When we last heard from BigID at the end of 2020, the company was announcing a $70 million Series D at a $1 billion valuation. Today, it announced a $30 million extension on that deal valuing the company at $1.25 billion just 4 months later.
This chunk of money comes from private equity firm Advent International, and brings the total raised to over $200 million across 4 rounds, according to the company. The late stage startup is attracting all of this capital by building a security and privacy platform. When I spoke to CEO Dimitri Sirota in September 2019 at the time of the $50 million Series C, he described the company’s direction this way:
“We’ve separated the product into some constituent parts. While it’s still sold as a broad-based [privacy and security] solution, it’s much more of a platform now in the sense that there’s a core set of capabilities that we heard over and over that customers want.”
Sirota says he has been putting the money to work, and as the economy improves he is seeing more traction for the product set. “Since December, we’ve added employees as we’ve seen broader economic recovery and increased demand. In tandem, we have been busy building a whole host of new products and offerings that we will announce over the coming weeks that will be transformational for BigID,” he said.
He also said that as with previous rounds, he didn’t go looking for the additional money, but decided to take advantage of the new funds at a higher valuation with a firm that he believes can add value overall. What’s more, the funds should allow the company to expand in ways it might have held off on.
“It was important to us that this wouldn’t be a distraction and that we could balance any funding without the need to over-capitalize, which is becoming a bigger issue in today’s environment. In the end, we took what we thought could bring forward some additional product modules and add a sales team focused on smaller commercial accounts,” Sirota said.
Ashwin Krishnan, a principal on Advent’s technology team in New York says that BigID was clearly aligned with two trends his firm has been following. That includes the explosion of data being collected and the increasing focus on managing and securing that data with the goal of ultimately using it to make better decisions.
“When we met with Dimitri and the BigID team, we immediately knew we had found a company with a powerful platform that solves the most challenging problem at the center of these trends and the data question,”Krishnan said.
Past investors in the company include Boldstart Ventures, Bessemer Venture Partners and Tiger Global. Strategic investors include Comcast Ventures, Salesforce Ventures and SAP.io.
Just shy of a year ago, I sent an email to our global fund manager partners and to our direct portfolio CEOs titled “Only the decisive survive.” At that time, not many outside of China were concerned about COVID-19. However, I was obsessed.
Hearing stories from fund manager friends with operations in China, I knew things were worse than what the Chinese press were telling the world. And I live only five miles south of the location of the first COVID death in the U.S. The pandemic was accelerating exponentially, and I wanted to get all of our partners to open their eyes to the risks and prepare as well as they could.
I’m not writing with that level of intensity or urgency this time, but I am concerned. We all need to be taking precautionary measures, not just in light of COVID, but to ensure our firms can continue to thrive when faced with unexpected tragedy.
We all need to be taking precautionary measures, not just in light of COVID, but to ensure our firms can continue to thrive when faced with unexpected tragedy.
My partner Susana invested in 90 funds over 20 years — she’s seen everything from motorcycle accidents to depression take out fund managers and CEOs. Life works that way sometimes, and it’s not always someone else. It’s the “What happens if I get hit by a bus scenario?” In this case, the bus happens to be a global pandemic.
One of our funds in Asia recently reported COVID cases in three CEOs among their 23 companies. While developed market infections and deaths are trending down, many countries are seeing serious new outbreaks, and some, like Brazil, are doing badly.
Pandemic forecasting site IHME predicts a growing caseload across sub-Saharan Africa and East Asia and Pacific regions. The LAC region is trending down overall, but some countries, including Colombia, are expected to experience a second (or third) wave of infections.
As the Economist said in mid-February, “Coronavirus is not done with humanity yet.”
A month or so ago, we were trying to move forward with an investment in a fund in Africa with whom we had been speaking and doing due diligence for a few months. They went radio silent for over two weeks. We didn’t know whether to be miffed, concerned for their health, or what.
More individuals than ever are donning the investor cap. Almost a fifth of U.S. equity trading in 2020 was driven by mom-and-pop investors — up from around 15% in the previous year. With such impressive returns to be made, many are deciding to set up a full-fledged investment business.
With the fundraising world becoming more democratic and accessible, we should help people find the right path to setting up a venture capital firm and also make sure the right people are entering the VC sphere. Startups are changing, and any new investment manager will have to adapt to the shifting landscape. VCs today have to provide more than money to get the best portfolio, and they must have a strong focus on impact to get the best institutional investors into their funds.
Startup investors can be the financial backbone for mass disruption. That’s why, at Founder Institute, we believe in the need for more VCs with strong values: Because they will prop up the companies that will build a brighter future for humanity. We’re not the only ones — our first “accelerator for ethical VCs” was oversubscribed.
VCs today have to provide more than money to get the best portfolio, and they must have a strong focus on impact to get the best institutional investors into their funds.
So if you want to lead your own VC fund in 2021, here are the main questions aspiring investors need to ask themselves.
Investing in startups is not just about making money. In selecting the startups that will become future industry leaders, VCs have a lot more power than most to do good (or harm). If you’re only interested in money, you likely won’t go too far. Identifying the greatest businesses means seeing beyond their capital into the longevity of their vision, their real-life impact on society, and how much consumers will love or hate them.
After all: Most startup founders pour their blood, sweat and tears into building a business not just to make money, but also to make an impact on the world and build products that align with their mission. Any new venture capitalist looking to attract the best founders needs to think about the vision and mission of their fund in the same terms.
Although VC firms have been slow on the uptake when it comes to environmental, social and governance (ESG) goals, there are signs that times are changing. Some firms are forming a community around implementing ESG, not only because of the external impact but because it furthers their business goals. To help accelerate this trend, we asked our VC Lab participants to take The Mensarius Oath (Latin for “banker” or “financier”), a professional code of conduct for finance professionals to create an ethical, prosperous and healthy world.
The number of VCs are growing and the industry is increasingly becoming concentrated. This means that simply offering large sums of money won’t get you traction with the best startups. Founders are looking for value over volume — they usually want mission alignment, connections, value-added services and industry expertise more than a blank check.
Remember that the best founders get to choose their VCs from a menu of options, not the other way around. To convince them that you’re the right match, you’ll need a proven track record in the same industry (or transferable experience from another industry) and referrals from credible people. You’ll also need a strong value proposition or niche that sets you apart from other funds. For example, Untapped Capital invests in “unexpected” and “undernetworked” founders, while R42 Group invests in AI and longevity-focused businesses.
If you don’t think you’ve got the profile to offer value to founders just yet, it’s worth taking some time to lay out exactly who you are. That is: what you hope to achieve as a fund manager, the vision you have for your portfolio companies and how you alone can help them get there.
As a new VC fund without historical data points, limited partners (LPs) will naturally be cautious to invest in your fund. So, you have to build a brand that tells your story and proves your reputation.
Go back to the basics and pinpoint exactly what your strengths are. If you’re having trouble finding inspiration, use statements like, “I can get the best deal because I have X,” or, “I help grow my portfolio companies by X” to get the ball rolling. Be wary of saying that the amount of money you have is your strength — at this stage, your bank balance isn’t your competitive edge. Focus instead on what makes you unique, credible and relevant. Having a high number of strategic contacts, extensive industry experience or a backsheet of successful exits could be your secret ingredients. For extra guidance, check out this resource my team put together to help fund managers consolidate their niche in an “investment thesis.”
Once you have a list, choose your top three strengths and write a followup sentence detailing how each of them can be enriched by your network and expertise. Ideally, share these with a test group (friends, family or fellow entrepreneurs) and ask them which is the most compelling. If there’s a general consensus toward one point, you know to make that a large chunk of your VC fund’s thesis.
Who you know is just as important as what you know, and the most prominent VCs tend to be in the middle of a flow of information and people. Your network tells founders that you’re respected and reassures them that they will probably be brought into the fold to connect with future mentors, customers, investors or hires.
If you’re a thought leader, the alumni of a well-known company like Uber or PayPal, or if you’ve started a community around an emerging vertical, you’re more likely to form a positive deal flow. But this status and these relationships have to be established before you launch your fund — if you try to network from zero, you’ll be spinning too many plates and won’t have the social proof to back yourself up.
Don’t just rely on your gut to tell you whether your network is satisfactory. Map out your personal ecosystem, sorting people based on familiarity (close contacts or acquaintances) and defining characteristics (consumers, finance, ex-CEOs, etc.). That “map” can be as basic as an Excel sheet with a column for each category, or you could use more attractive visual tools like Canva — great for sharing with your future team and encouraging them to fill any network gaps.
A VC fund runs like any other business — you have to develop a vision, recruit a team, form an entity, raise money, deliver value and report to stakeholders. To kick things off, you need to consider what size fund you want, and then secure significant commitments from LPs — at least 10% of your total fund. LPs can be corporations, entrepreneurs, government agencies and other funds.
Also keep in mind that most LPs will want you to personally invest at least 1% of the total fund size so that you have “skin in the game.”
For that reason especially, it’s best to start small, somewhere between $5 million and $20 million, and use this “training fund” to demonstrate returns and create a launchpad for bigger raises to follow.
Your partnership with companies will be for the long haul, so you can’t rely just on offering value when you wire the money. Founders need consistent support across the full startup lifecycle, meaning you need to be conscious not to overpromise and fail to deliver. Think of the startups you’d most like to work with: How could you help them now? How could you help them in the future? And how could you help them exit?
You can take a skills-centric approach, where you reserve different resources and connections based on marketing, hiring, fundraising and culture-creation that can be applied as the startup grows. Alternatively, you might want to make sprint-like plans, where you check in with founders on a repeating basis and iterate the support you offer based on their progress. Whatever way you chose to structure your support, ensure that you’re realistic about what you can bring to the table, your availability, preferred involvement and how you’ll document it.
The future of VC will be driven by venture capitalists with strong values who have built funds with the new needs of founders in mind. VC may once have been exclusive and mysterious, but 2021 could be the year VC becomes a more open and fair space for businesses and investors alike.
It’s no surprise that the venture capital market was incredibly active in the United States during the first quarter of 2021, but precisely how strong has only recently become clear. This morning, we’re digging into the data.
According to a report from PitchBook, venture capitalists unleashed a wave of capital in the first three months of the year. So much, in fact, that funding in the United States nearly doubled compared to the same quarter of 2020.
We’ll dig into specific numbers and trends regarding aggregate venture capital results in a moment, but what stood out the most while digesting the Q1 dataset was how strong VC results appeared across different states; a solo late-stage boom the quarter was not.
Seed deal volume appeared strong and early-stage venture capital activity could reach new highs in 2021, but late-stage venture capital activity in the United States is already setting records in both deal count and invested dollars.
The Exchange explores startups, markets and money.
We’ll parse the headline numbers and then dive into seed and super late-stage data with the help of Sarah Kunst of Cleo Capital, Jenny Lefcourt of Freestyle Capital, Iris Choi of Floodgate and Laela Sturdy of CapitalG.
With their help, we’ll contextualize the numbers and weave anecdotal observations into what the charts and graphs tell us. Especially in the case of seed data, which is famously laggy, added context is crucial. Let’s go!
According to PitchBook’s report, some 3,987 venture capital rounds were closed in the United States during Q1 2021. Those deals were worth $69 billion, a figure up nearly 93% from 2020’s first-quarter results.
In broad strokes, the United States had a crushing venture capital start to the new year, pandemic be damned. That is especially true when we consider 2020’s full-year figures. Last year, venture capitalists deployed some $166 billion into U.S.-based startups across 12,546 rounds. In contrast, if the first quarter’s pace was maintained during the rest of 2021, the United States would see around 16,000 rounds worth around $280 billion.
Of course, we cannot see the future, so those projections are merely shared to underscore how active the first quarter proved to be; we’ll have to wait for at least another quarter’s data to confidently predict full-year records for 2021.
Powering the rapid start to the venture capital year was a holistic boom: Seed deal volume is forecasted to have set a multi-year high, perhaps matching the historically strong Q2 2018 period. Early-stage venture capital during Q1 2021 was also robust, with $14.5 billion deployed across 1,170 rounds. Both numbers set a pace for fresh records in 2021.
And then there was late-stage dealmaking, which soared in the first quarter. In 2020, late-stage venture capital deals were worth $111.4 billion raised from 3,504 rounds. In the first quarter of 2021, some $51.9 billion was invested into late-stage startups across 1,291 deals.
Valuations and round sizes continued to rise across the board. If there was a better time to raise a big whack of venture capital as a U.S.-based startup, we cannot recall it. And the data seems to scream that the good times are now as good, or gooder, than ever.
When Hampus Jakobsson, Heidi Lindvall, and Joel Larsson, all well-known players in the European venture ecosystem, began talking about their new firm Pale Blue Dot, they began by looking at the problems with venture capital.
For the three entrepreneurs and investors, whose resumes included co-founding companies and accelerators like The Astonishing Tribe (Jakobsson) and Fast Track Malmö (Lindvall and Larsson) and working as a venture partner at BlueYard Capital (Jakobsson again), the problems were clear.
Their first thesis was that all investment funds should be impact funds, and be taking into account ways to effect positive change; their second thesis was that since all funds should be impact funds, what would be their point of differentiation — that is, where could they provide the most impact.
The three young investors hit on climate change as the core mission and ran with it.
As it was closing on €53 million ($63.3 million) last year, the firm also made its first investments in Phytoform, a London headquartered company creating new crops using computational biology and synbio; Patch, a San Francisco-based carbon-offsetting platform that finances both traditional and frontier “carbon sequestration” methods; and 20tree.ai, an Amsterdam-based startup, using machine learning and satellite data to understand trees to lower the risk of forest fires and power outages.
Now they’ve raised another €34 million and seven more investments on their path to doing between 30 and 35 deals.
These investments primarily focus on Europe and include Veat, a European vegetarian prepared meal company; Madefrom, a still-in-stealth company angling to make everyday products more sustainable; HackYourCloset, a clothing rental company leveraging fast fashion to avoid landfilling clothes; Hier, a fresh food delivery service; Cirplus, a marketplace for recycled plastics trading; and Overstory, which aims to prevent wildfires by giving utilities a view into vegetation around their assets.
The team expects to be primarily focused on Europe, with a few opportunistic investments in the U.S., and intends to invest in companies that are looking to change systems rather than directly affect consumer behavior. For instance, a Pale Blue Dot investment likely wouldn’t include e-commerce filters for more sustainable shopping, but potentially could include investments in sustainable consumer products companies.
The size of the firm’s commitments will range up to €1 million and will look to commit to a lot of investments. That’s by design, said Jakobsson. “Climate is so many different fields that we didn’t want to do 50% of the fund in food or 50% of the fund in materials,” he said. Also, the founders know their skillsets, which are primarily helping early stage entrepreneurs scale and making the right connections to other investors that can add value.
“In every deal we’ve gotten in co-investors that add particular, amazing, value while we still try to be the shepherds and managers and sherpas,” Jakobsson said. “We’re the ones that are going to protect the founder from the hell-rain of investor opinions.”
Another point of differentiation for the firm are its limited partners. Jakobsson said they rejected capital from oil companies in favor of founders and investors from the tech community that could add value. These include Prima Materia, the investment vehicle for Spotify founder Daniel Ek; the founders of Supercell, Zendesk, TransferWise and DeliveryHero are also backing the firm. So too, is Albert Wenger, a managing partner at Union Square Ventures.
The goal, simply, is to be the best early stage climate fund in Europe.
“We want to be the European climate fund,” Lindvall said. “This is where we can make most of the difference.”
TechCrunch is embarking on a major new project to survey European founders and investors in cities outside the major European capitals.
Over the next few weeks, we will ask entrepreneurs in these cities to talk about their ecosystems, in their own words. For this survey we are interested in startup hubs in England and Wales. (Scotland will follow, and Northern Ireland is here).
So this is your chance to put your cities on the Techcrunch Map!
We’re like to hear from founders and investors. We are particularly interested in hearing from diverse founders and investors. These are our humble suggestions for the cities we’d most like to hear from:
Bristol & Bath
Reading and Thames valley
If you are a tech startup founder or investor in one of the above cities please fill out the survey form here.
The more founders/investors we hear from in a particular city, the more likely it is that city will be featured in TechCrunch.
This is the follow-up to the huge survey of investors (see also below) we’ve done over the last six or more months, largely in capital cities.
These formed part of a broader series of surveys we’re doing regularly for ExtraCrunch, our subscription service that unpacks key issues for startups and investors.
This time, we will be surveying founders and investors in Europe’s other cities to capture how European hubs are growing, from the perspective of the people on the ground.
We’d like to know how your city’s startup scene is evolving, how the tech sector is being impacted by COVID-19, and generally how your city will evolve.
We leave submissions mostly unedited and are generally looking for at least one or two paragraphs in answers to the questions.
So if you are a tech startup founder or investor in one of these cities please fill out our survey form here.
SpaceX is set to send a payload to the moon in 2023, using its larger (and infrequently used) Falcon Heavy launch vehicle. The mission will fly a lander built by space startup Astrobotic, which itself will be carrying NASA’s VIPER, or Volatiles Investigating Polar Exploration Rover (this is the agency that loves torturing language to come up with fun acronyms, after all).
The launch is currently set for later in the year, and this would be Falcon Heavy’s first moon mission if all goes to plan. It would not, however, be SpaceX’s first lunar outing, since the company has booked missions to launch lunar landers as early as 2022 on behalf of both Masten and Intuitive Machines. Those would both employ Falcon 9 rockets, however, at least according to current mission specs. Also, all of the above timelines so far exist only on paper, and in the business of space, delays and schedule shifts are far from unusual.
This mission is an important one for all involved, however, so they’re likely to prioritize its execution. For NASA, it’s a key mission in its longer-term goals for Artemis, the program through which it seeks to return humans to the moon, and eventually establish a more permanent scientific presence there both in orbit and on the surface. Part of establishing a surface station will rely on using in-situ resources, of which water would be a hugely important one.
Astrobotic won the contract to deliver VIPER on behalf of NASA last year. The mission profile includes landing the payload on the lunar South Pole, which is the intended target landing area for NASA’s Artemis missions involving human astronauts. The lander Astrobotic is sending for this task is its Griffin model, which is a larger craft vs. its Peregrine lander, giving it the extra space required to carry the VIPER, and making it necessary to use SpaceX’s heavier lift Falcon Heavy launch vehicle.
NASA’s ambitious target of landing astronauts back on the moon by 2024 is in flux as the new administration looks at timelines and budgets, but it still seems committed to making use of public-private partnerships to pave the way, whenever it does attain that goal. This first Griffin mission, along with an earlier planned Peregrine landing, are part of NASA’s Commercial Lunar Payload Services (CLPS) program, which sought private sector partners to build and deliver lunar landers with NASA as one customer.
HomeX, a home services platform for homeowners and service providers, has raised $90 million in a funding round led by New Mountain Capital.
New Mountain Capital, a New York-based investment firm with more than $30 billion in assets under management, was the only institutional investor to put money in this round alongside company executives. The company was bootstrapped until a 2019 $50 million-plus debt financing.
Founded in 2017, Chicago-based HomeX aims to “radically improve” home services by pairing service workers with homeowners, both virtually and in person. It also has built software, and offers services for, contractors that are aimed at helping them drive and manage demand “more efficiently.”
Notably, one of the company’s co-founders, CTO Simon Weaver, and several team members were on the development team of Evi, a startup that had built an AI program that can be communicated with using natural language via an app, that was acquired by Amazon in 2012. That technology was essentially the brain behind Amazon’s virtual assistant Alexa.
HomeX uses artificial intelligence to diagnose home issues virtually before a contractor even goes out to a home, with the goal of helping them resolve a problem faster (by having the necessary equipment ahead of time for example), which in turn makes customers happier.
“We’re using machine-generated content to create solutions that are specific to a homeowner’s issues,” said co-founder and president Victor Payen. “Using machines to understand symptoms, the questions to ask and to actually get to a diagnosis and a recommendation or resolution is where AI absolutely shines and allows us to do things that were not possible even three or five years ago.”
Co-founder and CEO Michael Werner worked in the $500 billion services industry for years (his family founded Werner Ladders) and recognized just how fragmented it was. He also acknowledges that, especially in certain markets, “there’s a terrible imbalance between very high demand and not enough contractors to do the work, or rather, a terrible labor shortage.”
HomeX Remote Assist in particular virtually connects homeowners (via phone, video or chat) with HomeX’s licensed technicians to diagnose and repair common home issues. That business unit has experienced more than 400% growth in less than a year, according to Werner. Last year, the company grew by “about 5x” the number of contractors on its platform. It declined to reveal revenue figures.
Image courtesy of HomeX
“For homeowners, we’re making home maintenance less complicated,” Werner said. “At the same time, we want to help the contractor succeed. Similar to how telemedicine has changed how medicine is delivered, HomeX Remote Assist is going to change the service experience for taking care of your home.”
Another area of HomeX’s business that is growing rapidly is its B2B offering. Home warranty and insurance companies see remote services “as very additive to make their business more efficient,” notes Payen.
“We are using some of our capital toward a pilot program and a number of business development opportunities there,” he said.
For now, while the company is not profitable overall, it is profitable in the services side of its business, according to Werner. It has 250 employees and is contracted with 750 service workers. Over the years, it has served “hundreds of thousands” of clients via its platform, defined by unique virtual and physical appointments.
New Mountain Capital Managing Director Harris Kealey said his firm viewed HomeX as a business that is primed to reshape the home and commercial services industry.
“The market is massive and the need for change and innovation is substantial,” he said in a written statement.
Another company in the space, Thumbtack, recently expanded into video home checkups. Thumbtack, a marketplace where you can hire local professionals for home improvement and other services such as repairs, in December acquired Setter, a startup which provided its customers with video home checkups conducted by experts, and then offered personalized plans for how to address any issues.
Thumbtack had laid off 250 employees at the end of March 2020, after the company saw big declines in its major markets. Since then, however, CEO Marco Zappacosta told TechCrunch there’s been “a renewed focus on the home and an acceleration of digital adoption.”
Over the last few days, we’ve published several articles recapping panels from last week’s TechCrunch Early Stage virtual conference.
Each story is based on an interview with a founder or investor who addressed some of the most common startup dilemmas. Predictably, they’re mostly focused on the how and why:
TechCrunch reporter Natasha Mascarenhas interviewed Kleiner Perkins partner Bucky Moore to get sector-agnostic advice for founders who are ready to raise a Series A.
Their conversation isn’t a rehash of basic best practices — Moore says the pandemic has fundamentally changed the way he does business: “I actually believe that first meetings over Zoom are here to stay; I think it’s far more efficient.”
I’m looking forward to the eventual return of live TechCrunch events, but each Early Stage recap includes video and a complete transcript. As ever, full articles are available for Extra Crunch members.
Thanks very much for reading — I hope you have a fantastic weekend.
Senior Editor, TechCrunch
Full Extra Crunch articles are only available to members
Use discount code ECFriday to save 20% off a one- or two-year subscription
Image Credits: Nigel Sussman
Have you ever bought a pig in a poke?
It’s a saying from medieval times: A farmer traveling on an unfamiliar road agrees to buy a baby pig in a bag from a passing stranger. Unfortunately, when the farmer gets back to their hut and opens the sack, there’s a kitten inside.
The risk of getting stuck with a counterfeit item when buying online is real, especially when it comes to sneakers, jewelry and other designer products. That’s why online marketplace StockX created a rigorous product verification and authentication process.
To date, its users have conducted more than 10 million transactions for sneakers, handbags, streetwear, watches and other high-end items that are often produced in limited quantities.
StockX’s prices are regulated and all transactional data is transparent, factors that have combined to help the platform reach a $2.8 billion valuation.
In a four-part series that dropped this week, Extra Crunch analyzes this “foundational new category of market” that began as a hobbyist’s sneaker price chart.
Image Credits: Nigel Sussman (opens in a new window)
Yes, the baseball card company is going public in a debut that could easily be read as a way to put money into the NFT craze without actually having to buy cryptocurrencies.
Image Credits: Nigel Sussman (opens in a new window)
It appears that the slowdown in tech debuts is not a complete freeze; despite concerning news regarding the IPO pipeline, some deals are chugging ahead.
Alkami Technology joins a list that includes Coinbase’s impending direct listing and Robinhood’s expected IPO.
Texas-based Alkami Technology is a software company that delivers its product to banks via the cloud, so it’s not a legacy player scraping together an IPO during boom times.
Let’s dig into the latest SEC filing from the software unicorn.
Image Credits: TechCrunch
Last year could well have been the dawn of alternative protein in China. More than 10 startups raised capital to make plant-based protein for a country with increasing meat demand. Of these, Starfield, Hey Maet, Vesta and Haofood have been around for about a year; ZhenMeat was founded three years ago; and Green Monday is a nine-year-old Hong Kong firm pushing into mainland China.
The competition intensified further last year when American incumbents Beyond Meat and Eat Just entered China.
Although some investors worry the sudden boom of meat-substitute startups could turn into a bubble, others believe the market is far from saturated.
Image Credits: Joan Cros/NurPhoto/Getty Images
For those who follow the space, LG will be remembered fondly as a smartphone trailblazer. For well over a decade, the company was a major player in the Android category and a driving force behind a number of innovations that have since become standard.
LG continued pushing envelopes — albeit to mixed effect. But in the end, the company just couldn’t keep up.
This week, the South Korean electronics giant announced it will be getting out of the “incredibly competitive” category, choosing instead to focus on its myriad other departments.
Image Credits: Getty Images
Electric cars and trucks seem to have everything going for them: They don’t produce tailpipe emissions, they’re quieter than their fossil-fuel-powered counterparts and the underlying architecture allows for roomier and often sleeker designs.
But the humble lithium-ion battery powering these cars and trucks leads a difficult life. Irregular charging and discharge rates, intense temperatures and many partial charge cycles cause these batteries to degrade in the first five to eight years of use, and, eventually, they end up in a recycling facility.
Instead of sending batteries straight to recycling for raw material recovery — and leaving unrealized value on the table — startups and automakers are finding ways to reuse batteries as part of a small and growing market.
Image Credits: Meg Messina
Fuel Capital General Partner Leah Solivan joined us at TechCrunch Early Stage 2021 to explain how to avoid early mistakes in building your startup.
Solivan has ample experience on both sides of the fence, as she founded TaskRabbit and led it to exit through an acquisition by Ikea in 2017. She shared a list of 10 things to avoid in total, but here are some highlights of what to watch out for.
Image Credits: miodrag ignjatovic / Getty Images
Eghosa Omoigui, the founder and managing general partner of EchoVC Partners, has helped entrepreneurs navigate the first steps of starting a company and laying the right foundation early on.
Omoigui advocates for founders to develop their own All-22 tape — a tool used by professional football coaches that allows the viewer to see all 22 players on the field at the same time. It improves a coach’s line of sight, and, most importantly, helps avoid missing a critical motion or player.
The concept of this tool can — and should — be applied in the startup world as well, Omoigui said during the virtual TC Early Stage event. He explained what it means to have an All-22 tape and the steps founders should take to develop a skill set that will allow them to see and understand the playbook from all sides.
Image Credits: Zoom Video Communications, Inc.
This year at Early Stage, TechCrunch spoke with Zoom Chief Revenue Officer Ryan Azus about building an early-stage sales team.
Azus is perhaps best known for leading the video-calling giant’s income arm during COVID-19, but his experience building RingCentral’s North American sales organization from the ground up made him the perfect guest to chat with about building an early-stage sales team.
We asked him about when founders should step aside from leading their startup’s sales org, how to build a working sales culture, hiring diversely, how to pick customer segments and how to build a playbook.
Image Credits: Bryce Durbin / TechCrunch
Katie Moussouris has been in cybersecurity circles since some of the world’s biggest tech companies were startups, and helped to set up the first vulnerability disclosure and bug bounty programs.
Moussouris, who runs consultancy firm Luta Security, now advises companies and governments on how to talk to hackers and what they need to do to build and improve their vulnerability disclosure programs.
At TC Early Stage, Moussouris explained what startups should (and shouldn’t) do, and what priorities should come first.
Join us on our next (virtual) field trip to Southeast Michigan. All lights will be shining on the Motor City.
Why Detroit? This is where StockX and Rivian call home, along with a growing stable of medical technology companies, fintech startups and security companies. The area is quickly transforming thanks to active investors, low cost of living and access to amazing universities that have a long history of supporting entrepreneurs.
If you’re interested in what’s happening in Detroit in general, are seeking out a new up-and-coming city to live in, or looking for cool companies and talented founders to invest in, then you’ll want to register and drop Thursday, April 15, on your calendar.
Image Credits: Techstars
Should you try to get your company into an accelerator? How far along should your idea and your team be before applying? When it is time to apply, how do you make your application stand out from hundreds or thousands of others? How fancy do you need to get with the application video?
For answers, we spoke with Neal Sáles-Griffin, managing director of Techstars Chicago and an adjunct professor at Northwestern University. He’s got an incredible wealth of knowledge about all things startups.
Image Credits: Fenwick
Fenwick & West partner (and business lawyer) Dawn Belt joined us at TechCrunch Early Stage to break down some of the terms that trip up first-time entrepreneurs.
Belt has been involved in a number of key Silicon Valley moves, including EV company Proterra’s recent decision to go public via SPAC, as well as IPOs for Bill.com and Facebook. Here, she discusses key concepts like equity and the right of first refusal, and the role they play in the early stages of startup funding.
Image Credits: Calendly / OpenView
Product-led growth is all the rage in the Valley these days, and we had two leading thinkers discuss how to incorporate it into a startup at TechCrunch Early Stage 2021.
Tope Awotona is the CEO and founder of Calendly, which bootstrapped for much of its existence before raising $350 million at a $3 billion valuation from OpenView and Iconiq. And on the other side of that table (and this interview) sat Blake Bartlett, a partner at OpenView who has been leading enterprise deals based around the principles of efficient growth.
The two talked about bootstrapping and product-led growth, expanding internationally, when to bootstrap and when to fundraise, and how VCs approach a profitable company (carefully, and with a big stick). Oh, and how to spend $350 million.
Image Credits: MaC Venture Capital
Being a successful early-stage investor is about a lot more than simply identifying trends; a successful VC needs to think several steps ahead. For MaC Venture Capital founder Marlon Nichols, it’s an ability that’s helped him spot big names like Gimlet Media, MongoDB, Thrive Market, PlayVS, Fair, LISNR, Mayvenn, Blavity and Wonderschool early on.
Nichols joined us on TechCrunch Early Stage to discuss his strategies for early-stage investing and how those lessons can translate into a successful launch for budding entrepreneurs.
Image Credits: Generation Investment Management
Viewed from the outside, board selection and corporate governance can seem like a bit of a black box — particularly at a startup.
Generation Investment Management partner Dave Easton spoke at TechCrunch Early Stage about how to build a board as a founder, and, specifically, how to build a board you can live with. Easton’s experience serving on boards as both a full member and as an observer helped peel back the curtain on the murky topic of good governance.
Image Credits: Ureeka
Zoom-based pitch meetings became standard during the pandemic, but many investors say they intend to maintain the practice as more people are vaccinated.
In conversation with Jordan Crook, founder, investor, and business school professor Melissa Bradley offered pointers for how founders can prepare for Zoom calls, common pitfalls to avoid, and how to allocate time during the meeting.
Open-source software gave birth to a slew of useful software in recent years. Many of the great technologies that we use today were born out of open-source development: Android, Firefox, VLC media player, MongoDB, Linux, Docker and Python, just to name a few, with many of these also developing into very successful for-profit companies.
While there are some dedicated open-source investors such as the Apache Software Foundation incubator and OSS Capital, the majority of open-source companies will raise from traditional venture capital firms.
Our team has raised from traditional venture capital firms like Speedinvest, open-source-specific firms like OSS, and even from more hybrid firms like OpenOcean, which was created by the founders and senior leadership teams at MariaDB and MySQL. These companies understandably have a significant but not exclusive open-source focus.
Our area of innovation is an open-source AutoML server that reduces model training complexity and brings machine learning to the source of the data. Ultimately, we feel democratizing machine learning has the potential to truly transform the modern business world. As such, we successfully raised $5 million in seed funding to help bring our vision to the current marketplace.
Here, we aim to provide insights and advice for open-source startups that hope to follow a similar path for securing funding, and also detail some of the important risks your team needs to consider when crafting a business model to attract investment.
Obviously, venture capitalists find many open-source software initiatives to be worthy investments. However, they need to understand any inherent risks involved when successfully commercializing an innovative idea. Finding low-risk investments that lead to lucrative business opportunities remains an important goal for these firms.
In our experience, we found these risks fall into three major categories: market risk, execution risk, and founders’ risk. Explaining all three to potential investors in a concise manner helps dispel their fears. In the end, low-risk, high-reward scenarios obviously attract tangible interest from sources of venture capital.
Ultimately, investment companies want startups to generate enough revenue to reach a valuation exceeding $1 billion. While that number is likely to increase over time, it remains a good starting point for initial funding discussions with investors. Annual revenue of $100 million serves as a good benchmark for achieving that valuation level.
Market risks for open-source organizations tend to be different when compared to traditional businesses seeking funding. Notably, investors in these traditional startups are taking a larger leap of faith.
When Box announced it was getting a $500 million investment from private equity firm KKR this morning, it was hard not to see it as a positive move for the company. It has been operating under the shadow of Starboard Value, and this influx of cash could give it a way forward independent of the activist investors.
Industry experts we spoke to were all optimistic about the deal, seeing it as a way for the company to regain control, while giving it a bushel of cash to make some moves. However, early returns from the stock market were not as upbeat as the stock price was plunging this morning.
Alan Pelz-Sharpe, principal analyst at Deep Analysis, a firm that follows the content management market closely, says that it’s a significant move for Box and opens up a path to expanding through acquisition.
“The KKR move is probably the most important strategic move Box has made since it IPO’d. KKR doesn’t just bring a lot of money to the deal, it gives Box the ability to shake off some naysayers and invest in further acquisitions,” Pelz-Sharpe told me, adding “Box is no longer a startup its a rapidly maturing company and organic growth will only take you so far. Inorganic growth is what will take Box to the next level.”
Dion Hinchcliffe, an analyst at Constellation Research, who covers the work from home trend and the digital workplace, sees it similarly, saying the investment allows the company to focus longer term again.
“Box very much needs to expand in new markets beyond its increasingly commoditized core business. The KKR investment will give them the opportunity to realize loftier ambitions long term so they can turn their established market presence into a growth story,” he said.
Pelz-Sharpe says that it also changes the power dynamic after a couple of years of having Starboard pushing the direction of the company.
“In short, as a public company there are investors who want a quick flip and others that want to grow this company substantially before an exit. This move with KKR potentially changes the dynamic at Box and may well put Aaron Levie back in the driver’s seat.”
Josh Stein, a partner at DFJ and early investor in Box, who was a long time board member, says that it shows that Box is moving in the right direction.
“I think it makes a ton of sense. Management has done a great job growing the business and taking it to profitability. With KKR’s new investment, you have two of the top technology investors in the world putting significant capital into going long on Box,” Stein said.
Perhaps Stein’s optimism is warranted. In its most recent earnings report from last month, the company announced revenue of $198.9 million, up 8% year-over-year with FY2021 revenue closing at $771 million up 11%. What’s more, the company is cash-flow positive, and has predicted an optimistic future outlook.
“As previously announced, Box is committed to achieving a revenue growth rate between 12-16%, with operating margins of between 23-27%, by fiscal 2024,” the company reiterated in a statement this morning.
Investors remains skeptical, however, with the company stock price getting hammered this morning. As of publication the share price was down over 9%. At this point, market investors may be waiting for the next earnings report to see if the company is headed in the right direction. For now, the $500 million certainly gives the company options, regardless of what Wall Street thinks in the short term.
Box announced this morning that private equity firm KKR is investing $500 million in the company, a move that could help the struggling cloud content management vendor get out from under pressure from activist investor Starboard Value.
The company plans to use the proceeds in what’s called a “dutch auction” style sale to buy back shares from certain investors for the price determined by the auction, an activity that should take place after the company announces its next earnings report in May. This would presumably involve buying out Starboard, which took a 7.5% stake in the company in 2019.
Last month Reuters reported that Starboard could be looking to take over a majority of the board seats when the company board meets in June. That could have set them up to take some action, most likely forcing a sale.
While it’s not clear what will happen now, it seems likely that with this cash, they will be able to stave off action from Starboard, and with KKR in the picture be able to take a longer term view. Box CEO Aaron Levie sees the move as a vote of confidence from KKR in Box’s approach.
“KKR is one of the world’s leading technology investors with a deep understanding of our market and a proven track record of partnering successfully with companies to create value and drive growth. With their support, we will be even better positioned to build on Box’s leadership in cloud content management as we continue to deliver value for our customers around the world,” Levie said in a statement.
Under the terms of the deal, John Park, Head of Americas Technology Private Equity at KKR, will be joining the Box board of directors. The company also announced that independent board member Bethany Mayer will be appointed chairman of the board, effective on May 1st.
Earlier this year, the company bought e-signature startup SignRequest, which could help open up a new set of workflows for the company as it tries to expand its market. With KKR’s backing, it’s not unreasonable to expect that Box, which is cash flow positive, could be taking additional steps to expand the platform in the future.
Box stock was down over 8% premarket, a signal that perhaps Wall Street isn’t thrilled with the announcement, but the cash influx should give Box some breathing room to reset and push forward.
KKR has just closed $15 billion for its Asia-focused private equity fund, exceeding its original target size after receiving “strong support” from new and existing global investors, including those in the Asia Pacific region.
The new close came nearly four years after KKR raised its Asian Fund III of $9.3 billion and marks the New York-based alternative asset management titan’s ongoing interest in Asia. It also makes KKR Asian Fund IV one of the largest private equity funds dedicated to the Asia Pacific region.
KKR itself will inject about $1.3 billion into Fund IV alongside investors through the firm and its employees’ commitments. The new fund will be on the lookout for opportunities in consumption and urbanization trends, as well as corporate carve-outs, spin-offs, and consolidation.
KKR has been a prolific investor in Asia-Pacific since it entered the region 16 years ago with a multifaceted approach that spans private equity, infrastructure, real estate and credit. It currently has $30 billion in assets under management in the region.
The firm has been active during COVID-19 as well. On the one hand, the pandemic has accelerated the transition to online activities and singled out tech firms that proved resilient during the health crisis. Market disruption in the last year has also made valuations more attractive and pressured companies to seek new sources of capital. All in all, these forces provide “increasingly interesting opportunities for flexible capital providers like KKR,” the firm’s spokesperson Anita Davis told TechCrunch.
Since the pandemic, KKR has deployed about $7 billion across multiple strategies in Asia.
While KKR looks for deals across Asia, each market provides different opportunities pertaining to the state of its economy. For deals in consumption upgrades, KKR seeks out companies in emerging markets like China, Southeast Asia and India, said Davis. In developed countries like Japan, Korea and Australia, KKR observed that continued governance reform, along with a focus on return on equity (ROE), has driven carve-outs from conglomerates and spin-offs from multinational corporations, Davis added.
Specifically, KKR’s private equity portfolio in Asia consists of about 60 companies across 11 countries. Some of its more notable deals include co-leading ByteDance’s $3 billion raise in 2018 amid the TikTok parent’s rapid growth and bankrolling Reliance Jio with $1.5 billion in 2020.
“The opportunity for private equity investment across Asia-Pacific is phenomenal,” said Hiro Hirano, co-head of Asia Pacific Private Equity at KKR. “While each market is unique, the long-term fundamentals underpinning the region’s growth are consistent — the demand for consumption upgrades, a fast-growing middle class, rising urbanization, and technological disruption.”
The Asian Fund IV followed in the footsteps of KKR’s two other Asia-focused funds that closed in January, the $3.9 billion Asia Pacific Infrastructure Investors Fund and the $1.7 billion Asia Real Estate Partners Fund.
Venture capital has a diversity problem: Data show that Black and Latinx founders received just 2.6% of overall funding in 2020. Women-founded teams received nearly 30% less funding in 2020 than they did in 2019.
For decades, a close-knit community of brilliant but like-minded individuals built a system of pattern recognition. It produced high-growth companies with homogenous leadership teams. They called it meritocracy. Those of us who didn’t fit the profile were told, or were left to assume, that we didn’t have what it takes.
When a founder needs funding but investors don’t think they “have what it takes,” it can quickly become a self-fulfilling prophecy. No matter how good you are and how much product-market fit you achieve, at some point “what it takes” to scale a company is money.
Until recently, the lack of diversity in the ecosystem was largely an issue to those of us directly affected by it. It wasn’t until the groundbreaking #metoo and #BlackLivesMatter movements that the lack of funding for women and minorities became both evident — and evidently problematic — to the rest of the world.
I believe that underrepresented founders are the most undervalued asset class in the U.S. today, and investors are starting to realize that diversity is not charity — it’s economic opportunity.
Just look at the data on women-founded startups, which deliver 63% higher ROI (according to First Round Capital), generate twice as much revenue for every dollar invested (according to BCG), and take one full year less time to exit (according to PitchBook & AllRaise). Founders that have it harder, but persevere, lead to stronger companies with outsized results for their investors.
The good news is that recent events jolted many into action. A flurry of pledges, micro-funds and quick investments in support of Black founders arrived in the wake of George Floyd’s murder last summer. Overnight, these founders were heavily courted for meetings and speaking opportunities from people and firms they didn’t have access to in the past. Some secured investments and built new relationships that will help down the line. For many, the timing was off, and they didn’t benefit materially. In the end, the frenzy quieted down, and only 3% of 2020 VC deal volume went to Black-founded companies.
Ashlee Wisdom, the co-founder and CEO of digital health platform Health in Her HUE, experienced this firsthand.
“Last summer I was overwhelmed with inbounds from investors, which felt great at first,” she said. “But I was new to venture; I didn’t know how to build a strategy around fundraising, and most of those investors were looking for companies at a later stage than mine. No one I spoke to during that time seemed to be willing to invest in my pre-seed round despite our demonstrated traction. On the positive side, I met a lot of great investors who made meaningful introductions to pre-seed and early-stage funds. And some of those later-stage investors are now watching Health In Her HUE’s progress.”
It’s too soon to tell how sustainable the progress made last year will be. But we do have evidence from prior times that small, cosmetic efforts at diversity do not result in lasting change. Just take a look at what’s happened to VC funding for women recently.
In the aftermath of #metoo, investors and corporations were also spurred to act, with some success. For a while, VC investments in women-founded companies increased slowly but steadily. But once COVID hit, and investors retreated to their closest and most trusted referral networks, VC funding for women took a huge step backward. Crunchbase data show more than 800 female-founded startups globally received a total of $4.9 billion in venture funding in 2020, through mid-December, representing a 27% decrease over the same period the prior year.
The lesson is this: Efforts at the periphery of venture capital do not make a difference in the long run. The good news is many have started taking action. To achieve systemic, long-term improvements, VC firms will need to make changes to their core system, building diversity into the primary investing process itself. Results will not be visible immediately, but they will be far more sustainable and, as the data suggest, more profitable over the lifetime of these funds. Here are three specific actions VC firms can take to achieve this:
A recent PitchBook report notes that female investors are twice as likely to invest in companies with female founders and three times as likely in companies with female CEOs. And yet fewer than 10% of all VC partners are women. According to BLCK VC, more than 80% of venture firms don’t have a single Black investor on their team. That makes it less surprising that only 1 percent of venture-funded startup founders are Black.
When you hire from the same communities you want to invest in, and ensure your new hires are set up for success, you unlock dealflow, relationships, and insights into new markets and customer sets. This results in a more diverse portfolio and a stronger investment team, one that serves its entire portfolio of companies better.
Inputs lead to outputs. VC firms should do everything they can to foster stronger relationships with underrepresented founder communities to enable more diversity at the top of the deal flow funnel.
Partner, sponsor and invest in organizations like Female Founders Alliance, SoGal Foundation, Black Women Talk Tech and more. Go out of your way to attend events, ask for introductions, schedule casual coffee meetings and meet as many founders in those networks as you can — and foster those relationships meaningfully over time. This is how you seed decades of great dealflow.
There are hundreds of new funds, many of them with less than $50 million in assets under management, with direct access to pockets of talent that you are not currently seeing. These general partners have trusting, authentic relationships with founders who might be wary of mainstream VC. If you are a larger VC fund, you should be actively investing in them. Emerging managers can act as your scouts, and, in return, you will help build the ecosystem itself.
I believe that the lack of diversity in venture capital is a once-in-a-generation opportunity for those willing to make the earliest bets. If we invest in women at the same rate that we invest in men, this could boost the global economy by up to $5 trillion. That is a huge amount of return up for grabs. A homogenous portfolio misses that opportunity.
Most investors I know are aware of the opportunity and genuinely want to do better. The more urgency they feel, the more likely they are to spin up independent initiatives to address inequities directly. While these can be helpful, they’re also not sustainable. The best way to build a sustainably diverse portfolio is to do the slow, hard work of change from the inside out.
Mexico has been known as an up-and-coming tech hub and a gateway to the Latin American market. As an investor focused on developer-centered products, open-source startups and infrastructure technology companies with a particular interest in emerging market innovation, I have been wanting to do some firsthand learning there.
So, despite the ongoing pandemic, I took all the necessary precautions and spent roughly seven weeks in Mexico from January to March. I spent most of my time meeting founders to get a handle on what they are building, why they are pursuing those ideas, and how the entire ecosystem is evolving to support their ambitions.
Knowledge transfer is not the only trend flowing in the U.S.-Asia-LatAm nexus. Competition is afoot as well.
One fascinating, though not surprising, observation was how much LatAm entrepreneurs look to Asian tech giants for product inspiration and growth strategies. Companies like Tencent, DiDi and Grab are household names among founders. This makes sense because the market conditions in Mexico and other parts of LatAm resemble China, India and Southeast Asia more than the U.S.
What often happens is entrepreneurs first look to successful startups in the U.S. to emulate and localize. As they find product-market fit, they start to look to Asian tech companies for inspiration while morphing them to suit local needs.
One good example is Rappi, an app that started out as a grocery delivery service. Its future ambition is squarely to become the superapp of LatAm: It is expanding aggressively both geographically and productwise into delivery for restaurant orders, pharmacy and even COVID tests. It’s also introducing new payment, banking and financial-service products. Rappi Pay launched in Mexico just a few weeks ago, while I was still in the country.
Rappi now looks more like Meituan and Grab than any of its U.S. counterparts, and that’s not an accident. SoftBank, whose portfolio contains many of these Asian tech giants, invested heavily in Rappi’s previous two rounds and now has a $5 billion fund dedicated to the LatAm region. The knowledge and experience accumulated from Asian tech in the last 10 years is transferring to like-minded firms like Rappi, right under Silicon Valley’s proverbial nose.
Knowledge transfer is not the only trend flowing in the U.S.-Asia-LatAm nexus. Competition is afoot as well.
Because of similar market conditions, Asian tech giants are directly expanding into Mexico and other LatAm countries. The one I witnessed up close during my visit was DiDi.
DiDi’s foray into LatAm started in January 2018 with its acquisition of 99, a Brazilian ride-sharing company. In April 2018, DiDi entered Mexico with its bread-and-butter ride-sharing service. It wasn’t until April 2019 that DiDi launched its food delivery service, DiDi Food, in Monterrey and Guadalajara — two of the largest cities in Mexico. Its expansion hasn’t slowed down since, with a 10% extra earnings incentive to lure delivery drivers.
Image Credits: Kevin Xu
My Airbnb in Mexico City happened to be two blocks away from the large WeWork building where DiDi’s local office was located. Every day, I saw a long line of people responding to the earning incentives — waiting outside to get hired as DiDi delivery workers.
Meanwhile, the Uber office that’s literally one block away had hardly any foot traffic. As Uber and Rappi fight for more wealthy consumers, DiDi is working to attract lower-income users to grab market share, hoping that one day some of these people will reach the middle class and become profitable customers.
It seems safe to say that our honeymoon with Big Tech is officially over.
After years of questionable data-handling procedures, arbitrary content management policies and outright anti-competitive practices, it is only fair that we take a moment to rethink our relationship with the industry.
Sadly, most of the ideas that have gathered mainstream attention — such as the calls to break up Big Tech — have been knee-jerk responses that smack more of retributionist fantasies than sound economic thinking.
Instead of chasing sensationalist non-starters and zero-sum solutions, we should be focused on ensuring that big tech grows better as it grows bigger by establishing a level playing field for startups’ and competitors’ proprietary digital markets.
We can find inspiration on how to do just that by taking a look at how 20th-century lawmakers reined in the railroad monopolies, which similarly turned from darlings of industry to destructive forces of stagnation.
More than a century ago, a familiar story of a nation coming to terms with the unanticipated effects of technological disruption was unfolding across a rapidly industrializing United States.
While the first full-scale steam locomotive debuted in 1804, it took until 1868 for more powerful and cargo-friendly American-style locomotives to be introduced.
The more efficient and cargo-friendly locomotives caught on like wildfire, and soon steel and iron pierced through mountains and leaped over gushing rivers to connect Americans from coast to coast.
Soon, railroad mileage tripled and a whopping 77% of all intercity traffic and 98% of passenger business would be running on rails, ushering in an era of cost-efficient transcontinental travel that would recast the economic fortunes of the entire country.
As is often the case with disruptive technologies, early success would come with a heavy human cost.
From the very beginning, abuse and exploitation ran rampant in the railroad industry, with up to 3% of the labor force suffering injuries or dying during the course of an average year.
Railroad trust owners soon became key constituents of the widely maligned group of businessmen colloquially known as robber barons, whose corporations devoured everything in their path and made life difficult for competitors and new entrants in particular.
The railroad proprietors achieved this by maintaining carefully constructed walled gardens, allowing them to run competitors into the ground by means of extortion, exclusion and everything in between.
While these methods proved wildly successful for railroad owners, the rest of society languished under stifled competition and an utter lack of concern for consumers’ interests.
Learning from past experiences certainly doesn’t seem to be humankind’s strong suit.
In fact, most of our concerns with the tech industry are mirror images of the objections 20th-century Americans had against the railroad trusts.
Similar to the robber barons, Alphabet, Amazon, Apple, Facebook, Twitter, et al., have come to dominate the major thoroughfares of trade in a fashion that leaves little space for competitors and startups.
By instating double-digit platform fees, establishing strict limitations on payment processing protocols, and jealously hoarding proprietary data and APIs, Big Tech has erected artificial barriers to entry that make replicating their success all but impossible.
Over the past years, tech giants have also taken to cannibalizing third-party solutions by providing private-label versions — à la AmazonBasics — to the point where Big Tech’s clients are finding themselves undercut and outplayed by the platform-holders themselves.
Given the above, it is not surprising that the pace at which tech startups are created in the US has been declining for years.
In fact, VC veterans such as Albert Wenger have called attention to the “kill zone” around Big Tech for years, and if we are to reinvigorate the competitive fringe around our large tech conglomerates, something has to be done fast.
The 20th-century playbook for taming monopolistic railroad trusts offers several helpful lessons for dealing with Big Tech.
For first steps, Congress created the Interstate Commerce Commission (ICC) in 1887 and tasked it with administering reasonable and just rates for access to proprietary railroad networks.
Due to partisan politicking, the ICC proved relatively toothless, however. It wasn’t until Congress passed the 1906 Hepburn Act, which separated the function of transportation from the ownership of the goods being shipped, that we started seeing true progress.
By disallowing self-dealing and double-dipping in proprietary platforms, Congress succeeded in opening up access on equal terms both to existing competitors and startups alike, making a once-unnavigable thicket of exploitative practices into the metallic backbone of American prosperity that we know today.
This could never have been achieved by simply breaking the railroad trusts into smaller pieces.
In fact, when it comes to platforms and networks, bigger often is better for everyone involved thanks to network effects and several other factors that conspire against smaller platforms.
Most importantly, when access and interoperability rules are done right, bigger platforms can sustain wider and wider constellations of startups and third parties, helping us grow our economic pie instead of shrinking it.
In our post-pandemic economy, our attention should be in helping tech platforms grow better as they grow bigger instead of cutting them down to size.
Ensuring that startups and competitors can access these platforms on equitable terms and at fair prices is a necessary first step.
There are numerous other tangible actions policymakers can take today. For example, rewriting the rules on data portability, pushing for wider standardization and interoperability across platforms, and reintroducing net neutrality would go a long way in addressing what ails the industry today.
In the end, all of us would stand to benefit from a robust fringe of startups and competitors that thrive on the shoulders of giants and the platforms they have made.
Kaya VC’s new €72 million ($80m) fund will focus on startups in Prague, Warsaw and the wider CEE region. Previously called Enern, the Central and Eastern European VC — which, historically, started out investing in wind-farms and ended up invested in software — has changed its name to better reflect its modern focus. The firm will also back startups “at any stage” of funding. LPs in the fund include the EIF and a number of successful entrepreneurs from the region.
This is the team’s fourth fund, and together with the previous funds, the AUM is around €250m. The fund has invested in 27 companies with the latest investments into B2B marketplaces, healthtech and blockchain.
The decade-old Prague-based VC (“KAYA” will be the official naming format) has previously invested in Booksy (raised $70 million in January 2021), Twisto (€16 million this year), DocPlanner (€80m in 2019), and Rohlik ($230m this year). Kaya previously participated in liquidity events for Skype, Wise (formerly TransferWise) and Bolt, UiPath which recently raised $750 million at a $35 billion valuation ahead of an IPO.
Kaya says it will be sector agnostic, with partners following some personal passions: Tomas Obrtac on agri-tech; Pavel Mucha on next-generation consumer experiences; Tomas Pacinda on fintech, and Martin Rajcan focuses on energy transition. All other areas of tech will be looked at. Similar to funds such as Point Nine in Berlin, Kaya says it is an ‘equal partnership’ meaning each partner can make decisions on what to back.
The firm plans to be able to write the first cheque and is also backing super-early ‘studio projects’ which have gone on to raise subsequent funding rounds.
Pavel Mucha, partner at Kaya VC, commented in a statement: “When I initially started investing in local startups in Prague and Warsaw, it was because there was a need to work with people to build something valuable that didn’t exist already. Over the past 10 years, we’ve seen this sector grow and mature, and with that our strategy of backing intrepid founders who are making a difference from Booksy’s Stefan Batory to Rohlik’s Tomáš Čupr.”
Kaya is also part of the Included VC, network, a mentor network for underrepresented groups such as women and people of color. Mucha told me: “We’ve hired through their program, been closely involved and big supporters. We think it’s a great addition to the ecosystem within Europe, and hope to do more. It’s definitely a very meaningful initiative we stand fully behind.”
Martin Rajcan, partner at Kaya VC, added: “Founders coming out of Central and Eastern Europe are globally-orientated, have strong technical skills, and an unmatched hunger for success. It’s these strong fundamentals paired with a next-level intensity that makes them so exciting to work with and we want to support such talent in any way we can. With partners, venture partners, advisors, and scouts across Europe, we’re in a unique position to support founders in the diaspora outside of core cities such as Prague and Warsaw.”
In Turkish the word Kaya means ‘rock’, in Japanese, it’s ‘sanctuary’. Whatever the case, Kaya is in a good position to take advantage of the burgeoning startups in the CEE region. According to Dealroom there has been 5x more foreign investment in the CEE region than in 2015.
Michael Cohn became a celebrity in the Atlanta startup ecosystem when the company he co-founded was sold to Accenture in a deal valued somewhere between $350 million and $400 million nearly six years ago.
That same year, Sean O’Brien also made waves in the community when he helped shepherd the sale of the collaboration software vendor, PGi, to a private equity firm for $1.5 billion.
The two men are now looking to become fixtures in the city’s burgeoning new tech community with the close of their seed-stage venture capital firm’s first fund, a $27.4 million investment vehicle.
Overline’s first fund has already made commitments to companies that are expanding the parameters of what’s investible in the Southeast broadly and Atlanta’s startup scene locally.
These are companies like Grubbly Farms, which sells insect-based chicken feed for backyard farmers, or Kayhan Space, which is aiming to be the air traffic control service for the space industry. Others, like Padsplit, an Atlanta-based flexible housing marketplace, are tackling America’s low income housing crisis.
“Our business model is very different from that of a traditional software startup, and the Overline team’s unique strengths and operator mindset have been invaluable in helping us grow the company,” said Sean Warner, CEO and co-founder of Grubbly Farms.
That’s on top of investments into companies building on Atlanta’s natural strengths as a financial services, payments and business software powerhouse.
For all of the activity in Atlanta these days, the city and the broader southeastern region is still massively underfunded, according to O’brien and Cohn. The region only received less than 10 percent of all the institutional venture investments that were committed in 2020. Indeed, only seven percent of Atlanta founders raise money locally when they’re first starting out, an Overline survey suggested.
“The data reflects what we have seen throughout our careers building, growing, and investing in startups. There is no shortage of phenomenal founders and businesses coming out of Atlanta and the Southeast, but they often struggle to find institutional capital at their earliest stages,” said O’Brien, in a statement. “Overline will lead as the first institutional check for these companies and be a true partner to the Founders throughout their lifecycle—supporting them on the strategic and operational business initiatives and decisions that are critical to a company’s success.”
The limited partners in Overline’s first fund also reflects the firm’s emphasis on regional roots. The privately held email marketing behemoth Mailchimp anchored the fund, which also included partners like Cox Enterprises, Social Leverage,
Overline is supported by a bench of impressive partners that reflects the firm’s roots in the Southeast. Anchored by marketing platform, Mailchimp, additional partners include Cox Enterprises, Scottsdale, Ariz.-based Social Leverage, Wilmington, Del.-based Hallett Capital, and Atlanta Tech Village founder David Cummings, along with Techstars co-founder David Cohen.
“At Mailchimp, we love our hometown of Atlanta, and are proud of the robust startup ecosystem that’s growing in our city. The Overline founding team’s vision of deploying smart, local capital into startups in Atlanta and the Southeast aligns with our goals of promoting and advancing local innovation,” said Rick Lynch, CFO, Mailchimp, in a statement.
The firm expects to make investments of between $250,000 to $1.5 million into seed stage companies and has already backed 11 companies including, Relay Payments, a logistics fintech company that has raised over $40 million from top-tier investors.
“When we set out to build Atlanta Tech Village almost a decade ago, one of our primary goals was to help Atlanta develop into a top 10 startup city, where all entrepreneurs would thrive. We’re making tremendous strides as a community, as evidenced by the number of newly minted unicorns,” said serial entrepreneur and Atlanta Tech Village founder David Cummings. “I believe in Overline’s thesis that value-add institutional early-stage capital is critical to the ecosystem’s continued development. Since the early days, Michael and Sean have been an active presence in our community in a way that goes far beyond being a source of capital—as mentors, advisors, and champions of Atlanta founders. I am proud to be one of their first investors.”
I’ve recently advised a number of emerging venture capital funds that are struggling to determine the most effective steps they can take to support their portfolio companies.
Almost every private equity and venture capital investor now advertises that they have a platform to support their portfolio companies. The popularity of the model can be judged by the fact that the U.S. VC Platform community has grown approximately 120 percent in the last three years. Similarly, its European counterpart, the EU VC Platform, has tripled in the same period.
However, most of us don’t have the budget of an Andreessen Horowitz to support almost every major need of emerging companies. You could spend an unlimited budget on all possible company-building resources. “You can’t pick a platform strategy that’s unique, but you can pick a platform strategy that your firm can uniquely execute,” noted Maria Palma of REE Ventures.
I propose here a framework for prioritizing your platform buildout. Once you have assembled the right core team, I recommend prioritizing as follows:
First, meet with your portfolio company management. As an agenda for each meeting, I suggest:
In a presentation at the 4th Annual VC Platform Summit, Nick Kim, Crosscut Ventures’ head of platform, shared their platform development methodology, which he viewed as an exercise in product development.
“Firms should match services to the stage-specific needs of companies,” Dan Kozikowski, partner and head of platform for FirstMark Capital, told me. “For example, recruiting writ large is useful at all stages of development. But things like vendor introductions are only needle-movers at the earliest stages. Similarly, customer introductions are invaluable in the early days, but become less valuable once a company has a fully formed go-to-market function.”
Then, pluck the low-hanging fruit: easy, low-cost, and highly scalable infrastructure. This typically includes:
I recommend building a strong internal tech stack to handle the deluge of requests for help you’ll get from companies as you scale. “The biggest investment of resources with our tech platform relates to the capturing and maintenance of data on our huge portfolio of 1,100-plus evolving tech companies,” Jeff Pomeranz, partner at Right Side Capital, said.
“For instance, tracking ‘months-of-runway’ combined with the month-over-month change to that metric allows us to rapidly identify companies that may be distressed. Adding full lifecycle data and industry exposure tags to that, across such a large number of companies, often enables us to see trends ahead of the market, such as retail decimation a few years ago.” Investigate ways to use technology and analytics to make better investments.
Beyond these steps, I suggest you apply a two-part test:
Online branded payments now run the gamut of anything from Spotify vouchers, Netflix vouchers, Neosurf, PaySafe cards, and everything in between. Consumers use them to pay for a variety of things. In Europe, they are an increasingly big business. Now, European branded payments company Recharge.com has raised €10m ($11.8m) in a debt funding round led by London-based Kreos Capital, a growth debt provider for high-growth companies. In 2019 the Dutch fintech Creative Group, which owns the Recharge.com and Rapido.com brands, took investment of €22m from Prime Ventures.
Rehcharge has also appointed Michael Kent – who previously founded payments companies Small World and Azimo, along with UK neobank Tandem – as its non-executive chairman.
Recharge.com says it plans to use the funding to extend its mobile offering, product range, and expand in in regions such as North America, Latin America and the GCC. It’s also aiming for sales of €450m in 2021.
Günther Vogelpoel CEO of Recharge.com said in a statement: “We live in a world of instant wish fulfillment, from taxis that appear on demand to same-day delivery of consumer goods. Recharge.com gives customers a fast, safe and simple way to fulfill their wishes, whether that’s an essential remittance or access to digital goods and services.”
Commenting, Kent said: “The era of supermarket gift cards and mobile top-ups is drawing to a close. Branded payments have exploded during the global lockdown as consumers seek digital alternatives to the high street. People are now aware that online branded payments are safe, fast, and convenient.”
Through a range of digital vouchers from brands including Apple, Google, Spotify, Xbox and PlayStation as well as cross-border remittances of call, data credits etc Recharge is attacking the market from the consumer angle.
The biggest company in this space is Blackhawk networks which is owned by private equity group Silverlake. It’s considered a large player in Europe which has a direct-to-consumer model.
As Kent told me over a Zoom call: “Nobody actually owns the consumer side of this business globally so that’s the big opportunity.”