Kraal tells me. “Today’s card payment infrastructure based on 30 to 40-year-old technology is still in use across the global payment landscape. This legacy infrastructure is costing everyone time and money: consumers, merchants, payment-service-providers and banks. The legacy platforms require a lengthy on-boarding process and are expensive to maintain, [and] they also aren’t fit for purpose today because they don’t support data use”.
In addition, Kraal says that adding new functionality is a lengthy and expensive process, requiring the effort of specialised engineers which ultimately slows down innovation “for the whole card payments system”.
“Finally, every acquirer provides its customer with a different processing platform, which for a typical payment service provider (PSP) means they have to deal with multiple legacy platforms — and all the costs and specialised support each entails,” adds de Vries.
To solve this, Silverflow claims it has built the first payments processor with a “cloud-native platform” built for today’s technology stack. This includes offering simple APIs and “streamlined data flows” directly integrated into the card networks.
Continues de Vries: “Instead of managing a complex network of acquirers across markets with dozens of bank and card network connections to maintain, Silverflow provides card-acquiring processing as a service that connects to card networks directly through a simple API”.
Target customers are PSPs, acquirers and “global top-market merchants” that are seeing €500 million to 10 billion in annual transactions.
“As a managed service, Silverflow provides the maintenance for connections and new product innovation that users have typically had to support in-house or work on long-term product road maps with suppliers,” explains Kraal. “Based in the cloud, Silverflow is infinitely scalable for peak flows and also provides robust data insights that users haven’t previously been able to access”.
With regards to competitors, Kraal says there are no other companies at the moment doing something similar, “as far as we are aware”. Currently, acquirers use traditional third-party processors, such as SIA, Omnipay, Cybersource or MIGS. Some companies, like Adyen, have built their own in-house processing platform.
So, why hasn’t a cloud-native card processing platform like Silverflow been done before and why now? A lack of awareness of the problem might be one reason, says de Vries.
“Unless you have built several integrations to acquirers during your career, you are not aware that the 30 to 40-years-old infrastructure is still in use. This is not typically a problem some bright college graduates would tackle,” he posits.
“Second, to build this successfully, you need to have prior knowledge of the card payments industry to navigate all the legal, regulatory and technical requirements.
“Thirdly, any large corporate currently active in card payment processing will be aware of the problem and have the relevant industry knowledge. However, building a new processing platform would require them to allocate their most talented staff to this project for two-three years, taking away resources from their existing projects. In addition, they would also need to manage a complex migration project to move their existing customers from their current system to the new one and risk losing some of the customers along the way”.
Acapela, a new startup co-founded by Dubsmash founder Roland Grenke, is breaking cover today in a bid to re-imagine online meetings for remote teams.
Hoping to put an end to video meeting fatigue, the product is described as an “asynchronous meeting platform,” which Grenke and Acapela’s other co-founder, ex-Googler Heiki Riesenkampf (who has a deep learning computer science background), believe could be the key to unlock better and more efficient collaboration. In some ways the product can be thought of as the antithesis to Zoom and Slack’s real-time and attention-hogging downsides.
To launch, the Berlin-based and “remote friendly” company has raised €2.5 million in funding. The round is led by Visionaries Club with participation from various angel investors, including Christian Reber (founder of Pitch and Wunderlist) and Taavet Hinrikus (founder of TransferWise). I also understand Entrepreneur First is a backer and has assigned EF venture partner Benedict Evans to work on the problem. If you’ve seen the ex-Andreessen Horowitz analyst writing about a post-Zoom world lately, now you know why.
Specifically, Acapela says it will use the injection of cash to expand the core team, focusing on product, design and engineering as it continues to build out its offering.
“Our mission is to make remote teams work together more effectively by having fewer but better meetings,” Grenke tells me. “With Acapela, we aim to define a new category of team collaboration that provides more structure and personality than written messages (Slack or email) and more flexibility than video conferencing (Zoom or Google Meet)”.
Grenke believes some form of asynchronous meetings is the answer, where participants don’t have to interact in real-time but the meeting still has an agenda, goals, a deadline and — if successfully run — actionable outcomes.
“Instead of sitting through hours of video calls on a daily basis, users can connect their calendars and select meetings they would like to discuss asynchronously,” he says. “So, as an alternative to everyone being in the same call at the same time, team members contribute to conversations more flexibly over time. Like communication apps in the consumer space, Acapela allows rich media formats to be used to express your opinion with voice or video messages while integrating deeply with existing productivity tools (like GSuite, Atlassian, Asana, Trello, Notion, etc.)”.
In addition, Acapela will utilise what Grenke says is the latest machine learning techniques to help automate repetitive meeting tasks as well as to summarise the contents of a meeting and any decisions taken. If made to work, that in itself could be significant.
“Initially, we are targeting high-growth tech companies which have a high willingness to try out new tools while having an increasing need for better processes as their teams grow,” adds the Acapela founder. “In addition to that, they tend to have a technical global workforce across multiple time zones which makes synchronous communication much more costly. In the long run we see a great potential tapping into the space of SMEs and larger enterprises, since COVID has been a significant driver of the decentralization of work also in the more traditional industrial sectors. Those companies make up more than 90% of our European market and many of them have not switched to new communication tools yet”.
“I have to choose my words carefully,” says Joe Castelino of Stevens Creek Volkswagen in San Jose, Ca., when asked about the software on which most car dealerships rely for inventory information, to manage marketing, to handle customer relationships and to otherwise help sell cars.
Castelino, the dealership’s service director, laughs as he says this. But the joke has apparently been on car dealers, most of whom have largely relied on a few frustratingly antiquated vendors for their dealer management systems over the years — along with many more sophisticated point solutions.
It’s the precise opportunity that former Tesla CIO, Jay Vijayan, concluded he was well-positioned to address while still in the employ of the electric vehicle giant.
As Vijayan tells it, he knew nothing about cars until joining Tesla in 2011, following a dozen years of working in product development at Oracle, then VMWare. Yet he learned plenty over the subsequent four years. Specifically, he says he helped to build with Elon Musk a central analysis system inside Tesla, a kind of brain that could see all of the company’s internal systems, from what was happening in the supply chain to its factory systems to its retail platform.
Tesla had to build it itself, says Vijayan; after evaluating the existing software of third company providers, the team “realized that none of them had anything close to what we needed to provide a frictionless modern consumer experience.”
It was around then that a lightbulb turned on. If Tesla could transform the experience for its own customers, maybe Vijayan could transform the buying and selling experience for the much bigger, broader automotive industry. Enter Tekion, a now four-year-old, San Carlos, Ca., company that now employs 470 people and has come far enough along that just attracted $150 million in fresh funding led by the private equity investor Advent International.
With the Series C round — which also included checks from Index Ventures, Airbus Ventures, FM Capital and Exor, the holding company of Fiat-Chrysler and Ferrari — the company has now raised $185 million altogether. It’s also valued at north of $1 billion. (The automakers General Motors, BMW, and the Nissan-Renault-Mitsubishi Alliance are also investors.)
Eric Wei, a managing director at Advent, says that over the last decade, his team had been eager to seize on what’s approaching a $10 billion market annually. Instead, they found themselves tracking incumbents Reynolds & Reynolds, CDKGlobal and Dealertrack, which is owned by Cox Automotive, and waiting for a better player to emerge.
Then Wei was connected to Tekion through Jon McNeill, a former Tesla president and an advisory partner to Advent.
Says Wei of seeing its tech compared with its more established rivals: “It was like comparing a flip phone to an iPhone.”
Perhaps unsurprisingly, McNeill, who worked at Tesla with Vijayan, also sings the company’s praises, noting that Tekion even bought a dealership in Gilroy — the “garlic capital” of California — to use as a kind of lab while it was building its technology from scratch.
Such praise is nice, but more importantly, Tekion is attracting the attention of dealers. Though citing competitive reasons, Vijayan declined to share how many have bought its cloud software — which connects dealers with both manufacturers and car buyers and is powered by machine learning algorithms — he says it’s already being used across 28 states.
One of these dealerships is the national chain Serra Automotive, whose founder, Joseph Serra, is now an investor in Tekion.
Another is that Volkswagen dealership in San Jose, where Castelino — who doesn’t have a financial interest in Tekion — speaks enthusiastically about the time and expenses his team is saving because of Tekion’s platform.
For example, he says a customers need only log-in now to flag a particular issue. After that, with the help of an RFID tag, Stevens Creek knows exactly when that customer pulls into the dealership and what kind of help they need, enabling people to greet him or her on arrival. Tekion can also make recommendations based on a car’s history. It might, for instance, suggest to a customer a brake fluid flush “without an advisor having to look through a customer’s history,” he says.
As important, he says, the dealership has been able to cut ties with a lot of other software vendors, while also making more productive use of its time. Says Castelino, “As soon as a [repair order] is live, it’s in a dispatcher’s hand and a technician can grab the car.”
It’s like that with every step, he insists. “You’re saving 15 minutes again and again, and suddenly, you have three hours where your intake can be higher.”
Yin Wu has cofounded several companies since graduating from Stanford in 2011, including a computer vision company called Double Labs that sold to Microsoft, where she stayed on for a couple of years as a software engineer. In fact, it was only after that sale she she says she “actually understood all of the nuances with a company’s cap table.”
Her newest company, Pulley, a 14-month-old, Mountain View, Ca.-based maker of cap table management software aims to solve that same problem and has so far raised $10 million toward that end led by the payments company Stripe, with participation from Caffeinated Capital, General Catalyst, 8VC, and numerous angel investors.
Wu is going up against some pretty powerful competition. Carta was reportedly raising $200 million in fresh funding at a $3 billion valuation as of the spring (a round the company never official confirmed or announced). Last year, it raised $300 million. Morgan Stanley has meanwhile been beefing up its stock plan administration business, acquiring Solium Capital early last year and more newly purchasing Barclay’s stock plan business.
Of course, startups often manage to find a way to take down incumbents and a distraction for Carta, at least, in the form of a very public gender discrimination lawsuit by a former VP of marketing, could be the kind of opening that Pulley needs. We emailed with Yu yesterday to ask if that might be the case. She didn’t answer directly, but she did mention “values,” as long as shared some more details about what she sees as different about the two products.
TC: Why start this company? Has Carta’s press of late created an opening for a new upstart in the space?
YW: I left Microsoft in 2018 and started Pulley a year later. We skipped the seed and raised the A because of overwhelming demand from investors. Many wanted a better product for their portfolio companies. Many founders are increasingly thinking about choosing with companies, like Pulley, that better align with their values.
TC: How many people are working for Pulley and are any folks you pulled out of Carta?
YW: We’re a team of seven and have four people on the team who are former Y Combinator founders. We attract founders to the team because they’ve experienced firsthand the difficulties of managing a cap table and want to build a better tool for other founders. We have not pulled anyone out of Carta yet.
TC: Carta has raised a lot of funding and it has long tentacles. What can Pulley offer startups that Carta cannot?
YW: We offer startups a better product compared to our competitors. We make every interaction on Pulley easier and faster. 409A valuations take five days instead of weeks, and onboarding is the same day rather than months. By analogy, this is similar to the difference between Stripe and Braintree when Stripe initially launched. There were many different payment processes when Stripe launched. They were able to capture a large portion of the market by building a better product that resonated with developers.
One of the features that stands out on Pulley is our modeling feature [which helps founders model dilution in future rounds and helps employees understand the value of their equity as the company grows]. Founders switch from our competitors to Pulley to use our modeling tool [and it works] with pre-money SAFEs, post-money SAFEs, and factors in pro-ratas and discounts. To my knowledge, Pulley’s modeling tool is the most comprehensive product on the market.
TC: How does your pricing compare with Carta’s?
YW: Pulley is free for early-stage companies regardless of how much they raise. We’re price competitive with Carta on our paid plans. Part of the reason we started Pulley is because we had frustrations with other cap table management tools. When using other services, we had to regularly ping our accountants or lawyers to make edits, run reports, or get data. Each time we involved the lawyers, it was an expensive legal fee. So there is easily a $2,000 hidden fee when using tools that aren’t self-serve for setting up and updating your cap table.
TC: Is there a business-to-business opportunity here, where maybe attorneys or accountants or wealth managers private label this service? Or are these industry professionals viewed as competitors?
YW: We think there are opportunities to white label the service for accountants and law firms. However, this is currently not our focus.
TC: How adaptable is the software? Can it deal with a complicated scenario, a corner case?
YW: We started Pulley one year ago and we’re launching today because we have invested in building an architecture that can support complex cap table scenarios as companies scale. There are two things that you have to get right with cap table systems, First, never lose the data and second, always make sure the numbers are correct. We haven’t lost data for any customer and we have a comprehensive system of tests that verifies the cap table numbers on Pulley remain accurate.
TC: At what stage does it make sense for a startup to work with Pulley, and do you have the tools to hang onto them and keep them from switching over to a competitor later?
YW: We work with companies past the Series A, like Fast and Clubhouse. Companies are not looking to change their cap table provider if Pulley has the tool to grow with them. We already have the features of our competitors, including electronic share issuance, ACH transfers for options, modeling tools for multiple rounds, and more. We think we can win more startups because Pulley is also easier to use and faster to onboard.
TC: Regarding your paid plans, how much is Pulley charging and for what? How many tiers of service are there?
YW; Pulley is free for early-stage startups with less than 25 stakeholders. We charge $10 per stakeholder per month when companies scale beyond that. A stakeholder is any employee or investor on the cap table. Most companies upgrade to our premium plan after a seed round when they need a 409A valuation.
Cap table management is an area where companies don’t want a free product. Pulley takes our customers data privacy and security very seriously. We charge a flat fee for companies so they rest assured that their data will never be sold or used without their permission.
TC: What’s Pulley’s relationship to venture firms?
YW: We’re currently focused on founders rather than investors. We work with accelerators like Y Combinator to help their portfolio companies manage their cap table, but don’t have a formal relationship with any VC firms.
“More than 50% of our founders still are in their current jobs,” said John Vrionis, co-founder of seed-stage fund Unusual Ventures.
The fund, which closed a $400 million investment vehicle in November 2019, has noticed that more and more startup employees are thinking about entrepreneurship as the pandemic has shown how much room there is for new innovation. To gain a competitive advantage, Unusual is investing small checks into founders before they’re full-time.
Unusual, which cuts an average of eight checks per year into seed-stage companies, isn’t doling out millions to every employee who decides to leave Stripe. The firm is conservative with its spending and takes a more focused approach, often embedding a member from the firm into a portfolio company. It’s not meant to scale to dozens of portfolio companies a year, but instead requires a methodical approach.
One with a healthy pipeline of companies to choose from.
In an Extra Crunch Live chat, Vrionis and Sarah Leary, co-founder of Nextdoor and the firm’s newest partner, said lightweight investing matters in the early days of a company.
“There were a lot of teams that needed capital to start the journey, but frankly, it would have been over burdensome if they took on $2 or $3 million,” Leary said. “[New founders] want to be in a place where they have enough money to get going but not too much money that they get locked into a ladder in terms of expectations that they’re not ready to take advantage of.” The checks that Unusual cuts in pre-seed often range between $100,000 to half a million dollars.
Leary chalks up the boom to the disruption in consumer behavior, which opens up the opportunity for new companies to win.
While certifications for security management practices like SOC 2 and ISO 27001 have been around for a while, the number of companies that now request that their software vendors go through (and pass) the audits to be in compliance with these continues to increase. For a lot of companies, that’s a harrowing process, so it’s maybe no surprise that we are also seeing an increase in startups that aim to make this process easier. Earlier this month, Strike Graph, which helps automate security audits, announced its $3.9 million round, and today, Secureframe, which also helps businesses get and maintain their SOC 2 and ISO 27001 certifications, is announcing a $4.5 million round.
Secureframe’s round was co-led by Base10 Partners and Google’s AI-focused Gradient Ventures fund. BoxGroup, Village Global, Soma Capital, Liquid2, Chapter One, Worklife Ventures and Backend Capital participated. Current customers include Stream, Hasura and Benepass.
Shrav Mehta, the company’s co-founder and CEO, spent time at a number of different companies, but he tells me the idea for Secureframe was mostly born during his time at direct-mail service Lob.
“When I was at Lob, we dealt with a lot of issues around security and compliance because we were sometimes dealing with very sensitive data, and we’d hop on calls with customers, had to complete thousand-line security questionnaires, do exhaustive security reviews, and this was a lot for a startup of our size at the time. But it’s just what our customers needed. So I started to see that pain,” Mehta said.
After stints at Pilot and Scale AI after he left Lob in 2017 — and informally helping other companies manage the certification process — he co-founded Secureframe together with the company’s CTO, Natasja Nielsen.
“Because Secureframe is basically adding a lot of automation with our software — and making the process so much simpler and easier — we’re able to bring the cost down to a point where this is something that a lot more companies can afford,” Mehta explained. “This is something that everyone can get in place from day one, and not really have to worry that, ‘hey, this is going to take all of our time, it’s going to take a year, it’s going to cost a lot of money.’ […] We’re trying to solve that problem to make it super easy for every organization to be secure from day one.”
The main idea here is to make the arcane certification process more transparent and streamline the process by automating many of the more labor-intensive tasks of getting ready for an audit (and it’s virtually always the pre-audit process that takes up most of the time). Secureframe does so by integrating with the most-often used cloud and SaaS tools (it currently connects to about 25 services) and pulling in data from them to check up on your security posture.
“It feels a lot like a QuickBooks or TurboTax-like experience, where we’ll essentially ask you to enter basic details about your business. We try to autofill as much of it as possible from third-party sources — then we ask you to connect up all the integrations your business uses,” Mehta explained.
The company plans to use much of the new funding to staff up and build out these integrations. Over time, it will also add support for other certifications like PCI, HITRUST and HIPAA.
Contrast, a developer-centric application security company with customers that include Liberty Mutual Insurance, NTT Data, AXA and Bandwidth, today announced the launch of its security observability platform. The idea here is to offer developers a single pane of glass to manage an application’s security across its lifecycle, combined with real-time analysis and reporting, as well as remediation tools.
“Every line of code that’s happening increases the risk to a business if it’s not secure,” said Contrast CEO and chairman Alan Nauman. “We’re focused on securing all that code that businesses are writing for both automation and digital transformation.”
Over the course of the last few years, the well-funded company, which raised a $65 million Series D round last year, launched numerous security tools that cover a wide range of use cases from automated penetration testing to cloud application security and now DevOps — and this new platform is meant to tie them all together.
DevOps, the company argues, is really what necessitates a platform like this, given that developers now push more code into production than ever — and the onus of ensuring that this code is secure is now also often on that.
Traditionally, Nauman argues, security services focused on the code itself and looking at traffic.
“We think at the application layer, the same principles of observability apply that have been used in the IT infrastructure space,” he said. “Specifically, we do instrumentation of the code and we weave security sensors into the code as it’s being developed and are looking for vulnerabilities and observing running code. […] Our view is: the world’s most complex systems are best when instrumented, whether it’s an airplane, a spacecraft, an IT infrastructure. We think the same is true for code. So our breakthrough is applying instrumentation to code and observing for security vulnerabilities.”
With this new platform, Contrast is aggregating information from its existing systems into a single dashboard. And while Contrast observes the code throughout its lifecycle, it also scans for vulnerabilities whenever a developers check code into the CI/CD pipeline, thanks to integrations with most of the standard tools like Jenkins. It’s worth noting that the service also scans for vulnerabilities in open-source libraries. Once deployed, Contrast’s new platform keeps an eye on the data that runs through the various APIs and systems the application connects to and scans for potential security issues there as well.
The platform currently supports all of the large cloud providers like AWS, Azure and Google Cloud, and languages and frameworks like Java, Python, .NET and Ruby.
Last night Datto priced its IPO at $27 per share, the top end of its range that TechCrunch covered last week. The data and security-focused software company had targeted a $24 to $27 per-share IPO price range, meaning that its final per-share value was at the top of its estimates.
The Datto IPO won’t draw lots of attention; its business is somewhat dull, as selling software to managed service providers rarely excites. But, the public offering matters for a different reason: it gives us a fresh lens into today’s IPO market.
That lens is the perspective of slower, more profitable growth. What is that worth?
The value of quickly-growing and unprofitable software and cloud companies is well known. Snowflake made a splash earlier this year on the back of huge growth and enormous losses. Investors ate its shares up, pushing its valuation to towering heights. And this year we’ve even seen rapid growth and profits valued by public investors in the form of JFrog’s IPO.
But slower growth, software margins and profitability? Datto’s financial picture feels somewhat unique among the IPOs that TechCrunch has covered this year.
It’s a similar bet to the one that Egnyte is making; the enterprise software company crested $100 million ARR last year and announced that it grew by around 22% in the first half of 2020. And, it is profitable on an EBITDA basis. Therefore, the Datto IPO could provide a clue as to what companies like Egnyte and the rest of the late-stage startup crop content to grow more slowly, but with the benefit of actually making money.
Here are the deal’s nuts and bolts:
TechCrunch readers probably know that privacy regulations like Europe’s GDPR and California’s CCPA give them additional rights around their personal data — like the ability to request that companies delete your data. But how many of you have actually exercised that right?
An Israeli startup called Mine is working to make that process much simpler, and it announced this morning that it has raised $9.5 million in Series A funding.
Ringel explained that Mine scans users’ inboxes to help them understand who has access to their personal data.
“Every time that you do an online interaction, such as you sign up for a service or purchase a flight ticket, those companies, those services leave some clues or traces within your inbox,” he said.
Image Credits: Mine
Mine then cross-references that information with the data collection and privacy policies of the relevant companies, determining what data they’re likely to possess. It calculates a risk score for each company — and if the user decides they want a company to delete their data, Mine can send an automated email request from the user’s own account.
Ringel argued that this is a very different approach to data privacy and data ownership. Instead of building “fences” around your data, Mine makes you more comfortable sharing that data, knowing that you can take control when necessary.
“The product gives [consumers] the freedom to use the internet feeling more secure, because they know they can exercise their right to be forgotten,” he said.
Ringel noted that the average Mine user has a personal data footprint across 350 companies — and the number is more like 550 in the United States. I ran a Mine audit for myself and, within a few minutes, found that I’m pretty close to the U.S. average. (Ringel said the number doesn’t include email newsletters.)
Mine launched in Europe earlier this year and says it has already been used by more than 100,000 people to send 1.3 million data deletion requests.
The legal force behind those requests will differ depending on where you live and which company you are emailing, but Ringel said that most companies will comply even when they’re not legally required to do so, because it’s part of creating a better privacy experience that helps them “earn trust and credibility from consumers.” Plus, “Most of them understand that if you want to go, they’ve already lost you.”
The startup’s core service is available for free. Ringel said the company will make money with premium consumer offerings, like the ability to offload the entire conversation with a company when you want your data deleted. It will also work with businesses to create a standard interface around privacy and data deletion.
As for whether giving Mine access to your inbox creates new privacy risks, Ringel said that the startup collects the “bare minimum” of data — usually just your email address and your full name. Otherwise, it knows “the type of data, but not the actual data” that other companies have obtained.
“We would never share or sell your data,” he added.
The Series A was led by Google’s AI-focused venture fund Gradient Ventures, with participation from e.ventures, MassMutual Ventures, as well as existing investors Battery Ventures and Saban Ventures. Among other things, Ringel said the money will fund Mine’s launch in the United States.
The full recording is embedded below, along with a number of at-length quotes if you prefer to read. But here, above the paywall, I wanted to share my favorite bit from the conversation.
It’s about how Yext got into the business information game — what it calls PowerListings — from its product roots from around the time it raised a $25 million Series C.
Back at the TechCrunch50 event, Yext demoed a service that could record and transcribe phone calls and provide some extra analysis. Here’s how Lerman described the moment (quotes tidied up for readability):
I launched this at TechCrunch50 in 2009, we actually had a really cool technology. We figured out a way […] where we could put a tracked phone number on a business listing, record it, transcribe it [and] then run a semantic analysis on the call to determine ‘was it a good call or not?’
That demoed product worked well for Yext, as Lerman explained:
Within nine days of this launch, of actually putting this out there, we had a $25 million round from IVP.
At the time Yext put together a $20 million business that Lerman said was built “very quickly.” But, he continued, things went sideways from there:
At the same time, it turned out that that was not a very good business model to scale to 100 million of revenue — and beyond. And I learned that probably six months after [and] you’ve got to be intellectually honest with yourself. You see this happening: you see the churn, you see the customer acquisition costs happening, and I was faced with the choice. And one of the things that I think we did that was commendable was we started an entirely new business within the existing cap table of this company. And to this very day, we have some of the same shareholders that were with us in 2008.
What happened next was “a little complicated” in Lerman’s own words, but Yext started a new company “under the old company,” sold the old company to IAC (TechCrunch coverage here). That money went to “the balance sheet of NewCo,” and Yext built “this whole new idea to synchronize information across the web. And that was the PowerListings franchise [which] was the foundation of what we have to this very day.”
Yext has a big focus on search today, but PowerListings is still part of its product family.
What’s fascinating about the Yext story is how the company has reinvented itself a few times, all while scaling before and after its IPO. Usually we read about business stories that are oversimplified. The Yext story makes it clear that even a few changes don’t mean that something is wrong. You can shake up your startup and still go public.
If you need some help getting past the paywall, head here. Else, carry on and hit play on the video and enjoy the quotes.
Extra Crunch Live continues this week, with more VCs and founders swinging by for long, in-depth chats.