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Founders Fund confirms $3 billion in new capital across two funds

By Jonathan Shieber

Founders Fund, the investment firm led by its controversial co-founder Peter Thiel and partners Keith Rabois and Brian Singerman, has closed on $3 billion in new capital across two investment funds, TechCrunch confirmed.

News of the firm’s latest fundraising close was first reported in Axios.

The firm’s $1.2 billion Founders Fund VII closed in December and follows on the heels of a $1.3 billion Fund VI, which closed in 2016. The firm’s first growth fund, which raked in $1.5 billion, closed on Monday as well, according to a spokesperson for the investment firm. An additional $300 million in commitments is coming from the firm’s partnership to round out the $3 billion figure.

Fundraising for the new investment vehicles was first reported in The Wall Street Journal last October. And it follows the reunion earlier in 2019 of Rabois and Thiel — two of the most notorious members of the “PayPal mafia” that’s produced a number of billionaire entrepreneurs and investors.

The speed with which Founders Fund has been able to raise new capital is matched by the firm’s alacrity in deploying new dollars, according to industry watchers. Rabois in particular has made a splash at Founders Fund since joining the firm — investing large sums in competitive rounds, investors said.

But the firm’s success in fundraising is likely due to the returns it has been able to reap for its limited partners. For its 2011-vintage fund four, Founders Fund has more than quadrupled every dollar that the fund committed, to $4.60, according to a report in The Wall Street Journal (thanks to investments in Airbnb and Stripe Inc.). That figure compares favorably to the industry average of $2.11. Meanwhile, the firm’s third fund saw its returns increase to $3.80, 75 cents more than the industry average.

Founders Fund partner Cyan Banister described how the firm’s investment practices differ from other venture capital investors in a wide-ranging interview with TechCrunch last year:

As for how decisions get made, Banister explained that the voting structure is dependent on the size of the check. “So you’d meet with one or two or three or four partners, depending on your [investing] stage,” she told attendees. Because she’s looking at very early-stage startups, for example, she doesn’t have to meet with many people to make a decision. As “dollar amounts gets larger,” she continued, “you’re looking at full GP oversight,” including the involvement of senior members like Brian Singerman and Keith Rabois, and “that can a little more difficult.”

At Axios, Dan Primack reported that the growth fund would write checks of $100 million at least. The firm’s investment decisions would be structured with any two investment team members agreeing to back deals under $1.5 million. Any deal above $1.5 million requires approval from one partner and a general partner; deals above $5 million require one partner and two general partners; and deals above $10 million require approvals from two partners and the unanimous approval of Singerman, Thiel and Rabois. Any deal requiring the approval of the general partners means that the startup that is pitching has to at least talk on the phone or meet in person with the general partners.

Update: This story has been updated to reflect that the firm’s Fund VII was $1.2 billion and its Growth Fund was $1.5 billion. 

The Station: Lucid Motors spy shot and the birth of an AV startup

By Kirsten Korosec

The Station is a weekly newsletter dedicated to all things transportation. Sign up here — just click The Station — to receive it every Saturday in your inbox.

Hello again — or perhaps for the first time. This is Kirsten Korosec, senior transportation reporter at TechCrunch and your host here at The Station. This weekly newsletter will also be posted as an article after the weekend — that’s what you’re reading now. To get it first, subscribe for free. Please note that there will not be a newsletter February 22.

It was a drama-filled week with a hearing on the hill in D.C. about autonomous vehicle legislation that got a bit tense at times. Meanwhile, Uber tipped its hat to the past, EV startup Lucid started to lift the veil on its Air vehicle (scroll down for a spy shot!) and micromobility prepared for headwinds in Germany.

Before I ride off into the sunset for my vacation, one reminder for y’all. Don’t forget to reach out and email me at kirsten.korosec@techcrunch.com to share thoughts, opinions or tips or send a direct message to @kirstenkorosec.

Micromobbin’

the station scooter1a

Welcome back to micromobbin’, a regular feature in The Station by reporter Megan Rose Dickey. Before we get into her micromobility insights, a quick note that shared scooters are facing a fight in Germany that has prompted companies to unite over their “shared” cause. (Get it?)

Micromobility vehicles, first legalized in Germany last June, have flooded the marketplace and caused a backlash in cities like Berlin, where at least six apps, including Bird, Circ (now owned by Bird), Lime, Tier, Uber Jump and Voi operate. As the Financial Times first reported, amendments to the country’s Road Traffic Act would give individual cities the power to heavily restrict the areas in which e-scooters can be parked or ban them altogether.

Now back to Dickey’s micromobbin’.

Swiftmile, the startup that wants to become the gas station for electric micromobility vehicles, announced its move into advertising this week. Swiftmile already supplies cities and private operators with docks equipped to park and charge both scooters and e-bikes. Now, the company is starting to integrate digital displays that attach to its charging stations to provide public transit info, traffic alerts and, of course, ads.

“It adds tremendous value because it’s a massive market,” Swiftmile CEO Colin Roche told TechCrunch. “Tons of these corporations want to market to that group but you cannot do that on a scooter, nor should you. So there’s a massive audience that wants to market to that group but also cities like us because we’re bringing order to the chaos.”

Meanwhile, Bird unveiled more details about its loyalty program, called Frequent Flyer. It’s currently in the pilot phase, which means it’s only available in select markets. But the benefits for riding five times in 28 days include no start fees for rides between 5 a.m. to 10 a.m., Monday through Friday and the ability to reserve your Bird in advance for up to 30 minutes at no cost.

— Megan Rose Dickey

A little bird

blinky cat bird green

We don’t just hear things. We see things too. This week in a little bird — the place where we share insider news, not gossip — I’m going to share two spy shots of a production version of Lucid Motors’ upcoming Air electric vehicle. See below.

The photos of the production version of the Lucid Air were taken during an event hosted for some of the vehicle’s first reservation holders. (I wasn’t there, but luckily some readers of The Station were.) By the way, we also hear that reservations are in the “low four figures.”

Lucid Air production reveal

You’ll notice that the production version of the Air is nearly identical to the beta version. Unfortunately, we don’t see the interior. But reports suggest it falls in the understated luxury category and without giant screens.

Lucid is preparing for one of the more important moments in its history as a company. The production version of Air will be unveiled in April at the New York Auto Show. In the run-up to the auto show, Lucid is revealing more information about the vehicle, including a recent video that suggested the vehicle had a real-world range of more than 400 miles. Lucid has hit that 400-mile range in simulated testing, but how it operates on the roads is what really matters.

What’s impressive, if those numbers bear out, is that it was accomplished with a 110-kWh battery pack. That’s an improvement from back in 2016 when Lucid said it would need a 130-kWh battery pack to achieve that range. In my past conversations with CEO Peter Rawlinson — and one wild ride with him behind the wheel of an early Air prototype in Vegas — it’s clear he is obsessed with battery efficiency. That apparently hasn’t waned.

Car and Driver, which was at this special event, noted in its report that Rawlinson has a goal to get to five miles per kilowatt-hour. Right now, Tesla can lay claim to the most efficient electric vehicle with the upcoming Model Y at a claimed 4.1 miles per kilowatt-hour.

And late Friday, Tesla CEO Elon Musk tweeted that the Tesla Model S now has an estimated EPA range above 390 miles or ~630 km.

Inside the beltway

It got a little prickly on Capitol Hill during a House panel hearing this week that aimed to tackle how best to regulate autonomous vehicles. Watch the hearing to see it all unfold. Here’s a handy link to it.

A quick history lesson: The SELF DRIVE ACT was unanimously passed in 2017 by the Republican-controlled House of Representatives. AV START, a complementary bill introduced in the Senate, failed to pass because Democrats said it didn’t go far enough to address safety and liability issues.

A bipartisan group revived efforts to come up with legislation that would address Democrat concerns and give auto manufacturers and AV developers greater freedom to deploy vehicles that lack controls like a steering wheel or pedals, which are currently required by federal law.

There was some level of public agreement between the traditional auto manufacturers and AAJ over the issue of accountability. But there is still a huge divide between organizations like the Consumer Technology Association and safety advocates and trial lawyers over the issue of forced arbitration.

Groups like the American Association for Justice, a group representing trial lawyers, want to ban forced arbitration in any autonomous vehicle bill.

Meanwhile, CTA president and CEO Gary Shapiro submitted testimony that was clearly opposed to limiting the use of arbitration. The CTA argues that arbitration reduces the cost of litigation and provides more timely remedies.

People who were in the room told me they were surprised by how unwavering Shapiro’s comments were, and suggested that it wasn’t in step with how some auto manufacturers view the issue.

Following the hearing, the House Energy and Commerce and Senate Commerce, Science and Transportation committees circulated seven sections to industry groups covering issues such as crash-data sharing and cybersecurity, according to reporting by Bloomberg Government. There was one missing provision. Any guesses? Yup, the provision dealing with forced arbitration. That has caused some Democrats to abandon the bill.

There are two ways for this bill to survive in this congressional session — by unanimous consent, meaning everyone agrees to it, or by being attached to another bill. The first option is highly unlikely. And the second is just as slim, as there are limited opportunities in the Senate to attach self-driving legislation to another bill.

Adventures in ride hailing

Two items to mention that illustrate how the world of ride hailing continues to evolve.

First up is Uber. The company is piloting a new feature aimed at older adults that will let customers dial a 1-800 number and speak to an actual human being to hail a ride. The pilot is launching in Arizona, followed by other yet unnamed states. Sounds sort of familiar, doesn’t it?

It’s not quite like calling a taxi dispatcher, though. You’ll still need a phone that can receive SMS or text messages to get information on the driver and their ETA.

Now let’s jump over to Nigeria where new regulations in the country’s commercial center of Lagos are creating some chaos.

Lagos has started to restrict where shared motorcycles, called okadas, can operate. That is affecting motorcycle-taxi businesses like ORide, Max .ng and Gokada.

In a statement via email, ORide’s senior director of Operations, Olalere Ridwan, said the rules entail “a ban on commercial motorcycles…in the city’s core commercial and residential areas, including Victoria Island and Lagos Island.”

The motorcycle taxi limitations have also thrown off Lagos’s disorderly transit grid — overloading other mobility modes (such as mini-buses) and forcing more people to pound pavement and red-dirt to get to work, according to reporter Jake Bright.

Google’s axe sparks a spin-off

Google bookbot-cartken

I wanted to highlight one of our ONMs, otherwise known as original news manufacturers. Ba dum bump.

Freelancer Mark Harris is back with a scoop on Google’s short-lived Bookbot program and how its death sparked a new and still-in-stealth startup called Cartken.

Bookbot was a robot created within Google’s Area 120 incubator for experimental products. The plan was to pilot an autonomous robot in Mountain View that would pick up library books from users and bring them back to the library. Apparently, it was well received. But it was killed off far before its nine-month pilot was slated to end. Bookbot’s demise followed Google’s decision to scale back efforts to compete with Amazon in shopping.

But Bookbot appears to be back, albeit in a slicker form and with a broader use case than a library book shuttle. Engineers working on Bookbot as well as a logistics expert who was once in charge of operations at Google Express left the company to form Cartken in fall 2019.

Check out Harris’ deep dive into Bookbot, Google’s shift away from shopping and Cartken.

TC Sessions: Mobility savings

You might have heard or read here in this newsletter that TC Sessions: Mobility is returning for a second year on May 14 in San Jose — a day-long event brimming with the best and brightest engineers, policymakers, investors, entrepreneurs and innovators, all of whom are vying to be a part of this new age of transportation.

Now here’s my discount deal for you. To get 10% off tickets, including early-bird, use code AUTO. The early-bird sale ends April 9. Early-bird tickets are available now for $250 — that’s $100 savings before prices go up. Students can book a ticket for just $50. Book your tickets today.

So far, we’ve announced:

  • Shin-pei Tsay, director of policy, cities and transportation at Uber
  • Boris Sofman, who is leading Waymo’s autonomous trucking efforts
  • Nancy Sun, Ike Robotics chief engineer and co-founder
  • Trucks VC general partner Reilly Brennan
  • Porsche North America CEO Klaus Zellmer
  • Olaf Sakkers, general partner at Maniv Mobility

Expect more announcements each week leading up to the May 14th event.

Where top VCs are investing in open source and dev tools (Part 1 of 2)

By Arman Tabatabai

The once-polarizing world of open-source software has recently become one of the hotter destinations for VCs.

As the popularity of open source increases among organizations and developers, startups in the space have reached new heights and monstrous valuations.

Over the past several years, we’ve seen surging open-source companies like Databricks reach unicorn status, as well as VCs who cashed out behind a serious number of exits involving open-source and dev tool companies, deals like IBM’s Red Hat acquisition or Elastic’s late-2018 IPO. Last year, the exit spree continued with transactions like F5 Networks’ acquisition of NGINX and a number of high-profile acquisitions from mainstays like Microsoft and GitHub.

Similarly, venture investment in new startups in the space has continued to swell. More investors are taking shots at finding the next big payout, with annual invested capital in open-source and dev tool startups increasing at a roughly 10% compounded annual growth rate (CAGR) over the last five years, according to data from Crunchbase. Furthermore, attractive returns in the space seem to be adding more fuel to the fire, as open-source and dev tool startups saw more than $2 billion invested in the space in 2019 alone, per Crunchbase data.

As we close out another strong year for innovation and venture investing in the sector, we asked 18 of the top open-source-focused VCs who work at firms spanning early to growth stages to share what’s exciting them most and where they see opportunities. For purposes of length and clarity, responses have been edited and split (in no particular order) into part one and part two of this survey. In part one of our survey, we hear from:

Rocket Lab readies parachute tests for its rocket recovery and reuse program

By Darrell Etherington

Rocket Lab is proceeding as planned with its efforts to recover and reuse spent rocket boosters from its Electron launch vehicle, and has completed its first prototype parachute for use in the recovery process. Rocket lab CEO Peter Beck announced last year that it would be aiming for reusability with the first stage of its rocket, using a system that includes the booster re-entering Earth’s atmosphere, then deploying a parachute to slow its descent so that it can be caught mid-air by a helicopter and returned to land.

Already, Rocket Lab has made good progress on its plan, with two tests under its belt of the guided re-entry par tof the process, including a launch in early December 2019, and one just last week. Now, Beck said on Twitter that the company is ready to move on to stage two, which is developing the parachute system that will deploy once the rocket has completed re-entry, to slow its rate of descent. Rocket Lab’s first parachute prototype is ready, Beck says, and the company will start testing it using low-altitude drops, as well as testing the capture process, beginning next week.

Stage 1 reusability:
-Get through the “wall”✅. – – Now let’s slow it down. Rocket Lab’s first prototype chute is complete. The Low altitude drop and capture test program begins next week. pic.twitter.com/SBvqxoFABg

Peter Beck (@Peter_J_Beck) February 5, 2020

Beck said during the event revealing Rocket Lab’s reusability plan that the most difficult part of the whole process was reducing the rocket’s speed during its return to Earth, which could mean that these parachute tests will be relatively simple to ace compared to the re-entry guidance system tests that preceded it. Then, it’ll be a matter of integrating the two systems, so that the returning rocket can slow itself enough just through orientation (it’s not firing any retro rockets in Earth’s atmosphere to control its descent like SpaceX’s Falcon 9 booster) to enable the parachute to take it the rest of the way.

Rocket Lab plans to attempt a full rocket recovery sometime before the end of 2020, and if it manages to get the process right, the primary benefit for the company will be an increased ability to turn around missions for more frequent successive launches, which Beck says is key to its goals of providing responsive, flexible launch services for customers.

The four corners of the new space economy

By Devin Coldewey

It’s gotten to the point now where a handful of angel investors can put a space company on the map. But the same changes that have made the industry accessible have made it increasingly complex to track its trends. By default, all space startups are exciting, but companies vary widely in risk, capital intensity and maturity. Here’s what you need to know about the four main areas of the new space economy.

Launch: playground of billionaires and forward thinkers

Perhaps simply the most exciting industry to be a part of today, orbital launch service has gone from a government-funded niche dominated by a handful of primes to a vibrant, growing community serving insatiable demand.

There’s a good reason why it was dominated for so long by the likes of ULA, whose Delta rockets took up a huge majority of missions for decades. The barrier to entry for launch is huge.

As such there are three ways to enter the sector: brute force, stealth, and novelty.

Brute force is how SpaceX and Blue Origin have managed to accomplish what they have. With billions in investment from people who don’t actually care whether money is made in the short term (or with Bezos, even in the long term), they can perform the research and engineering necessary to make a full-scale launch platform. Few of these can ever really exist, and participation is limited when they do. Fortunately we all reap the benefits when billionaires compete for space superiority.

Stealth, perhaps better described as smart positioning, is where you’ll find Rocket Lab. This New Zealand-based company didn’t appear out of nowhere — look at its timeline and you’ll see scaled-down tests being conducted more than a decade ago. But what founder Peter Beck and his crew did was anticipate the market and work doggedly towards a specific solution.

Rocket Lab is focused on small payloads, delivered with short turnaround time. This avoids the trouble of competing against billionaires and decades-old space dynasties because, really, this market didn’t exist until very recently.

“Responsive space, or launch on demand, is going to be increasingly important,” Beck said. “All satellites are vulnerable, be it from natural, accidental, or deliberate actions. As we see the growth and aging of small sat constellations, the need for replenishment will increase, leading to demand for single spacecraft to unique orbits. The ability to deploy new satellites to precise orbits in a matter of hours, not months or years, is critical to government and commercial satellite operators alike.”

Rocket Lab’s tenth launch, nicknamed “Running Out of Fingers.”

Investing in Rocket Lab early on would have seemed unexciting as for year after year they made measured progress but took on no cargo and made no money. Patience is the primary virtue here. But investors with foresight are looking back now on the company’s many successful launches and bright future and marveling that they ever doubted it.

The third category of launch is novelty: entirely new launch techniques like SpinLaunch or Leo Aerospace. The term may not inspire confidence, and that’s deliberate. Companies taking this approach are high-risk, high-reward propositions that often need serious funding before they can even prove the basic physical possibility of their launch technique. That’s not an investment everyone is comfortable making.

On the other hand, these are companies that, should they prove viable, may upend and collect a significant portion of the new and growing launch market. Here patience is not so much required as extra diligence and outside expertise to help separate the wheat from the chaff. Something like SpinLaunch may sound outlandish at first, but the Saturn V rocket still seems outlandish now, decades after it was built. Leaving the confines of established methods is how we move forward — but investors should be careful they don’t end up just blasting their cash into orbit.

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