As more and more news businesses turn to paywalls and subscriptions, The Financial Times looks like an early model and success story — a few months ago the organization announced that it’s passed 1 million paying readers, with digital subscribers accounting for more than three-fourths of its circulation.
Now The FT is looking to share some of what it’s learned (and further diversify its business) by launching a new consulting unit called FT Strategies.
Chief Data Officer Tom Betts told me that The FT built a lot of the technology behind its subscription efforts. At first, the team assumed that it might be able to build a business selling that technology to other publishers. After all, Vox Media and The Washington Post are both trying to do something similar with their content management systems.
So it was surprising to hear Betts say that FT Strategy is actually “a pure consulting business.”
Asked whether The FT might eventually start selling a tech product as well, he replied, “Never say never about the technology dimension, but I think as we did our market research and started talking to customers and looking more at the technological landscape out there, we realized that over the years, many of the elements of the technology we have built have become commoditized.”
That doesn’t mean there’s a technology stack that publishers can buy off-the-shelf that can meet all their needs (there’s at least one startup called The News Project trying to piece that stack together).
But Betts argued, “Even if you go and buy best-of-breed technology, that doesn’t mean you can assembly it in the right way to make it useful and meaningful to scale and grow direct-to-consumer revenues. And most importantly it doesn’t mean that you know how to operate it with teams and how to actually use it to successfully scale and grow your business.”
That’s precisely what FT Strategies is trying to provide. In fact, Betts said the company has already been quietly testing out the idea in beta and built up a customer list that includes Bonnier, The Business of Fashion, Penguin Random House and the V&A — so not just news companies, but also a book publisher and an art and design museum.
“I believe that the capabilities that we’e built, clearly they are salient to other news publishers, but I believe that they span far beyond that,” Betts explained.
He went on to argue that FT Strategies could potentially work with any company that’s “either facing disruption as the news media industry has” or that’s in a sector that’s part of the broader direct-to-consumer trend — basically, any company that needs help figuring out “how do we market to individuals, how do we build relationships to individuals, how do we leverage those relationships both so that the consumers have the most positive and engaging experience with our products and to maximize revenue.”
As for whether any of these business might be leery about giving another company — and, in some cases, a competitor — access to their customer data, Betts said that philosophically, the FT believes that “a healthy paid content ecosystem is good for the FT and it’s good for all the publishers that participate in it.”
More concretely, he said his team is “very clear internally about having the Chinese walls and professional standards for FT Strategy that ensures the right levels of confidentiality of clients’ data [so] their confidential information doesn’t leak back into the core operation.”
SoftBank, a long-time WeWork investor, plans to invest between $4 billion and $5 billion in exchange for new and existing shares, according to CNBC . The deal, expected to be announced as soon as tomorrow, represents a lifeline for WeWork, which is said to be mere weeks from running out of cash and has been shopping several of its assets as it attempts to lessen its cash burn.
WeWork declined to comment.
To be clear, it is reportedly the Vision Fund’s parent company, SoftBank Group Corp. that is taking control, with SoftBank International chief executive officer Marcelo Claure stepping in to support company management, per reports.
The Japanese telecom giant’s move comes precisely four weeks after co-founder and former CEO Adam Neumann relinquished control of the company and transitioned into a non-executive chairman role, and about three weeks after WeWork decided to delay its highly anticipated initial public offering. WeWork’s vice chairman Sebastian Gunningham and the company’s president and chief operating officer Artie Minson are currently serving as WeWork’s co-CEOs.
In addition to those personnel shake-ups, WeWork has lost its communications chief, Jimmy Asci, its chief marketing officer, Robin Daniels and several others. Meanwhile, the company has slashed hundreds of jobs, and opted to shut down its school, WeGrow, in 2020.
Now expected to go public in 2020, WeWork was also said to be in negotiations with JPMorgan for a last-minute cash infusion. The company, now a cautionary tale, will surely continue to reduce the sky-high costs of its money-losing operation in the upcoming months.
WeWork revealed an unusual IPO prospectus in August after raising more than $8 billion in equity and debt funding. Despite financials that showed losses of nearly $1 billion in the six months ending June 30, the company still managed to accumulate a valuation as high as $47 billion, largely as a result of Neumann’s fundraising abilities.
“As co-founder of WeWork, I am so proud of this team and the incredible company that we have built over the last decade,” Neumann said in a statement confirming his resignation last month. “Our global platform now spans 111 cities in 29 countries, serving more than 527,000 members each day. While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive. Thank you to my colleagues, our members, our landlord partners, and our investors for continuing to believe in this great business.”
If you’ve read anything of mine in the past year, you know just how complicated security can be.
Every day it seems there’s a new security lapse, a breach, a hack, or an inadvertent exposure, such as leaving a cloud storage server unprotected without a password. These things happen, but they don’t have to; aecurity isn’t as difficult as it sounds, but there’s no one-size-fits-all solution.
We asked Google’s Heather Adkins, Duo’s Dug Song, and IOActive’s Jennifer Sunshine Steffens for their best advice. Here’s what they had to say.
Quotes have been edited and condensed for clarity.
The one resounding message from the panel: don’t put security off.
“There are basically three areas that folks should start considering how to bucket those risks,” said Duo’s Song. “The first is corporate risk in defending your users and applications they access. The second is application security and product risk. A third area is is around production, security and making sure that the operation of your security program is something that keeps up with that risk. And then a fourth — a new and emerging space — is trust, and not just privacy, but also safety.”
It’s better to be proactive about security than to be reactive to a data breach; not only will it help your company bolster its security posture, but it also serves as an important factor in future fundraising negotiations.
Song said founders have a “very direct obligation” to think about security as soon as they take someone else’s money, but especially when a company starts gathering user or customer data. “You have to put yourself in the shoes of those folks whose data you have to protect,” he said. “It’s not just your existential threats to your business, but you do have a responsibility, right to figure out how to do this well.”
IOActive’s Steffens said startups are already a target — simply because it’s assumed many won’t have thought much about security.
“A lot of attackers will go after startups who have high value data, because they know security is not a priority and it’s going to be a lot easier to get ahold of,” she said. “Data these days is extraordinarily valuable.”
Google’s Adkins, who runs the search giant’s internal information security team, joined the company almost two decades ago when it was just the size of a large startup. Her job is to keep the company’s network, assets, and employees safe.
“When I got there, they were so fanatical about security already, that half of the job was already done,” she said. “From the moment [Google] took its first search query, it was thinking about where those logs are stored, who has access to them, and what is its responsibility to its users,” she said.
“Startups who are successful with security are those where the chief executive and the founders are fanatical from day one and understand what threats exist to the business and what they need to do to protect it,” she said.
Song said many popular products and technologies these days come with strong security by default, such as iPhones, Chromebooks, security keys and Windows 10.
“You’re better off than the 90% of large companies out there,” he said. “That’s one of those few strategic advantages you have as a smaller, nimbler organization that doesn’t have a lot of legacy,” he added. “You can do things better from the start.”
“A lot of the basics are still key,” said Steffens. “Even as we come out with the new shiny technology, having things like firewalls and antivirus, and multi-factor authentication.”
“Security doesn’t always have to be a money thing,” she said. “There’s a lot of open source technology that’s really great.”
“The sooner you start thinking about security, the less expensive it is in the end,” said Steffens.
That’s because, the experts said, proactive security gives companies an edge over competitors who tack on security solutions after a breach. It’s easier and more cost-effective to get it right the first time without having to fill in gaps years later.
It might be a hard sell to funnel money into something where you won’t actively see financial returns, which is why founders should think of security as investments for the future. The idea is that if you spend a little money at the start, it can save you down the line from the inevitable — a security incident that will cost you in bad headlines, lost customer trust, and potentially fines or other sanctions.
At the recent TechCrunch Disrupt SF, Senegalese VC investor Marieme Diop suggested that Silicon Valley’s unicorn IPO model might not be right for African startups.
The is largely because the continent’s startups face a vastly different macro business environment, Diop explained during a discussion of investing in Africa with 500 Startups’ Sheel Mohnot and IFC’s Wale Ayeni. In a subsequent conversation, she clarified an alternative approach for African startups to raise capital from public listings.
“It might be a better option to set lower revenue expectations and have startups list on local exchanges to raise capital from IPOs when they’re ready,” said Diop. “We may be able to create more gazelles at home than unicorns abroad,”
A gazelle at home could be a company valued at a $100 million or more and generating revenues of $15 to $50 million, according to Diop.
“We should have a discussion of setting a right valuation, a valuation that is more appropriate to African startups,” she said.
A VC investor at Orange Digital Ventures and co-founder of Dakar Angels Network, Diop’s perspective comes in the wake of Jumia’s going public on the New York Stock Exchange this April.
The e-commerce venture became the first VC-funded digital company operating in Africa to list on a major global exchange, a fact that may have raised expectations for additional $100 million revenue tech firms creating unicorns and IPOs in Africa.
The $100 million revenue point has served as the unofficial IPO benchmark for startups and investors; after reaching unicorn status in 2014, Jumia achieved it last year (with big losses in tow).
But as I mentioned in a previous Extra Crunch piece, it will be difficult for startups operating in Africa to hit that revenue mark, even with all the leaps and bounds occurring in the continent’s economies and tech sector. The overall operating environment is still fairly costly and challenging, compared to other regions.
To put the $100 million revenue benchmark in perspective for Africa, the continent’s entire tech VC funding only recently surpassed $1 billion annually, according to Partech data, which means the $100 million rule would requires a company to generate annual revenues up to roughly 10% of the yearly value of VC raised across the entire ecosystem.
Late last night the Financial Times reported that HuffPost, arguably one of the crown jewels of Verizon Media Group’s remaining network of media properties (which includes TechCrunch), is up for sale.
Verizon has been shedding media properties in a retreat from the strategy that it had begun to execute with the acquisition of AOL for $4.4 billion back in 2015. Through the AOL deal, chief executive Tim Armstrong became the architect of the telecommunications company’s media and advertising strategy.
Armstrong’s vision was to roll up as much online real estate as he could while creating a high technology advertising architecture on the back-end that could better target consumers based on their media consumption (which the telecom company would also own).
The idea was to provide a broad-based competitor to the reach of ad platforms on Google and Facebook which were also targeting users based on their browsing history and interests. The benefit that Google and Facebook had was that they had a more holistic view of what consumers did online and they positioned themselves as a distribution channel between media companies and users — essentially redistributing their articles and videos and hoovering up the ad dollars that had previously gone to those media companies.
The multi-billion dollar land grab continued when Verizon paid $4.5 billion for Yahoo in 2017.
Now it appears that Verizon has a multi-billion dollar case of buyer’s remorse. Part of the billions that Verizon spent on Yahoo was for the early social network Tumblr, which Yahoo had acquired for $1.1 billion back in 2013.
Earlier this year Verizon unloaded Tumblr for the cost of a luxury Manhattan apartment. That $3 million sale was presaged by the significant fall from grace of other former high-flying media and tech properties.
Vice was once worth $5.7 billion at the height of the media investment bubble, but earlier this year Disney wrote down its stake in the company to virtually nothing.
At least Vice is emerging as a survivor. the company has rolled up Refinery29. Vox Media is also doing well in the new world of media. It bought Recode back in 2015 and recently acquired the publisher behind New York Magazine to expand its purview into paper publications and get its hands on the popular New York websites Intelligencer, The Cut, Vulture, and Grub Street.
Other publications like Hello Giggles, which was founded by the actress Zooey Deschanel, were sold to Time Magazine. High-fliers like Buzzfeed, HuffPost, Vice and Vox have all had to lay off staff in recent months.
It’s been a wild ride for HuffPost, which began in 2005 as a collection of celebrity bloggers brought together under the auspices of Arianna Huffington, from whom the site took its name.
AOL acquired The Huffington Post back in 2011 in a deal that was valued at $315 million less than a year after picking up TechCrunch for $25 million.
Verizon announced layoffs across its media properties at the beginning of the year. It cut roughly 7 percent of its staff — or around 800 jobs — including some at HuffPost.
In a statement to the Financial Times, Verizon said that it would not comment on rumors and speculation.
Neither Verizon Media nor HuffPost responded to a request for comment by the time of publication.
Since it was founded by journalist Jessica Lessin in 2013, The Information has stood out in the tech news landscape for its focus on an ad-free, subscription-driven business model (a focus that seems increasingly prescient).
Now, the upcoming launch of an app called Ticker suggests that the company is looking to expand its audience while maintaining that subscription model.
The Information describes Ticker as its first consumer app. The assumption is that anyone who’s currently paying the $399 annual fee for an Information subscription needs it for their job — whether they’re an investor, entrepreneur or some other professional in the tech industry.
The new app, meanwhile, is designed for anyone who might be interested in keeping up-to-date with the latest tech news, and it’s priced much more affordably, at $29 per year. (Information subscribers will get access as well.)
Apparently the app was inspired by the Briefing section of The Information website, which offers quick summaries (usually drawn from reporting by other publications) of major tech news.
Ticker, meanwhile, will include a section called Today with summaries of the day’s tech headlines — similar to Briefing, but written for a consumer audience. It will also include a calendar highlighting upcoming IPOs, conferences and other events that readers might want to know about. (Not included: The Information’s full articles and original reporting.)
“More and more, we’ve been hearing from readers who don’t have a business reason to follow tech but are finding it more and more central to their lives,” Lessin said in a statement. “We are launching Ticker for them — giving them access to the best summaries of the most significant news, written by our team at The Information.”
The company plans to launch Ticker later this fall. In the meantime, you can sign up here.
TruTag Technologies, a company that creates microscopic, edible barcodes to authenticate medications, food, vaping pods and other products, has raised a $7.5 million Series C. The funding, led by Pangaea Ventures and Happiness Capital, will be used to further commercialize its technology and develop new solutions.
Along with earlier rounds, this brings TruTag’s total funding to $25 million. Its clients include PwC, which uses the company’s technology in its Food Trust Platform quality assurance program for Australian beef exports.
A high magnification of TruTag particles, each of is an edible “chip” that authenticates the product it is applied to.
Called TruTags, the company’s tiny barcodes are made out of nano-porous silica, a material that has received GRAS (generally recognized as safe) notice from the U.S Food and Drug Administration, and can be placed directly on products or in packaging to track it through the supply and logistics chain.
TruTags are used with hyperspectral imaging technology, which is able to process much more wavelengths than other imaging methods, so it can collect more precise and detailed data from an image. When scanned, the barcodes provide information about where a product was manufactured, lot numbers, authorized distributors and safe use.
In email, TruTag chief executive officer Michael Bartholomeusz, who holds a PhD in materials engineering from the University of Virginia, told TechCrunch that the company sees the most growth opportunities in industries, such as pharmaceuticals, nutraceutical foods and cannabis, that deal with counterfeit products from the black market or the “grey market,” including products from unauthorized suppliers.
“TruTags material is an already approved excipient in pills by the FDA. Pharmaceuticals and food comprise a very large portion of the global counterfeiting problem, and given the very unique edible feature of TruTag’s solution, this is a core area of focus for the company,” he says.
For example, the technology can be used to lock vaping systems so they only work with authentic vaping pods, helping reduce the number of counterfeit pods on the market. Bartholomeusz adds that TruTags is close to coming to market in the CBD space.
TruTags’ ability to be placed directly on products, its edibility and instant authentication in one to five seconds differentiates it from other solutions. Bartholomeusz notes that other quality assurance tech include specialized symbols, inks and holograms, though many of those products have the disadvantages of being replicable by high-quality printers or relying on consumers’ ability to recognize them.
In a press statement, Matthew Cohen, director of technology at Pangaea, which focuses on investing in advanced materials technology, said “Pangaea is excited to partner with TruTag and help the company expand its team and product portfolio. We believe TruTag’s edible barcode technology will help increase consumer confidence and ultimately save lives. TruTag is making our world better by utilizing compelling advanced materials and advanced material process innovations to combat rising problems such as drug counterfeiting.”
Proportunity, the startup that provides “help to buy”-style equity loans primarily for first-time property buyers, has raised £2 million in additional funding.
Billed as a seed round, backing comes from Anthemis, the fintech investor, and Axel Springer Digital Ventures, the early-stage venture arm of European digital publisher Axel Springer. The startup and Entrepreneur First alumni had previously raised £1.7 million in equity and a credit line of debt financing.
Previous investors include Global Founders Capital, Concrete VC (backed by Starwood Capital Group), Savills, EF, Trusted Insights and Le Studio VC, along with angel investors Matt Robinson (Nested), Chris Mairs (EF), Charlie Songhurst, Nicolas Berggruen and Julian Critchlow.
Founded in 2016 by Vadim Toader and Stefan Boronea, Proportunity wants to help first-time buyers purchase a home that is more suited to their needs than a mortgage alone might afford.
It does this by providing an equity loan of up to 15% of a property’s value to enable the home buyer to effectively put down a bigger deposit and therefore secure a more competitive mortgage. This, claims the startup, also enables the home buyer to potentially purchase a larger or better-located property, and reduce the amount of interest charged by the mortgage lender in the long term.
The way it works, therefore, is quite similar to the U.K. government’s “Help To Buy” scheme, except it isn’t restricted to a new build and you have to pay monthly interest on the loan from the get-go. Like Help To Buy, when you sell the house or remortgage it in within five years, you have to repay the Proportunity equity loan at 15% of the current market price.
Therefore, if the price of the house has gone up, the amount you pay back also will have increased. In the event that the price has gone down, the startup loses money.
All of this is backed by Proportunity’s machine learning-based forecasting technology, which claims to be able to identify good-value properties in up-and-coming areas. The idea is that better use of data — from crime and school ratings to broadband speeds and pollution — can help reduce the risk of equity-based property loans both for the lender and borrower.
With regards to how many homes Proportunity has helped finance, the startup isn’t breaking out the exact numbers. However, co-founder Vadim Toader tells me it is “more than 20 and less than 100.”
He also says that two of the top five high-street lenders in the U.K. have lent alongside Proportunity on multiple homes, proving that the model can be made to work (a year ago it wasn’t clear how the market would respond to Proportunity’s equity loan offer). The company is currently working with 12 mortgage brokers in total.
“We’ve made partnerships with real estate agencies, and their mortgage broker arms, so they can refer the first-time buyers that come to them directly,” says Toader.
Meanwhile, I asked Toader to run through what assumptions have proven true so far or haven’t panned out.
He says that the team thought it would prove to be a complicated proposition to explain to customers, but actually they tend to get it quickly due to awareness of the U.K. government’s Help To Buy scheme.
He also thought Proportunity could help speed up the home-buying process, but a few parts, such as conveyancing, can still take a few months.
And despite Proportunity’s data play, “people do get emotionally attached to properties. Data helps them detach a bit, but not that much.”
London and Tel Aviv based VC firm 83North has closed out its fifth fund at $300 million, as we reported earlier. It last raised a $250 million fund in 2017 and expects to continue the same investment mix, while tracking developments in emerging areas like healthcare AI and autonomous vehicles.
In a conversation with general partner Laurel Bowden, the veteran investor shared a few further thoughts with Extra Crunch — talking about the tech scene in Europe vs Israel, what the firm looks for in a team and tips on scaling globally.
The interview has been lightly edited for clarity.
TechCrunch: Is Europe starting to catch up to Israel when it comes to deep tech startups?
Laurel Bowden: We clearly think we have in our portfolio some deep tech. And in other VC portfolios too — there’s clearly some deep tech [coming out of Europe]. And then on the reverse side you’ve seen more consumer-related stuff coming out of Israel. But still if you take a blanket look, we see more data infrastructure, security, storage coming out of Israel than we see in Europe — that’s for sure.
This week, we hosted 23 panels on all aspects of building startups on the Extra Crunch stage at TechCrunch Disrupt SF. Thanks to the thousands of attendees who attended those talks, as well as the workshops we held on the Breakout Stage — your enthusiasm was palpable.
We also had hundreds of new EC members join during the conference — to all of you: welcome!
This newsletter covers all of last week, and is a bit abbreviated thanks to Disrupt. Back to normal next week.
Extra Crunch media columnist Eric Peckham interviewed almost a dozen leading venture capitalists about the state of edtech, including Jennifer Carolan of Reach Capital, Aydin Senkut of Felicis Ventures, and Charles Birnbaum of Bessemer. There is still a lot of enthusiasm for the space, but the theses for these investors have diverged quite significantly.
Marlon Nichols , Managing Partner at MaC Venture Capital (a new LA-based seed fund with investments in Catalyte, Codeverse, and Wonderschool):
“Many education technology companies target individual teachers, which presents a long path to sizable revenue (requires too many customers) while others usually attempt to navigate the lengthy and bureaucratic sales cycle of selling to school districts. VCs prefer companies that have short sales cycles that can scale revenue quickly so in general, edtech companies are difficult investments for venture capital.
That said, education is a giant opportunity in the US because high quality education is not evenly distributed across communities or social classes. It’s a crisis. Companies that address this at scale are attractive if the revenue model makes sense. That’s why I led the first round into Wonderschool, which delivers high quality education and child care at costs relative to one’s zip code. The schools double as the educator’s home so there isn’t a need for real estate investment.”
Dropbox may be known for its singular file storage product, but the company is adapting and changing as it seeks new customers and also learns more about what “file storage” really means to users.
When Elizabeth Warren took on Mark Zuckerberg and Facebook earlier this week, it was a low moment for what New Yorker writer Andrew Marantz calls “techno-utopianism.”
That the progressive, populist Massachusetts Senator and leading Democratic Presidential candidate wants to #BreakUpBigTech is not surprising. But Warren’s choice to spotlight regulating and trust-busting Facebook was nonetheless noteworthy, because of what it represents on a philosophical level. Warren, along with like-minded political leaders, social activists, and tech critics, has begun to offer the first massively popular alternative to the massively popular wave of aggressive optimism and “genius” ambition that characterized tech culture for the past decade or two.
“No,” Warren and others seem to say, “your vision is not necessarily making the world a better place.” This is a major buzzkill for tech leaders who have made (positive) world-changing their number one calling card — more than profits, popularity, skyscrapers like San Francisco’s striking Salesforce Tower, or any other measure.
Enter Marantz, a longtime New Yorker staff writer and Brooklyn, N.Y. resident who has recently trained his attention on tech culture, following around iconic figures on both sides of what he sees as the divide of our time — not between tech greats whose successes make us all better and those who would stop them, but between the alternative figures on the “new right” and the self-understood liberals of Silicon Valley who, according to Marantz, have both contributed to “hijacking the American conversation.”
Marantz’s first book, “Antisocial: Online Extremists, Techno-Utopians, and the Hijacking of the American Conversation,” will be released next week, and I recently had a chance to talk with him for this series the ethics of technology.
Greg Epstein: Congratulations on your absolutely fascinating new book Antisocial, and on everything you’ve been up to.
PayPal is the first company to walk away from Facebook’s Libra cryptocurrency.
“PayPal has made the decision to forgo further participation in the Libra Association at this time and to continue to focus on advancing our existing mission and business priorities as we strive to democratize access to financial services for underserved populations,” PayPal said in an emailed statement. “We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future. Facebook has been a longstanding and valued strategic partner to PayPal, and we will continue to partner with and support Facebook in various capacities.”
It could be that PayPal isn’t the only firm to walk away from the ambitious effort to transform the entire global financial system.
Mastercard, Visa and other companies may join PayPal in backing away from the Libra project, which has been the subject of mounting criticism since its launch.
As we reported when Libra first launched, Facebook doesn’t control the Libra organization or currency, but gets a single vote alongside the remaining partners which include Uber, Andreessen Horowitz, the venture capital firm with roughly $10 billion in assets under management, Mastercard and Visa. Each partner has invested at least $10 million in the project and the association will promote the open-sourced Libra Blockchain.
The partners will not only pitch the Libra Blockchain and developer platform with its own Move programming language, plus sign up businesses to accept Libra for payment and even give customers discounts or rewards.
Facebook has a lot more riding on the success of the Association that just it’s Libra stake. The company has also launched a subsidiary company called Calibra that handles crypto transactions on its platform that would use the Libra blockchain.
Governments around the world have been up in arms about what they see as Facebook and its partners making an end run around the existing financial services.
And earlier this month, Facebook chief executive Mark Zuckerberg indicated that the company would be willing to push back the launch of the cryptocurrency past its planned 2020 launch date, in an interview with the Japanese Nikkei news service.
At age 27, Jordan Fudge is quietly making a splash in the VC world.
Fudge is the managing partner of Sinai Ventures, a multi-stage VC fund that manages $100 million and has more than 80 portfolio companies including Ro, Drivetime, Kapwing, and Luminary. His 2017 investment in Pinterest — a secondary shares deal from his prior firm that was rolled into Sinai when he spun out — will have returned the value of Sinai’s Fund I by itself once the lockup on shares expires next week.
Fudge and co-founder Eric Reiner, a Northwestern University classmate, hired staff in New York and San Francisco when Sinai launched in early 2018. Today, they’re centralizing the team in Los Angeles for its next fund, a bet on the rising momentum of the local startup ecosystem and their vision to be the city’s leading Series A and B firm.
Fudge and Reiner have intentionally stayed off the radar thus far, wanting to prove themselves first through a track record of investments.
A part-time film financier who also serves on the board of LGBT advocacy non-profit GLAAD, Fudge describes himself as an atypical VC firm founder, an edge he’s using to carve out his niche in a crowded VC landscape.
I spoke with Fudge to learn more about his strategy at Sinai and what led to him founding the firm. Here’s the transcript (edited for length and clarity):
Eric Peckham: Tell me the origin story here. How did Sinai Ventures get seeded?
Jordan Fudge: I was working for Eagle Advisors, a multi-billion dollar family office for one of the founders of SAP, focused on the tech sector across public markets, crypto, and eventually VC deals. Two years in, I pitched them on spinning out to focus on VC and they seeded Sinai with the private investments like Compass and Pinterest I had done already, plus a fresh fund to invest out of on my own. It was $100 million combined.
WeWork, the co-working business once valued at $47 billion, is expected to announce significant layoffs this month, following reports the company was looking to slash as many as 5,000 roles, or one-third of its workforce, Bloomberg reports.
Now expected to go public in 2020 at a valuation as low as $10 billion, WeWork is also in negotiations with JPMorgan for a last-minute cash infusion to replace the capital expected from the now-postponed IPO, per reports. The company, now a cautionary tale, has been working with bankers in recent weeks to reduce the sky-high costs of its money-losing operation.
News of potential layoffs come about two weeks after co-founder and chief executive officer Adam Neumann resigned from his post and the nine-year-old company postponed its highly anticipated initial public offering. Neumann is now serving as the company’s non-executive chairman, succeeded by WeWork’s former vice chairman Sebastian Gunningham and the company’s president and chief operating officer Artie Minson.
The embattled company has been struggling to satisfy Wall Street skeptics, who were floored by the company’s eye-popping valuation. Since Neumann’s resignation, WeWork has begun several cost-cutting initiatives and is reportedly looking to sell off several of its acquisitions, including Managed by Q, Conductor and Meetup.
Layoffs are a natural next step for the business as it aims to carve out a clear path to profitability, now a requisite for a 2020 IPO. To float at any point in the future, after all, WeWork must prove elevating “the world’s consciousness” will eventually lead to profits.
WeWork revealed an unusual IPO prospectus in August after raising more than $8 billion in equity and debt funding. Despite financials that showed losses of nearly $1 billion in the six months ending June 30, the company still managed to accumulate a valuation as high as $47 billion, largely as a result of Neumann’s fundraising abilities.
“As co-founder of WeWork, I am so proud of this team and the incredible company that we have built over the last decade,” Neumann said in a statement confirming his resignation. “Our global platform now spans 111 cities in 29 countries, serving more than 527,000 members each day. While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive. Thank you to my colleagues, our members, our landlord partners, and our investors for continuing to believe in this great business.”
We’ve reached out to WeWork for comment.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.
The move was widely expected, but The We Company (which owns WeWork) made it official yesterday, with new co-CEOs Artie Minson and Sebastian Gunningham declaring that they’ve “decided to postpone our IPO to focus on our core business.”
Since the company’s S-1 became public, it has faced intense scrutiny over the general state of its finances, and more specifically over the power and behavior of Adam Neumann, who stepped down as CEO last week.
It’s a decision that plunges many websites into legal hot water in Europe. The Court says consent must be obtained prior to storing or accessing non-essential cookies, such as tracking cookies for targeted advertising.
Twitter is rolling out its spam and abuse filter for Direct Messages, a month and a half after the company announced it had started testing the feature. This should be useful for people who want to keep their DMs open without having to see abusive content.
Earlier this summer, Microsoft introduced an extra layer of security for its OneDrive product, allowing users to protect their files with two-step verification. Now it’s rolling this feature out worldwide.
The company’s new mobile experience includes a dedicated “For You” tab where a continually updated feed of content is presented to users, including music and podcast recommendations.
Currently, Rapyd lets customers use its API to enable checkout, funds collection, fund disbursements, compliance as a service, foreign exchange, card issuing and integration.
SmartNews’ Jeannie Yang talks about the app’s place in the media ecosystem, creating recommendation algorithms that don’t reinforce biases, the difference between its Japanese and American users and the challenges of presenting political news in a highly polarized environment. (Extra Crunch membership required.)
After raising $100 million, virtual reality content startup Jaunt has been in a precarious position for a few years now. It seems like the saga has finally come to a close as the startup announced that Verizon has purchased the company’s technology.
The studio rode the wave of VR hype following Facebook’s acquisition of Oculus, but after years of trying to find a business in immersive entertainment, spanning software and camera hardware, the company has spent its past year trying to sell off its VR assets while pursuing a business focused on augmented reality and what it calls the “distribution of volumetric video of humans.”
A deal with Spinview Global to purchase the company’s VR tech that was reported last year never happened, a spokesperson tells TechCrunch. Verizon is walking away with Jaunt’s technology assets here, which is inclusive of their VR tech and their newer AR efforts. It doesn’t sound like any employees are coming onboard as part of the transition, but there will be some Jaunt folks helping to bring the tech onboard for a brief period.
The company’s spokesperson opted not to comment when asked whether the startup was winding down following the deal.
Why does Verizon want these assets? Verizon Media (of which TechCrunch is apart of) already has some assets in the VR space, including the virtual reality content studio RYOT, which has been playing around with 360 content and general AR/VR content. The company’s Envrnmnt arm is basically focusing on making AR and VR apps run more efficiently on mobile, which is something Jaunt has had to be mindful of as they’ve tried to focus on broadcasters that need to deal with bandwidth strains.
We don’t have a price tag on the deal, but the startup raised $100 million from investors, including GV and Disney. In October of last year, the company laid off a “significant portion of its employees” and by the end of the year they were auctioning off office furniture.
As a result, Neumann stepped down down as CEO last week (he will continue to serve as non-executive chairman). In addition, the company is looking to focus on its core co-working business, which means it’s planning major layoffs and even reportedly looking to sell some of the companies it acquired over the last couple of years — namely Managed by Q, Conductor and Meetup.
So it was widely expected that The We Company would delay its IPO. Today, it made things official with the release of a statement from new co-CEOs Artie Minson and Sebastian Gunningham:
We have decided to postpone our IPO to focus on our core business, the fundamentals of which remain strong. We are as committed as ever to serving our members, enterprise customers, landlord partners, employees and shareholders. We have every intention to operate WeWork as a public company and look forward to revisiting the public equity markets in the future.
What’s the lesson of WeWork?
Here’s a startup that has been a darling of Silicon Valley investors for years, whose offices and CEO have been stunningly painted across the covers of major trade magazines and strategically deployed across major tech conference stages, including our very own. At its peak, the company commanded a valuation of tens of billions of dollars and was supposed to be on course for the stratosphere, joining companies like Google and Facebook.
And then it all came crashing down, in literally a handful of days.
It’s easy to point to WeWork’s potentially 75%+ valuation drop, its looming layoffs, the firing of its CEO, and the seeming compression of a whole heck of a lot of investors and employee equity as a sordid disaster tale of capitalism, and venture capitalism in particular. VCs — none more so than Masayoshi Son at SoftBank — constantly overbought, oversold, and overcommitted to a company that had pretty much no business fundamentals whatsoever.
So what’s the lesson of WeWork for venture capital? In a word, nothing.
Venture capitalism is about investing in bold bets with huge, outsized returns. It’s meant to be risk-adjusted, both at the valuation scale but also at a portfolio scale. VCs should be buying equity at the right price to take into account every individual startup’s risk profile while also constructing a portfolio that selects each of those risks for the best overall return.
For WeWork, much of those dollars were driven by SoftBank’s Vision Fund, which seemed to double down again and again on the company, even at loggerheads with its own limited partners. The Vision Fund made a bet, seemingly with reasonable access to internal information, and that bet turned out to be wrong.
But a bet it was.
Many bets in venture turn out to be duds. Sometimes you lose some of your money. Sometimes you lose all of it.
And then sometimes you make it in spades. SoftBank’s Son once invested $20 million into a fledging Chinese ecommerce company called Alibaba. That stake is worth around $100 billion today, excluding an $11 billion stock sale a few years ago that was recognized on SoftBank’s financials earlier this year.
This is the math that Son sees in venture: 111,000,000,000 / 20,000,000 = 5,550x. There is no other asset class on the planet that will turn a dollar into thousands of dollars like venture capital.
WeWork’s woes don’t change this base formula. Nor does the continual drop of Wag, which received $300 million from the Vision Fund and looks to be going through tough challenges.
In any portfolio, there are going to be losses. The infamous J-curve in venture, where losses materialize far faster than gains in the early years of a fund, is alive and well — even at the growth stage.
And WeWork isn’t even dead yet — it still has cash, and it will rebuild. Will it be the largest startup turnaround in history? Possibly. Could it go straight to bankruptcy? Sure. Will the Vision Fund make money? Well, it really depends on that preference stack and a thousand other variables to be determined in the coming weeks, months, and years.
It’s all so early. My guess is that we still have about five years to go before we really start to get sufficient information to evaluate the Vision Fund’s ambitions.
Along this line thoughI don’t think I just need to defend venture capitalism though, but capitalism itself.
Matt Stoller, who has made it his mission to target big companies including Big Tech, summarizes the WeWork situation as emblematic of “counterfeit capitalism,” a system of founding story myths and fake growth charts underwritten by venture capitalists trying to build long-term, sustainable monopolistic companies using predatory pricing to kill off competitors.
Yet, that narrative totally misses the point of what capital does, and what investment means. Very, very few companies (venture-backed or not) are profitable from day one. Opening a restaurant requires buying equipment and signing a lease well before any customer walks in through the front door. Ditto for software startups, which need to actually build software before a user will pay for it. Capital investment is the bridge between plans to execution and launch.
The question is how long should a company be unprofitable to goad sales and drive revenues? A decade or two ago, it used to be that companies needed to be profitable to IPO. But why? Why precisely then should a company slow down its investment and clean up its cash flows? Why not earlier? Why not later?
In fact, something great has happened in the last few years in the credit markets: at least some investors are increasingly positioning their portfolios for growth rather than cash flows. They are willing to wait for profits, sometimes for years.
Or, in other words, more and more investors are thinking long-term about the ultimate potential worth of a business.
WeWork could be profitable today. It could shutter its most recently opened locations, condense down to a handful of locations in major cities, and roll around in its positive cash flow. Of course the Vision Fund understands this. But why lock in small gains today when there is so much more potential lurking out there?
We should be cheering this behavior, and not castigating it, even if WeWork itself might turn out to be a dud. The lesson of this whole saga isn’t that capitalism isn’t performing. In fact, it’s precisely the opposite: (venture) capitalism is performing better than ever to invest in future, long-range growth.
Across the political, social and economic stage, women’s issues are finally receiving heightened attention and priority.
There are more women than ever seeking political office; funding for female-founded startups is reaching record levels (even if they still have a long way to go to reach gender parity); a sizable cohort of female-founded and led companies have achieved billion-dollar unicorn valuations; and several women-led companies, including PagerDuty, The RealReal, and Eventbrite, have entered the public markets with successful IPOs.
What’s driving so much positive change?
Clearly, broadened awareness of gender and power issues, largely due to #MeToo, as well as an increase in the number of female investors, thanks to groups like All Raise, are all contributing catalysts. In addition, women now outnumber men in college, a majority of American moms are in the workforce, and in 40 percent of households those women are the breadwinners. But it’s more than that; I believe that there’s a profound generational shift afloat, and that this first wave of female-led unicorns is just the tip of the NASDAQ iceberg.
Unlike previous generations who may have either looked at self-investment as self-indulgence or who simply didn’t have the resources or technology available to make supplementary investments in themselves, today’s badass millennial women are unapologetic about their desire to invest in their own success and well-being. Determined to succeed without compromising their values or physical and mental wellness, these uber-empowered millennial women are making viable a new generation of startups to help them realize their dreams and feel comfortable in their skin. I refer to this economic wave as She-conomy 2.0.
For decades now there have been tech companies, which I refer to as She-conomy 1.0, catering to traditional and homogeneous identities of women primarily as shoppers and caregivers. In contrast, these new modern She-conomy 2.0 brands address latent, historically unmet, often un-discussed and under-served needs that speak to the multitude of other facets of our identities.
These companies have less to do with what women buy and more to do with their willingness to invest in themselves — in their careers and in their physical and emotional health and well-being. They are seeking and are willing to pay for products and services that help them advance their careers, feel comfortable about their bodies, and provide the physical and emotional support they’re seeking.
The founding members of Allraise (Image courtesy of Allraise)
Women are taking control of their careers and supporting each other.
More than two decades ago, when I had my first child, I joined a mom’s group at Stanford Hospital. We were all working moms trying to juggle career and motherhood. It was a truly challenging time for each of us. The group provided such helpful support that we met every Monday evening for five years until our kids were in kindergarten. Why Mondays? Because Mondays are especially hard for working parents, marking yet another week in search of balance. We realized that meeting on Monday evenings provided us with the support we needed to make it through the work week. Perhaps even more critically, it gave us something about Mondays to look forward to.
There’s something incredibly empowering about experiencing a major transition like a new job or new parenthood as part of a cohort. Sheryl Sandberg famously sought to institutionalize this kind of support for working women with her non-profit Lean In. It has dramatically raised awareness around working women’s struggles. However, individual Lean In group leaders are usually volunteers running these sessions on the side while working and shouldering life’s endless list of other responsibilities.
Now a new generation of organizations is offering this support — for a fee. As for-profit organizations, they’re doing so in a scalable, consistent and reliable way. Women don’t have to worry about whether the organizer will be able to carve out time to orchestrate a meeting because doing so is the organizer’s job. Chief, Declare, The Assembly*, The Wing and The Riveter are all examples of companies that are growing and thriving because they’re offering valuable space, support and services that women are willing to pay for. Most of these organizations initially targeted millennials, but women of all generations are benefiting and participating.
A look inside one of The Riveter’s Seattle co-working spaces.
Women are changing the narrative around previously taboo topics and promoting inclusiveness and acceptance of oneself.
It wasn’t long ago that mannequins, much like cover models, only came in one size. Now mainstream brands not only sell broader offerings; they increasingly showcase them in magazines, catalogs, stores and the runway. For example, Nike’s flagship store in London featured both plus-sized mannequins and para-sport mannequins for people with physical and intellectual abilities, and Rhianna’s new inclusive lingerie line regularly presents both plus-size and pregnant models.
Millennials (like all of us) don’t want to feel shamed; they want to feel empowered and beautiful. Instead of settling for frumpy, ill-fitting clothing or outdated product design, millennials are using their social media megaphones to tell the market what they want. Traditional companies like Victoria’s Secret have moved at a molasses-like pace to evolve from treating women as objects of fantasy to celebrating their right to feel great about themselves. Their antiquated practices have created the opportunity for new startups to create brands centered on body positivity. Some companies are filling largely underserved market needs by catering exclusively to larger and specialty sizes, and others are addressing previously taboo topics like body hair, which also contribute strongly to feelings around body positivity. Eloquii offers extended clothing sizes, Ruby Ribbon* and Third Love provide a wide sizing range of under garments and bras, and Fur addresses body hair and grooming.
Women are dedicating more attention to their own health and relationships.
Self-help books have been around for ages, but tech is paving the way for a new generation of services to provide guidance and support that are more convenient and targeted. At the same time, women are increasingly willing to discuss health issues that were previously taboo, like menstruation, menopause and perimenopause, fertility, and depression. Advancements in technology are making health-related self-care more accessible from the convenience of our wristbands and phones. Meanwhile, people are spending a disproportionate amount of their wealth on health, making the entire healthcare industry ripe for disruption.
All of these factors are making femtech big business. Countless new companies are helping women take more active control of their sexual health, including birth control and STI testing (Pill Club and Nurx), period tracking (Flo Health), fertility and egg freezing (Kind Body and Carrot Fertility), menopause (Rory, Genneve), postpartum depression and miscarriage (Maven) and even our relationships (Relish* and Bumble). In addition, no shortage of femtech companies are addressing period care, such as Lola, Cora, The Flex Company, Thinx, and Sustain Natural.
These companies are only viable because so many women — beginning with millennials but expanding out to the rest of us — are now willing and able to invest in themselves. United across a shared mission of female empowerment and inclusivity, She-onomy 2.0 is making it more realistic than ever to empower us to advance our careers, feel good about ourselves and stay healthy. Hats off to the badass millennial women leading this charge; we’re all better off professionally, emotionally and even physically thanks to you!
*Denotes portfolio company for Trinity Ventures
TechCrunch’s biggest event of the year is happening this coming week at the brand-new Moscone North convention center in SF. We have wall-to-wall programming on our inaugural Extra Crunch stage, where audience members can ask questions to our panelists on topics as diverse as growth marketing, recruiting, fundraising, legal quandaries, and more.
If you want to join but haven’t bought your ticket, remember that all Extra Crunch annual subscribers get 20% off our tickets by emailing firstname.lastname@example.org. And if you can’t join, we will have synopses of some of the EC panels coming out in the following weeks.
A while back, we added an Extra Crunch member benefit where all EC members can receive 100,000 Brex Rewards points if they sign up for a new Brex account. Now, those points can also be transferred to JetBlue, perhaps for those fancy Mint seats between New York and SF. We are going to continue to add new member benefits, so do let us know if you have any interesting ideas or want to partner with us.
Finally, we now have a new Twitter handle for Extra Crunch: @extracrunch. We will be retweeting all EC articles on the handle, and later on, will be exploring other ways to engage with members through Twitter. Follow us!
Top venture capital partner recruiter (among other verticals) Dan Miller of True Search describes what it takes to become an investor these days at a VC firm:
If you are interviewing for operating roles in companies in parallel to interviewing with VC firms, you will get multiple offers (probably quite good ones) in the former category before you’ve made it far in the latter. It is exceedingly common in the VC Partner searches I run to find out that an excellent candidate has multiple strong offers in Product roles from big tech companies and hot startups, for example, before they’ve made it halfway through a VC interview process.
TechCrunch’s apps maven Sarah Perez is starting a new, occasional series on the most important developments in the app world along with her analysis of what’s taking place. This week, she explores AltStore, a new type of app store, iOS 13 adoption trends, an App Annie acquisition, and five or so other stories: