Under new guidance issued by the Small Business Administration it seems non-profits and faith-based groups can apply for the Paycheck Protection Program loans designed to keep small business afloat during the COVID-19 epidemic, but most venture-backed companies are still not covered.
Late Friday night, the Treasury Department updated its rules regarding the “affiliation” of private entities to include religious organizations but keep in place the same rules that would deny most startups from receiving loans.
(b) If you are a faith-based organization, *no affiliation rules apply to you,* because the SBA just said so. Out of nowhere. At like 10pm on a Friday night.
— Doug Rand (@doug_rand) April 4, 2020
The NVCA and other organizations had pushed Treasury Secretary Steve Mnuchin to clarify the rules regarding startups and their potential eligibility for loans last week. And House Republican leader Kevin McCarthy even told Axios that startups would be covered under the revised regulations.
2/ There are rumors that the PPP Loan program may still fix the Affiliate Rule next week. Until fixed, it's nearly impossible for most VC-backed startups to apply because it would require huge legal lift to amend all of the charters of these companies to change control provisions
— Mark Suster (@msuster) April 4, 2020
At its essence, the issue for startups seems to be centered on the board rights that venture investors have when they take an equity stake in a company. For startups with investors on the board of directors, the decision-making powers that those investors hold means the startup is affiliated with other companies that the partner’s venture firm has invested in — which could mean that they’re considered an entity with more than 500 employees.
“[If] there’s a startup that’s going gangbusters right now, they shouldn’t apply for a PPP loan,” wrote Doug Rand, the co-founder of Seattle-based startup Boundless Immigration, and a former Assistant Director for Entrepreneurship in the Office of Science and Technology Policy during the Obama administration, in a direct message. “But most startups are getting killed because, you know, the economy is mostly dead.”
The $2 trillion CARES Act passed by Congress and signed by President Trump was designed to help companies that are adversely affected by the economic fallout resulting from the COVID-19 outbreak in the US and their employees — whether those businesses are directly affected because their employees can’t leave home to do their jobs or indirectly, because demand for goods and services has flatlined.
While some tech startups have seen demand for their products actually rise during these quarantined days, many companies have watched as their businesses have gone from one to zero.
The sense frustration among investors across the country is palpable. As the Birmingham-based investor, Matt Hottle, wrote, “After 4 days of trying to help 7 small businesses navigate the SBA PPP program, the program went to shit on launch. I’m contemplating how many small businesses, counting on this money, are probably locked out. I feel like I/ we failed them.”
After 4 days of trying to help 7 small businesses navigate the @SBAgov PPP program, the program went to shit on launch. I’m contemplating how many small businesses, counting on this money, are probably locked out. I feel like I/ we failed them.
— Matt Hottle (@MattRedhawk) April 4, 2020
And although the rules around whether or not many startups are eligible remain unclear, it’s probably wise for companies to file an application, because, as the program is currently structured, the $349 billion in loans are going to be issued on a first-come, first-served basis, as Suster flagged in his tweets on the subject.
General Catalyst is advising its companies that are also backed by SBIC investors to apply for the loans, because that trumps any other rules regarding affiliation, according to an interview with Holly Maloney Burbeck, a managing director at the firm.
And there’s already concerns that the money could run out. In a tweet, the President announced that he would request more money from Congress “if the allocated money runs out.”
I will immediately ask Congress for more money to support small businesses under the #PPPloan if the allocated money runs out. So far, way ahead of schedule. @BankofAmerica & community banks are rocking! @SBAgov @USTreasury
— Donald J. Trump (@realDonaldTrump) April 4, 2020
“Congress saw fit to allow Darden to get a forgivable small business loan—actually a taxpayer-funded grant—for like every Olive Garden in America. But Congress somehow neglected to provide comparable rescue measures for actual small businesses that have committed the sin of convincing investors that they have the potential to employ a huge number of people if they can only survive,” Rand wrote in a direct message. “The Trump administration has full authority to ride to the rescue, and they did… but only for large religious organizations.”
We’re now several weeks into what has become a very big dip for the global economy due to the coronavirus pandemic, but amidst that, we are seeing are some notable pockets of investment activity emerging that will help shape how the future startup landscape will look. Today, one of the biggest venture capital firms in the world announced the closing of a huge fund, money that it will use in large part to help its portfolio businesses weather the storm.
Insight, the firm that has backed the likes of Twitter and Shopify and invests across a range of consumer and enterprise startups (400 in all), today announced that it has closed a fund of $9.5 billion, money it will be using to support startups and “scale-ups” (larger and older startups that are still private) in the coming months. Investments will typically be between $10 million and $350 million, “although larger transactions are also possible,” the company said.
“First and foremost, we want to acknowledge the current climate and the hardships being felt across the globe,” said Jeff Horing, Insight Partners’ founder and MD, in a statement. “We are thankful and humbled by the support of our investors which enables us to continue to deliver world class resources during turbulent economic times. Fund XI gives us continued flexibility to provide the combination of capital and operating support that suits the different needs of every software company in a dynamic world.”
This fund, numbered XI, brought in a number of returning backers alongside new investors, and it is record-sized for the company. It also appears to have been oversubscribed, since back in November when it was launched the fund was estimated to be worth just over $7 billion. All the more impressive, too, is that it closed just this week, at a time when many startups are starting to feel the pinch of a business downturn, and are either laying off staff or freezing hiring to curtail costs, leading investors to get a little shaky.
Insight’s fund is a signal of two themes. One is that there are, even now, some silver linings, where particular business areas are seeing huge surges of activity (videoconferencing to connect all the people now sheltering in place at home; those helping keep food delivery operational; entertainment streaming companies; and those focusing on medical research or telehealth are just five categories seeing a positive impact; there are more). This fund will help Insight invest in these opportunities to help these businesses grow to meet the demand.
The second theme is a little less upbeat but still important, and that is the fact that there are a number of very promising ideas out there that have already been backed by VC money, which will not survive the current economic crunch without some support. VC money will likely be used in a very targeted way to help in those situations, alongside more fiscal belt-tightening and other funding means (for example, loans that the U.S. government will be issuing via the CARES act to help small businesses get through lean times brought by the coronavirus pandemic).
Indeed, a spokesperson said Insight will be “hyper-focused on supporting its portfolio companies” with ongoing and near-future funding.
We’ve reached out to see if we can get more detail on how new investments, versus reinvesting in existing portfolio companies, will figure in future funding, and we’re also asking if there are specific categories that are of particular interest at the moment. We’ll update this post as we learn more.
“Since our first investment 25 years ago, the global software ecosystem has matured even as it continues to innovate, spurring Insight’s own innovation in sourcing, and our data-driven partnership approach to working with ScaleUp companies as a minority or buyout investor,” said Managing Director Deven Parekh. “We are grateful that through economic cycles and unprecedented circumstances, Insight Partners remains a sought-after institutional platform for supporting next generation software companies.”
In a separate letter to investors, Horing and Parekh also noted the complicated climate of the moment — which includes not just the challenge of VCs raising funds right now amid a climate of LPs also feeling the crunch, but also the fact that not all startups will be able to rely on all their investors to support them through these challenging times. Tough decisions will need to be made at all levels.
Modsy, an e-commerce company that creates 3D renderings of customized rooms, has confirmed to TechCrunch that it laid off a number of staff. In addition, several of its executives, including CEO Shanna Tellerman, will take a 25% pay cut. TechCrunch first heard about the layoffs from a source. The company’s confirmation of cuts comes amid a wave of layoffs in the technology and startup communities.
In a statement from the CEO Shanna Tellerman to TechCrunch, Modsy said that “[i]n an effort to maintain a sustainable business during these unprecedented circumstances, we made a round of necessary layoffs and ended a number of designer contracts this week.” The company reaffirmed belief in its “long-term growth plans” in the same statement.
Modsy did not immediately respond when asked about how many individuals were impacted by this layoff. Update: The company declined to share the number of employees impacted.
Modsy bets on individuals looking to glam up their homes by better visualizing the new furniture they want to buy. Users can enter the measurements of their living room and add budget and style preferences, and Modsy will help them with custom designs and finding furniture that fits — literally.
The layoffs show that customer appetite might be changing. Last week, home improvement platform Houzz confirmed that it has scratched plans to create in-house furniture for sale. It also laid off 10 people across three locations: the U.K., Germany and China. Houzz is comparatively larger than Modsy, with a roughly $4 billion valuation. But scratching its in-house plan that would have likely brought in more capital is yet another data point in how e-commerce companies are struggling right now to get consumers to spend on items other than beans, booze and bread starters.
In retrospect there were rumblings that the company was cutting staff. A number of recent reviews from its Glassdoor page note layoffs, with one review from March 25, 2020 calling them “mass” in nature; our original source on the company’s recent cuts also noted their breadth.
You can find other social media posts concerning the company’s layoffs, some noting more than one wave. TechCrunch has not confirmed if the recent layoffs are the first of two, or merely the first set of cuts.
A little over 10 months ago the company was in a very different mood. Back in May of 2019, flush with new capital, Modsy’s CEO said that the “home design space, the inspiration category is thriving.”
“Pinterest just IPO’d, and it seems as if every TV channel is entering the home design category,” she said. “Meanwhile, e-commerce sites have barely changed since the introduction of the Internet.”
Against a backdrop where the life-or-death consequences of biotechnology innovation are becoming increasingly apparent as the world races to develop vaccines and therapies to treat COVID-19, life sciences investor ARCH Venture Partners has raised $1.46 billion in funding to finance new tech development.
The two funds, ARCH Venture Fund X and ARCH Venture Fund X Overage, are the latest in the firm’s long line of investment vehicles dedicated to invest in early stage biotechnology companies.
“ARCH has always been driven to invest in great science to impact human health. There isn’t a better illustration of our principles than our all-in battle against COVID-19,” said co-founder and Managing Director Robert Nelsen in a statement. “The healthcare revolution will be accelerated by the changes that are happening now and we are excited to continue to invest aggressively in risk takers doing truly transformational science.”
ARCH portfolio companies Vir Biotechnology, Alnylam Pharmaceuticals, VBI Vaccines, Brii Biosciences, and Sana Biotechnology are all working on COVID-19 therapeutics; while Quanterix is developing technology to support clinical testing and clinical trial development. Another company that ARCH has backed, Twist Biosciences, has gene editing tools that the company believes can support therapeutic and vaccine development; and Bellerophon, a developer of inhaled nitric oxide delivery technologies, received emergency access approval from the FDA as a treatment to help alleviate respiratory distress associated with COVID-19.
The firm’s Overage fund will be used to take larger stakes in later-stage companies that require more capital, the firm said.
“Our companies bring cutting-edge science, tools and talent to bear in developing medicines for a wide range of diseases and conditions faced by millions. With these two new funds, we are continuing that work with urgency and a deep sense of purpose,” managing director Kristina Burow said in a statement. “We invest at all levels, whether it’s fifty thousand dollars or hundreds of millions, so that each company and each technology has the best chance to advance and change the landscape.”
The two new funds are roughly the same size as ARCH’s last investment funds, which closed in 2016 with $1.1that billion, but are a big jump from the 2014 ARCH funds that raised $560 million in total capital commitments.
The increasing size of the ARCH funds is a reflection of a broader industry trend which has seen established funds significantly expand their capital under management, but also is indicative of the rising status of biotech investing in the startup landscape.
These days, it’s programmable biology, not software, that’s eating the world.
“ARCH remains committed to our mission of the last 35 years, advancing the most promising innovations from leading life science and physical sciences research to serve the worldwide community by addressing critical health and well-being challenges,” said Keith Crandell in a statement. “ARCH has been privileged to found, support and invest in groundbreaking new companies pursuing advancements in infectious disease, mental health, immunology, genomic and biological tools, data sciences and ways of reimagining diagnostics and therapies.”
Managing directors for the new fund include Robert Nelsen, Keith Crandell, Kristina Burow, Mark McDonnell, Steve Gillis and Paul Thurk.
As the global economy grinds to a halt, every business sector has been impacted, including the linked worlds of startups and venture capital.
But how much has really changed? If you read VC Twitter, you might think that nothing has changed at all. It’s not hard to find investors who say they are still cutting checks and doing deals. But as Q1 venture data trickles in, it appears that a slowdown in VC activity is gradually forming, something that founders have anecdotally shared with TechCrunch.
To get a better handle on how venture capitalists are approaching today’s market, TechCrunch corresponded with a number of active investors to learn how their investment selection process might be changing in light of COVID-19 and its related disruptions. We wanted to know how their investing cadence in Q1 2020 compared to the final quarter of 2019 and the prior-year period. We also asked if their focus had changed, how valuations have shifted and what their take on the LP market is today.
We heard back from Duncan Turner of SOSV, Alex Doll of TenEleven Ventures, Alex Niehenke of Scale Venture Partners, Paul Murphy of Northzone, Sean Park of Anthemis and John Vrionis of Unusual Ventures.
We’ll start with the key themes from their answers and then share each set of responses in detail.
The VCs who responded haven’t slowed their investing pace — yet.
There’s likely some selection bias at work, but the venture capitalists who were willing to answer our questions were quick to note that they wrote a similar number of checks in Q1 2020 as in both Q4 2019 (the sequentially preceding quarter) and Q1 2019 (the year-ago quarter). Some were even willing to share numbers.
Until very recently, it had begun to seem like anyone with a thick enough checkbook and some key contacts in the startup world could not only fund companies as an angel investor but even put himself or herself in business as a fund manager.
It helped that the world of venture fundamentally changed and opened up as information about its inner workings flowed more freely. It didn’t hurt, either, that many billions of dollars poured into Silicon Valley from outfits and individuals around the globe who sought out stakes in fast-growing, privately held companies — and who needed help in securing those positions.
Of course, it’s never really been as easy or straightforward as it looks from the outside. While the last decade has seen many new fund managers pick up traction, much of the capital flooding into the industry has accrued to a small number of more established players that have grown exponentially in terms of assets under management. In fact, talk with anyone who has raised a first-time fund and you’re likely to hear that the fundraising process is neither glamorous nor lucrative and that it’s paved with very short phone conversations. And that’s in a bull market.
What happens in what’s suddenly among the worst economic environments the world has seen? First and foremost, managers who’ve struck out on their own suggest putting any plans on the back burner. “I would love to be positive, and I’m an optimist, buut I would have to say that now is probably one of the toughest times” to get a fund off the ground,” says Aydin Senkut, who founded the firm Felicis Ventures in 2006 and just closed its seventh fund.
It’s a perfect storm for first-time managers,” adds Charles Hudson, who launched his own shop, Precursor Ventures, in 2015.
Hitting pause doesn’t mean giving up, suggests Eva Ho, cofounder of the three-year-old, seed-stage L.A.-based shop Fika Ventures, which last year closed its second fund with $76 million. She says not to get “too dismayed” by the challenges. Still, it’s good to understand what a first-time manager is up against right now, and what can be learned more broadly about how to proceed when the time is right.
Know it’s hard, even in the best times
As a starting point, it’s good to recognize that it’s far harder to assemble a first fund than anyone who hasn’t done it might imagine.
Hudson knew he wanted to leave his last job as a general partner with SoftTech VC when the firm — since renamed Uncork Capital — amassed enough capital that it no longer made sense for it to issue very small checks to nascent startups. “I remember feeling like, ‘Gosh, I’ve reached a point where the business model for our fund is getting in the way of me investing in the kind of companies that naturally speak to me,” which is largely pre-product startups.
Hudson suggests he may have overestimated interest in his initial idea to create a single GP fund that largely backs ideas that are too early for other investors. “We had a pretty big LP based [at SoftTech] but what I didn’t realize is the LP base that’s interested in someone who is on fund three or four is very different than the LP base that’s interested in backing a brand new manager.”
Hudson says he spent a “bunch of time talking to fund of funds, university endowments — people who were just not right for me until someone pulled me aside and just said, ‘Hey, you’re talking to the wrong people. You need to find some family offices. You need to find some friends of Charles. You need to find people who are going to back you because they think this is a good idea and who aren’t quite so orthodox in terms of what they want to see in terms partner composition and all that.'”
Collectively, it took “300 to 400 LP conversations” and two years to close his first fund with $15 million. (Its now raising its third pre-seed fund).
Ho says it took less time for Fika to close its first fund but that she and her partners talked with 600 people in order to close their $41 million debut effort, adding that she felt like a “used car salesman” by the end of the process.
Part of the challenge was her network, she says. “I wasn’t connected to a lot of high-net-worth individuals or endowments or foundations. That was a whole network that was new to me, and they didn’t know who the heck I was, so there’s a lot of proving to do.” A proof-of-concept fund instill confidence in some of these investors, though Ho notes you have to be able to live off its economics, which can be miserly.
She also says that as someone who’d worked at Google and helped found the location data company Factual, she underestimated the work involved in running a small fund. “I thought, ‘Well, I’ve started these companies and run these big teams. How how different could it be? Learning the motions and learning what it’s really like to run the funds and to administer a fund and all responsibilities and liabilities that come with it . . . it made me really stop and think, ‘Do I want to do this for 20 to 30 years, and if so, what’s the team I want to do it with?'”
Investors will offer you funky deals; avoid these if you can
In Hudson’s case, an LP offered him two options, either a typical LP agreement wherein the outfit would write a small check, or an option wherein it would make a “significant investment that have been 40% of our first fund,” says Hudson.
Unsurprisingly, the latter offer came with a lot of strings. Namely, the LP said it wanted to have a “deeper relationship” with Hudson, which he took to mean it wanted a share of Precursor’s profits beyond what it would receive as a typical investor in the fund.
“It was very hard to say no to that deal, because I didn’t get close to raising the amount of money that I would have gotten if I’d said yes for another year,” says Hudson. He still thinks it was the right move, however. “I was just like, how do I have a conversation with any other LP about this in the future if I’ve already made the decision to give this away?”
Fika similarly received an offer that would have made up 25 percent of the outfit’s debut fund, but the investor wanted a piece of the management company. It was “really hard to turn down because we had nothing else,” recalls Ho. But she says that other funds Fika was talking with made the decision simpler. “They were like, ‘If you sign on to those terms, we’re out.” The team decided that taking a shortcut that could damage them longer term wasn’t worth it.
Your LPs have questions, but you should question LPs, too
Senkut started off with certain financial advantages that many VCs do not, having been the first product manager at Google and enjoying the fruits of its IPO before leaving the outfit in 2005 along with many other Googleaires, as they were dubbed at the time.
Still, as he tells it, it was “not a friendly time a decade ago” with most solo general partners spinning out of other venture funds instead of search engine giants. In the end, it took him “50 no’s before I had my first yes” — not hundreds — but it gave him a taste of being an outsider in an insider industry, and he seemingly hasn’t forgotten that feeling.
Indeed, according to Senkut, anyone who wants to crack into the venture industry needs to get into the flow of the best deals by hook or by crook. In his case, for example, he shadowed angel investor Ron Conway for some time, working checks into some of the same deals that Conway was backing.
“If you want to get into the movie industry, you need to be in hit movies,” says Senkut. “If you want to get into the investing industry, you need to be in hits. And the best way to get into hits is to say, ‘Okay. Who has an extraordinary number of hits, who’s likely getting the best deal flow, because the more successful you are, the better companies you’re going to see, the better the companies that find you.”
Adds Senkut, “The danger in this business is that it’s very easy to make a mistake. It’s very easy to chase deals that are not going to go anywhere. And so I think that’s where [following others] things really helped me.”
Senkut has developed an enviable track record over time. The companies that Felicis has backed and been acquired include Credit Karma, which was just gobbled up by Intuit; Plaid, sold in January to Visa; Ring, sold in 2018 to Amazon, and Cruise, sold to General Motors in 2016, and that’s saying nothing of its portfolio companies to go public.
That probably gives him a kind of confidence that it’s harder to earlier managers to muster. Still, Senkut also says it’s very important for anyone raising a fund to ask the right questions of potential investors, who will sometimes wittingly or unwittingly waste a manager’s time.
He says, for example, that with Felicis’s newest fund, the team asked many managers outright about how many assets they have under management, how much of those assets are dedicated to venture and private equity, and how much of their allotment to each was already taken. They did this so they don’t find themselves in a position of making a capital call that an investor can’t meet, especially given that venture backers have been writing out checks to new funds at a faster pace than they’ve ever been asked to before.
In fact, Felicis added new managers who “had room” while cutting back some existing LPs “that we respected . .. because if you ask the right questions, it becomes clear whether they’re already 20% over-allocated [to the asset class] and there’s no possible way [they are] even going to be able to invest if they want to.”
It’s a “little bit of an eight ball to figure out what are your odds and the probability of getting money even if things were to turn south,” he notes.
Given that they have, the questions look smarter still.
The Los Angeles-based venture capital studio focused on blockchain and fintech startups which longtime venture investor Tim Draper now calls home has added a new venture partner to its team.
Draper Goren Holm, the firm Draper manages alongside co-founders Alon Goren and Josef Holm said Rodney Sampson has joined the crew as a venture partner.
Sampson previously founded Multicast Media Technologies, which was acquired for $24 million back in 2010 and was a partner at TechSquare Labs, which has a portfolio valued at over $1.5 billion.
Currently serving as a non-resident senior fellow at the Brookings Institution, Sampson was brought on by the new firm to work on diversifying deal flow.
“Rodney will play a key contribution to Draper Goren Holm’s strategy to diversify our deal flow. We are excited to have him on board as he brings the grit, deep industry insight, and entrepreneurial spirit we need to build the next generation blockchain hub in Los Angeles and beyond,” said Alon Goren, in a statement.
The relationship between Sampson, Goren and Holm dates back nearly a decade, when the three men met at a crowdfunding event in Las Vegas.
“I couldn’t be more excited to join their team to bring the future of blockchain technologies and startup to market; and as a platform for equity as we work to solve our planet and society’s hardest challenges,” said Sampson in a statement.
Since 2012, Dr. Jeanne Loring, the founder of the eponymous Loring Lab at Scripps Research, has been thinking about how to use pluripotent stem cells as a potential treatment for Parkinson Disease.
Now, eight years later, Aspen Neuroscience, the company she founded to bring her research to market has raised $70 million in funding and is set to begin clinical trials.
Roughly 60,000 Americans are diagnosed with Parkinson disease, which destroys parts of the brain responsible for motor function. The disease causes a debilitating loss of movement as a result of the degradation of a specific type of neuron in the brain responsible for the production of dopamine — a chemical that facilitates the brain’s control of mood and movement.
Aspen’s experimental treatment takes skin cells from patients who already have Parkinson’s disease and converts those cells into pluripotent stem cells using the technique that won Shinya Yamanaka and John Gurdon the Nobel Prize for medicine back in 2012.
It was Yamanaka’s discovery that in some ways served as a trigger for the work that Loring and Aspen’s chief executive officer Dr. Howard Federoff would be bringing to market eight years later.
Other cell replacement therapies for Parkinson’s had run into difficulties because patient’s bodies would reject the introduction of foreign neurons — in much the same way that organ transplants are sometimes unsuccessful because a host rejects the foreign tissue.
Aspen’s technology uses the host’s own tissue to develop the stem cells that will become the basis for treatment. A patient who carries a diagnosis of Parkinsons would be consented to give a biopsy and the tissue collected is then placed in a cell culture. The cells are then converted into pluripotent stem cells through the introduction of an inert viral RNA that recodes the cell structure.
Those pluripotent stem cells are then converted into neurons that are then transplanted into a patient to replace the ones that Parkinson’s disease has destroyed.
Federoff and Loring have known each other for years, and when the former vice chancellor for health affairs at the University of California, Irvine heard what Loring and her team was working on he stepped down to join her company as chief executive.
Federoff previously founded MedGenesis Therapeutix, another privately held company working on a treatment for Parkinsons. “Much of what we do for Parkinsons and the extant gene therapy is stabilizing the disease,” says Federoff. “Cells of fibroblasts help to dial the clock back.”
The key is the use of autologous cells — those collected from the same individual that will receive the transplant, says Federoff.
Aspen’s novel approach was compelling enough to win the support of longtime healthcare investors including OrbiMed, ARCH Venture Partners, Frazier Healthcare Partners, Domain Associates, Section 32, and former Y Combinator President, Sam Altman.
Following the new round, Aspen is significantly expanding its board of directors to include Faheem Hasnain, the founder of Gossamer Bio who’s taking the chairman role at Aspen; Tom Daniel a venture partner at ARCH Ventures, and Peter Thompson, a partner at OrbiMed.
Aspen’s first product is currently undergoing investigational new drug (IND)-enabling studies for the treatment of sporadic forms of Parkinson disease, the company said. Its second product uses gene correction and neuron therapy to try to treat genetic forms of Parkinson disease.
According to the company, the financing will support the completion of all remaining investigational studies and FDA submission of the studies relating to the company’s lead product. In addition, the financing will support data collection from a Phase 1 clinical trial and the expansion into Phase 2 randomized studies.
At these difficult times, parents are concerned for their children’s education, especially given so much of it has had to go online during the COVID-19 pandemic. But what about pre-schoolers who are missing out?
Pre-school children are sponges for information but don’t get formal training on reading and writing until they enter the classroom when they are less sponge-like and surrounded by 30 other children. Things are tougher for non-English speaking children who’s parents want them to learn English.
Lingumi, a platform aimed at toddlers learning critical skills, has now raised £4 million in a funding round led by China-based technology fund North Summit Capital – a fund run by Alibaba’s former Chief Data Scientist Dr Min Wanli – alongside existing investors LocalGlobe, ADV and Entrepreneur First.
The startup, launched in 2017, is also announcing the launch of daily free activity packs and videos to support children and families during the COVID-19 outbreak, and it has pledged to donate 20% of its sales during this period to the Global Children’s Fund.
Lingumi’s interactive courses offer one-to-one tutoring with a kind “social learning” and its first course helps introduce key English grammar and vocabulary from the age of 2.
Instead of tuning into live lessons with tutors, which are typically timetabled and expensive, Lingumi’s lessons are delivered through interactive speaking tasks, teacher videos, and games. At the end of each lesson, children can see videos of Lingumi friends speaking the same words and phrases as them. Because the kids are watching videos, Lingumi is cheaper than live courses, and thus more flexible for parents.
The company launched the first Lingumi course in China last year, focused on teaching spoken English to non-English speakers. The platform is now being used by more than 100,000 families globally, including in mainland China, Taiwan, UK, Germany, Italy and France. More than 1.5 million English lessons have taken place in China over the past six months, and 40% of active users are also playing lessons daily. Lingumi says its user base grew 50% during China’s lockdown and it has had a rapid uptake in Europe.
“Lingumi’s rapid expansion in the Chinese market required a strategic local investor, and Dr Min and the team had a clear-sighted understanding of the technology and scale opportunity both in China, and globally.”
Dr Wanli Min, general partner at North Summit Capital, commented: “It is only the most privileged children who can access native English speakers for one-on-one tutoring… Lingumi has the potential to democratize English learning and offer every kid a personalized curriculum empowered by AI & Lingumi’s ‘asynchronous teaching; model.”
Competitors to include Lingumi include live teaching solutions like VIPKid, and learning platforms like Jiliguala in China, or Lingokids in the West.
Just three months after capping what was the best year for Indian startups, having raised a record $14.5 billion in 2019, they are beginning to struggle to raise new capital as prominent investors urge them to “prepare for the worst” and cut spending.
In an open letter to startup founders in India, ten global and local private equity and venture capitalist firms including Accel, Lightspeed, Sequoia Capital and Matrix Partners cautioned that the current changes to the macro environment could make it difficult for a startup to close their next fundraising deal.
The firms, which included Kalaari Capital, SAIF Partners, and Nexus Venture Partners — some of the prominent names in India to back early-stage startups — asked founders to be prepared to not see their startups’ jump in the coming rounds and have a 12-18 month runway with what they raise.
“Assumptions from bull market financings or even from a few weeks ago do not apply. Many investors will move away from thinking about ‘growth at all costs’ to ‘reasonable growth with a path to profitability.’ Adjust your business plan and messaging accordingly,” they added.
Signs are beginning to emerge that investors are losing appetite to invest in the current scenario.
Indian startups participated in 79 deals to raise $496 million in March, down from $2.86 billion that they raised across 104 deals in February and $1.24 billion they raised from 93 deals in January this year, research firm Tracxn told TechCrunch. In March last year, Indian startups had raised $2.1 billion across 153 deals, the firm said.
New Delhi ordered a complete nation-wide lockdown for its 1.3 billion people for three weeks earlier this month in a bid to curtail the spread of COVID-19.
The lockdown, as you can imagine, has severely disrupted businesses of many startups, several founders told TechCrunch.
Vivekananda Hallekere, co-founder and chief executive of mobility firm Bounce, said the firm had cut salary across the board — except for those who make less than $3,950 a year. “Founders would take a 100% pay cut. This will give us run-way of beyond 30 months. Glad we raised money when we didn’t need,” he said.
Founder of a Bangalore-based startup, which was in advanced stages to raise more than $100 million, said investors have called off the deal for now. He requested anonymity.
Food delivery firm Zomato, which raised $150 million in January, said it would secure an additional $450 million by the end of the month. Two months later, that money is yet to arrive.
Many startups are already beginning to cut salaries of their employees and let go of some people to survive an environment that aforementioned VC firms have described as “uncharted territory.”
Travel and hotel booking service Ixigo said it had cut the pay of its top management team by 60% and rest of the employees by up to 30%. MakeMyTrip, the giant in this category, also cut salaries of its top management team.
Beauty products and cosmetics retailer Nykaa on Tuesday suspended operations and informed its partners that it would not be able to pay their dues on time.
Investors cautioned startup founders to not take a “wait and watch” approach and assume that there will be a delay in their “receivables,” customers would likely ask for price cuts for services, and contracts would not close at the last minute.
“Through the lockdown most businesses could see revenues going down to almost zero and even post that the recovery curve may be a ‘U’ shaped one vs a ‘V’ shaped one,” they said.
And then Nadella and Anant Maheshwari, president of Microsoft India, discussed the success story of B2B platform Udaan in three separate onstage public appearances.
Headquartered in Bangalore, Udaan is a business-to-business e-commerce marketplace founded by former Flipkart executives Amod Malviya, Vaibhav Gupta and Sujeet Kumar. The startup used Microsoft’s free Azure credits to scale in its early days; as in some other markets, Microsoft, Amazon and Google offer free cloud credits in bulk to early, promising Indian startups in a bid to onboard them and see if their solutions could be relevant to other clients down the road.
More often than not, these bets don’t work, but sometimes they pay off. Udaan, valued at about $2.7 billion after raising nearly $900 million from investors like Lightspeed Venture Partners, Tencent Holdings, GGV Capital and Hillhouse Capital, has become one of Microsoft India’s biggest clients in the last three years.
Udaan was founded in 2016 at the tail end of India’s e-commerce frenzy, when scores of startups that had attempted to build business-to-consumer online shopping platforms were conceding defeat.
At the time, very few players — like Power2SME and Moglix (industrial products) and Bizongo (packaging for businesses) — were looking at the business-to-business market in India.
Udaan is valued at about $2.7B after raising nearly $900M from investors like Lightspeed Venture Partners, Tencent Holdings, GGV Capital and Hillhouse Capital and has become one of Microsoft India’s biggest clients.
But despite venturing into a road less traveled, Udaan had ambitious dreams. The startup was building its own logistics network, a herculean task that even Flipkart and Amazon avoided to a certain measure for years, yet it was reaching an audience that had never sold online.
Four years ago, mathematician Vlad Voroninski saw an opportunity to remove some of the bottlenecks in the development of autonomous vehicle technology thanks to breakthroughs in deep learning.
Now, Helm.ai, the startup he co-founded in 2016 with Tudor Achim, is coming out of stealth with an announcement that it has raised $13 million in a seed round that includes investment from A.Capital Ventures, Amplo, Binnacle Partners, Sound Ventures, Fontinalis Partners and SV Angel. More than a dozen angel investors also participated, including Berggruen Holdings founder Nicolas Berggruen, Quora co-founders Charlie Cheever and Adam D’Angelo, professional NBA player Kevin Durant, Gen. David Petraeus, Matician co-founder and CEO Navneet Dalal, Quiet Capital managing partner Lee Linden and Robinhood co-founder Vladimir Tenev, among others.
Helm.ai will put the $13 million in seed funding toward advanced engineering and R&D and hiring more employees, as well as locking in and fulfilling deals with customers.
Helm.ai is focused solely on the software. It isn’t building the compute platform or sensors that are also required in a self-driving vehicle. Instead, it is agnostic to those variables. In the most basic terms, Helm.ai is creating software that tries to understand sensor data as well as a human would, in order to be able to drive, Voroninski said.
That aim doesn’t sound different from other companies. It’s Helm.ai’s approach to software that is noteworthy. Autonomous vehicle developers often rely on a combination of simulation and on-road testing, along with reams of data sets that have been annotated by humans, to train and improve the so-called “brain” of the self-driving vehicle.
Helm.ai says it has developed software that can skip those steps, which expedites the timeline and reduces costs. The startup uses an unsupervised learning approach to develop software that can train neural networks without the need for large-scale fleet data, simulation or annotation.
“There’s this very long tail end and an endless sea of corner cases to go through when developing AI software for autonomous vehicles, Voroninski explained. “What really matters is the unit of efficiency of how much does it cost to solve any given corner case, and how quickly can you do it? And so that’s the part that we really innovated on.”
Voroninski first became interested in autonomous driving at UCLA, where he learned about the technology from his undergrad adviser who had participated in the DARPA Grand Challenge, a driverless car competition in the U.S. funded by the Defense Advanced Research Projects Agency. And while Voroninski turned his attention to applied mathematics for the next decade — earning a PhD in math at UC Berkeley and then joining the faculty in the MIT mathematics department — he knew he’d eventually come back to autonomous vehicles.
By 2016, Voroninski said breakthroughs in deep learning created opportunities to jump in. Voroninski left MIT and Sift Security, a cybersecurity startup later acquired by Netskope, to start Helm.ai with Achim in November 2016.
“We identified some key challenges that we felt like weren’t being addressed with the traditional approaches,” Voroninski said. “We built some prototypes early on that made us believe that we can actually take this all the way.”
Helm.ai is still a small team of about 15 people. Its business aim is to license its software for two use cases — Level 2 (and a newer term called Level 2+) advanced driver assistance systems found in passenger vehicles and Level 4 autonomous vehicle fleets.
Helm.ai does have customers, some of which have gone beyond the pilot phase, Voroninski said, adding that he couldn’t name them.
Espressive, a four-year-old startup from former ServiceNow employees, is working to build a better chatbot to reduce calls to company help desks. Today, the company announced a $30 million Series B investment.
Insight Partners led the round with help from Series A lead investor General Catalyst along with Wing Venture Capital. Under the terms of today’s agreement, Insight founder and managing director Jeff Horing will be joining the Espressive Board. Today’s investment brings the total raised to $53 million, according to the company.
Company founder and CEO Pat Calhoun says that when he was at ServiceNow he observed that, in many companies, employees often got frustrated looking for answers to basic questions. That resulted in a call to a Help Desk requiring human intervention to answer the question.
He believed that there was a way to automate this with AI-driven chatbots, and he founded Espressive to develop a solution. “Our job is to help employees get immediate answers to their questions or solutions or resolutions to their issues, so that they can get back to work,” he said.
They do that by providing a very narrowly focused natural language processing (NLP) engine to understand the question and find answers quickly, while using machine learning to improve on those answers over time.
“We’re not trying to solve every problem that NLP can address. We’re going after a very specific set of use cases which is really around employee language, and as a result, we’ve really tuned our engine to have the highest accuracy possible in the industry,” Calhoun told TechCrunch.
He says what they’ve done to increase accuracy is combine the NLP with image recognition technology. “What we’ve done is we’ve built our NLP engine on top of some image recognition architecture that’s really designed for a high degree of accuracy and essentially breaks down the phrase to understand the true meaning behind the phrase,” he said.
The solution is designed to provide a single immediate answer. If, for some reason, it can’t understand a request, it will open a help ticket automatically and route it to a human to resolve, but they try to keep that to a minimum. He says that when they deploy their solution, they tune it to the individual customers’ buzzwords and terminology.
So far they have been able to reduce help desk calls by 40% to 60% across customers with around 85% employee participation, which shows that they are using the tool and it’s providing the answers they need. In fact, the product understands 750 million employee phrases out of the box.
The company was founded in 2016. It currently has 65 employees and 35 customers, but with the new funding, both of those numbers should increase.
If you’re looking for toothbrushes, skin-care face masks, mattresses, glasses or even socks, there’s a digitally-native, direct-to-consumer (D2C) company or two that can help you out.
And thanks to smart digital marketing, the cult followings that ensue and the economics of e-commerce, D2C has changed how we relate to consumer goods (while attracting a waterfall of investment dollars).
Globally, D2C startups have raised between $8 billion to $10 billion in known venture capital across more than 600 deals since the start of 2019, according to Crunchbase data. The industry was catalyzed by a number of nine-figure deals for companies like Glossier, which sells makeup products, and Ro, which is a telehealth startup.
Indeed, when prepping this post for publication, our list of notable D2C rounds since the start of 2019 grew long enough that we abandoned the idea of including a digest. The sector has been active across a host of verticals, making it hard to sum up in terms other than rounds and dollars invested.
But those are trailing indicators of what is going on between D2C startups and their investors. TechCrunch was curious, especially in the wake of the troubled Casper IPO, how investor sentiment might have shifted and what venture capitalists are looking for in the category.
To get a grip on the matter, we caught up with Nicole Quinn from Lightspeed Venture Partners, Ben Lerer and Caitlin Strandberg from Lerer Hippeau, Gareth Jefferies from Northzone, Matthew Hartman of Betaworks Ventures, Alexis Ohanian of Initialized Capital and Luca Bocchio of Accel.
We got into advice for founders looking to raise, whether influencer marketing is worth it and which channel one investor says is an “all-but-closed door for most D2C companies.” We’ll start with a summary of the three trends that stood out the most from our collected answers and then share the full investor digests.
Chinese gaming giant Beijing Kunlun has agreed to sell popular gay dating app Grindr for about $608 million, ending a tumultuous four years under Chinese ownership.
Reuters reports that the Chinese company sold its 98% stake in Grindr to a U.S.-based company, San Vicente Acquisition Partners.
The app, originally developed in Los Angeles, raised national security concerns after it was acquired by Beijing Kunlun in 2016 for $93 million. That ownership was later scrutinized by a U.S. government national security panel, the Committee on Foreign Investment in the United States (CFIUS), which reportedly told the Beijing-based parent company that its ownership of Grindr constituted a national security threat.
CFIUS expressed concern that data from the app’s some 27 million users could be used by the Chinese government. Last year, it was reported that while under Chinese ownership, Grindr allowed engineers in Beijing access to the personal data of millions of U.S. users, including their private messages and HIV status.
Beijing Kunlun had agreed to sell the unit by June.
Little is known about San Vicente Acquisition, but a person with knowledge of the deal said that the company is made up of a group of investors that’s fully owned and controlled by Americans. Reuters said that one of those investors is James Lu, a former executive at Chinese search giant Baidu.
The deal is subject to shareholder approval and a review by CFIUS.
A spokesperson for Grindr declined to comment on the record.
The company’s recent launches focused on improving its support for AI, high-performance computing and accelerated computing workloads, which is surely what Nvidia is most interested in here.
“Building AI supercomputers is exciting to the entire SwiftStack team,” says the company’s co-founder and CPO Joe Arnold in today’s announcement. “We couldn’t be more thrilled to work with the talented folks at NVIDIA and look forward to contributing to its world-leading accelerated computing solutions.”
The two companies did not disclose the price of the acquisition, but SwiftStack had previously raised about $23.6 million in Series A and B rounds led by Mayfield Fund and OpenView Venture Partners. Other investors include Storm Ventures and UMC Capital.
SwiftStack, which was founded in 2011, placed an early bet on OpenStack, the massive open-source project that aimed to give enterprises an AWS-like management experience in their own data centers. The company was one of the largest contributors to OpenStack’s Swift object storage platform and offered a number of services around this, though it seems like in recent years it has downplayed the OpenStack relationship as that platform’s popularity has fizzled in many verticals.
SwiftStack lists the likes of PayPal, Rogers, data center provider DC Blox, Snapfish and Verizon (TechCrunch’s parent company) on its customer page. Nvidia, too, is a customer.
SwiftStack notes that it team will continue to maintain an existing set of open source tools like Swift, ProxyFS, 1space and Controller.
“SwiftStack’s technology is already a key part of NVIDIA’s GPU-powered AI infrastructure, and this acquisition will strengthen what we do for you,” says Arnold.
VC firm TLcom Capital closed its Tide Africa Fund at $71 million in February, and announced plans to invest in 12 startup over the next 18 months.
He told TechCrunch the fund was somewhat agnostic on startup sectors, but was leaning toward infrastructure, logistics ventures vs. consumer finance companies.
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.
Both of these companies have gone on to expand in Africa and receive subsequent investment by U.S. investment bank, Goldman Sachs .
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.
One $50 million round wasn’t enough for South Africa’s Jumo, so the fintech firm raised another — $55 million — in February, backed by
Goldman Sachs led the Cape Town based company’s $52 million round back in 2018.
“This fresh investment comes from new and existing…investors including Goldman Sachs, Odey Asset Management and LeapFrog Investments,” Jumo said in a statement — though Goldman told TechCrunch its participation in this week’s round isn’t confirmed.
After the latest haul, Jumo has raised $146 million in capital, according to Crunchbase.
Founded in 2015, the venture offers a full tech stack for partners to build savings, lending, and insurance products for customers in emerging markets.
Jumo is active in six markets and plans to expand to two new countries in Africa (Nigeria and Ivory Coast) and two in Asia (Bangladesh and India).
The company’s products have disbursed over $1 billion loans and served over 15 million people and small businesses, according to Jumo data.
Jumo joins a growing list of African digital-finance startups raising big money from outside investors and expanding abroad. A $200 million investment by Visa in 2019 catapulted Nigerian payments firm Interswitch to unicorn status, the same year the company launched its Verge card product on Discover’s global network.
Amazon Web Services has entered a partnership with Safaricom — Kenya’s largest telco, ISP and mobile payment provider — in a collaboration that could spell competition between American cloud providers in Africa.
In a statement to TechCrunch, the East African company framed the arrangement as a “strategic agreement” whereby Safaricom will sell AWS services (primarily cloud) to its East Africa customer network.
Partnering with Safaricom plugs AWS into the network of one East Africa’s most prominent digital companies.
Safaricom, led primarily by its M-Pesa mobile money product, holds remarkable dominance in Kenya, Africa’s 6th largest economy. M-Pesa has 20.5 million customers across a network of 176,000 agents and generates around one-fourth of Safaricom’s ≈ $2.2 billion annual revenues (2018).
A number of Safaricom’s clients (including those it provides payments and internet services to) are companies, SMEs and startups.
The Safaricom-AWS partnership points to an emerging competition between American cloud service providers to scale in Africa by leveraging networks of local partners.
The most obvious rival to the AWS-Safaricom strategic agreement is the Microsoft -Liquid Telecom collaboration. Since 2017, MS has partnered with the Southern African digital infrastructure company to grow Microsoft’s AWS competitor product — Azure — and offer cloud services to the continent’s startups and established businesses.
More Africa-related stories @TechCrunch
African tech around the ‘net
Tens of thousands of Indians move to the United States to pursue higher education each year. But like many others who have arrived from a foreign land, they can’t secure education loans or personal loans from the banks at interest rates on par with those levied on local students.
The reason why these students — or anyone else moving to a different country — have to abide by a higher interest rate is because they don’t have a credit score with any local credit bureau. So for banks and other financial institutions, there is more risk when they engage with foreigners. So they charge more.
An Indian student studying in the U.S., for instance, borrows money at an interest rate over 13%, compared to their local peers who can secure the same amount of credit, if not more, at less than half of that interest rate.
Bangalore and San Francisco-based startup Leap Finance, which was founded last year, announced on Tuesday that it is tackling this very challenge, and has started to serve Indian students in the U.S.
Indian students in the U.S. can secure financing from Leap Finance at an interest rate of between 8% to 10%, said Arnav Kumar, co-founder of the startup, in an interview with TechCrunch.
The startup said it is underwriting the loans based on several alternative and derived data points to assess a student’s future income.
Kumar and Vaibhav Singh, the other co-founder who previously worked at financial services groups InCred and Capital Float, arrived at the idea of creating Leap Finance partly because they too faced similar challenges in foreign markets.
Leap Finance founders pose for a picture
“It affects all sorts of things. You often end up with a credit limit on your credit card, for instance, that is only a fraction of your earnings,” he said.
Serving Indian students is a big addressable market in itself. “Indian students make up 25% of a class in many top graduate programs in the U.S. These are smart, hard-working students who got in the best programs and have a great future ahead. Yet, the education loans they avail of are at interest rates twice as high as their American peers,” said Singh.
“This disparity stems from systemic inefficiencies and lack of innovation. We have innovated on multiple dimensions — technology, financial structuring and risk — to bring down the interest rate and improve customer experience,” he added.
The startup, which currently employs more than two dozen people and is hiring for a number of technology roles, began to disburse loans in recent weeks and said more than 100 students are already benefiting from the service.
The startup said it is currently serving Indian students in the U.S., but plans to serve such Indian students in Canada, the U.K. and Indonesia, where the interest rate could go as high as 20%, said Kumar, who previously served as an Associate VP at VC fund SAIF Partners .
As part of the announcement, the duo said they have raised $5.5 million led by Sequoia Capital India. Bhupinder Singh, chief executive of financial services group InCred and Kunal Shah, founder and chief executive of financial services firm Cred also participated in the round.
In a statement, Ashish Agrawal, principal at Sequoia Capital India, said, “Indian students studying abroad today spend $15B annually and we estimate an annual credit need for >$5B against this. This attractiveness of the market, strong founder-market fit and Leap’s mission-driven team is what led to our belief in an early partnership with them.”
Brooklinen, a startup that sells bedding and other home goods online, has raised $50 million in new funding from Summit Partners.
Recent headlines are spurring bigger questions about the direct-to-consumer retail business, with Blue Apron exploring a potential sale and Casper also disclosing disappointing growth and persistent losses. but Brooklinen co-founder and CEO Rich Fulop said his company is different in one key way: It’s profitable.
In fact, Fulop said that the startup has been profitable for three of the last five years. When Brooklinen first launched in 2014,, it had to be profitable, because investors were skeptical about the idea, leaving Rich and Viki Fulop (they’re husband-and-wife co-founders) to bootstrap the company until raising $10 million from FirstMark Capital in 2017.
Even then, Fulop told me he was “kind of uncomfortable” spending more money than he was taking in, so Brooklinen got back to profitability in 2019. At the same time, he said topline revenue grew 40 percent last year.
Asked how he balanced growth and profitability, Fulop said, “It’s honestly basic stuff. We focused on margins.”
For example, he said that the company lowered its customer acquisition costs by taking “a hard look” at its different marketing channels and cutting back on the ones that “weren’t carrying their weight.” It also “invested in site analytics and A/B testing platforms,” while launching new products like robes, shower curtains and bath rugs.
Fulop said the company’s focus has now expanded beyond sleep and bedding, allowing it offer a range of goods around comfort at home.
“We talk religiously to our customers,” he added — and apparently, surveys showed that Brooklinen customers were interested in buying comfortable loungewear from the company.
The startup also opened its first permanent store in Brooklyn earlier this year, selling both Brooklinen products and goods from other brands that sell through the company’s Spaces marketplace. Fulop said the store is already profitable on “a four-wall basis” (basically, it’s profitable if you don’t include the initial start up costs), and one of the plans for the new funding is to open many more brick-and-mortar businesses.
He also said that Brooklinen’s business is almost entirely U.S.-based currently, so he plans to expand internationally.
“Brooklinen’s profitability, customer repeat rate, and consistently smart and deliberate growth decisions make them a rare brand to partner with,” said Summit Partners Managing Director Chris Dean in a statement. “Many brands focus on a growth-at-all-costs model that we believe isn’t sustainable for longevity; we are thrilled to find a like-minded partner and to work together on the next stage of growth for Brooklinen.”
Spinny, an online platform for selling used cars, has secured $43.7 million from a cohort of influential investors in a new financing round as it looks to expand to more Indian cities.
The Series B financing round for the Gurgaon-based startup was led by the Fundamentum Partnership, the growth-capital fund backed by tech veterans Nandan Nilekani and Sanjeev Aggarwal. US-based General Catalyst Partners, Korea based KB Financial Group and existing investors Accel, SAIF Partners and Alteria Capital also participated in the round.
The four-year-old startup has raised about $57 million to date, and according to a person familiar with the matter, the new round gave it a post money valuation of about $150 million.
Spinny runs a platform to facilitate sale and purchase of used cars. Niraj Singh, co-founder and chief executive of the startup, told TechCrunch in an interview that Spinny brings the trust factor that people are looking for when they are purchasing a car.
“Most of these people are aged under 35. They are aspirational and want to get better cars. But it’s a hassle for them to find a trustworthy place and deal with agents,” he said.
The Gurgaon-based four-year-old startup is solving that by inspecting and purchasing the cars and then selling them itself. “Since there is no middlemen, we are able to sell the cars at more affordable prices and we offer a five-day, no-question asked full-refund if someone is not satisfied with their purchase. On top of that, we also offer a year-long warranty on these cars,” he said.
Spinny operates in four cities in India today and has sold nearly 10,000 cars. Until 2017, the startup acted as a marketplace for sale and purchase of cars, essentially serving as a listing platform. “Then, we pivoted as we wanted to control the full supply chain,” he said.
Nandan Nilekani, co-founder and Chairman of Fundamentum said, the fund was impressed by Spinny’s “full stack business” that is building a competitive differentiation as it scales.
“This fits into Fundamentum’s thesis of backing long term oriented entrepreneurs to solve complex business problems using technology and who aspire to build a company at scale and to last,” he said.
On Spinny’s website, people can find the car they want to purchase and then inspect and test drive it from the startup’s physical hubs. Spinny currently has nine hubs in India, something it plans to scale to 20 by the end of the year as it scales to more cities in the country.
It competes with heavily-backed Cars24 and CarDekho, both of which count Sequoia Capital as an investor, as well as Droom, which has raised over $130 million, and Naspers-owned marketplace Olx.
At stake is a huge opportunity. The market for used cars in India is estimated to grow from $13 billion to $25 billion by 2023, despite the slowdown in automobile industry in the country.