Silicon Valley air purifier startup Molekule was born out of an idea Florida University Dr. Yogi Goswami had back in the 90’s using photo-voltaic technology to kill air pollutants. His son, a young boy at the time, suffered from severe allergies and Dr. Goswami wanted to build something those like him could use in their home to clear the air. But the sleekly designed Molekule took a bit of a blow last fall when Wirecutter called it “the worst air purifier we’ve ever tested.”
Molekule has since told TechCrunch comparing its PECO technology to the more common HEPA air filter technology is like comparing apples to oranges. “Up until now, everything has been air filtration, not real air purification,” co-founder and CEO of the company Jaya Rao told TechCrunch.
To disprove the naysayers, Molekule sent off its tech for testing at the Berkeley Lab, which concluded no measurable amount of VOC’s or ozone were emitted, Molekule effectively removed harmful chemicals in the air like toluene, limonene, formaldehyde as well as ozone and that “no secondary byproducts were observed when the air cleaner was operated in the presence of a challenge VOC mixture.”
Compare that to Wirecutter’s own assessment that, “on its auto setting, which is its medium setting, the Molekule reduced 0.3-micron particulates by (in the best case) only 26.4 percent over the course of half an hour. Compare that with the 87.6 percent reduction the Coway Mighty achieved on its medium setting.” TechCrunch reached out to Wirecutter and was told it still stands by its findings and does not recommend consumers purchase a Molekule.
It should be noted Consumer Reports also tested the Molekule device and it, too, did not recommend a purchase as the unit was not “proficient at catching larger airborne particles.” However, Molekule demonstrated to other news outlets at its own facilities that the photochemical reaction in its units did break down contaminants and kill mold spores.
“To test PECO technology you actually need really sophisticated equipment,” Rao said. “Boiling it down to really simple factors is not enough because air is made up of many tiny but toxic things. These are air-born chemicals nanometers in size, which Wirecutter admittedly did not test at all for.”
Wirecutter’s Tim Heffernan disputes Molekule’s claims of superiority in the category, however. “Now they are comparing apples to oranges,” he told TechCrunch. “The claims about destroying bacteria and viruses, for example, HEPA filters capture them and they capture them permanently.”
So how’s a consumer to know what’s right? First, take into account Molekule commissioned the Berkeley Lab for their independent testing and that Wirecutter and Consumer reports ran their own independent testing. However, it might boil down to understanding the premise of the technology. HEPA filters came out of the Manhattan Project in the 40’s, when scientists needed to develop a filter suitable for removing radioactive materials from the air. It works by capturing and filtering out harmful particles, viruses and mold. However, PECO, the technology in a Molekule unit, uses the science of light to kill mold and bacteria and break down harmful particulates in the air.
Regardless of whether you want an air purifier that captures particulates or breaks them down, Molekule has continued to move forward. The company has since launched a mini unit meant for smaller rooms and started to grow business verticals outside of the direct-to-consumer model, forging partnerships with hotels and hospitals.
It has also raised just announced a raise of $58 million in Series C funding, bringing just over $91 million to its coffers. Rao tells TechCrunch the raise was unexpected but came out of chats with Samantha Wang from RPS Ventures, which led the round.
“We feel confident in Molekule’s PECO technology, and have taken an extensive look at the science behind it. It is not only backed by decades of academic research, it has also gone through the peer-reviewed process numerous times, and has been tested and validated by third-party scientists and laboratories across the country,” Wang told TechCrunch.
Molekule also tells TechCrunch it has seen a healthy growth trajectory in the past year, despite the negative press. According to the company, Molekule has seen a 3x increase in our year over year filter subscription revenue since launch and its repeat customer growth sits at about 200%.
It’s a well-designed, though pricier air purification machine with an interesting future in the commercial space, particularly in hospitals, schools, commercial manufacturing, and hotels, as Wang points out. As long as the tech truly works.
Other participation in the round included Founder’s Circle Capital and Inventec Appliances Corp (IAC). Existing investors Foundry Group, Crosslink Capital, Uncork Capital, and TransLink Capital also participated in the financing.
French startup Cityscoot is raising a $25.6 million (€23.6 million) funding round from Allianz France, Demeter as well as existing investors Groupe RATP and Banque des Territoires. The startup is also raising at least $6.5 million (€6 million) in debt in order to finance its service.
Cityscoot is a free-floating electric scooter service (moped scooters). Users can locate and unlock scooters using a mobile app. You can then park it and lock it again.
The service is currently live in Paris, Nice, Milan and Rome. With today’s funding round, the startup plans to expand to two new European cities, starting with Barcelona in May 2020. Cityscoot will operate a fleet of 8,000 scooters.
In Paris alone, Cityscoot handles 15,000 to 25,000 trips per day. Each trip lasts 15 minutes on average. Given that you pay €0.24 to €0.34 per minute, it means that Cityscoot is generating tens of thousands of euros of revenue per day in Paris.
Over the past few months, Cityscoot has partnered with Uber so that you can locate and unlock scooters straight from the Uber app. It looks like the integration isn’t live yet.
Cityscoot’s main competitor Coup shut down a couple of months ago. “Even though Coup is a well-known brand in this market with a loyal customer base that regularly uses our services, operating Coup in the long term has become economically unsustainable,” the company said at the time.
Unit economics could be the reason why Cityscoot recently raised its prices. If you don’t top up your account, you now pay €0.34 per minute instead of €0.29 per minute. You pay less if you buy prepaid packages. This could be a great way to foster recurring use.
Recapped. Layoffs. Slowdown. CEO transition. Budget cuts. Downsizing.
In spite of a spate of massive startup exits the last few months, culminating in fintech’s shining moment yesterday with Intuit’s $7.1 billion acquisition of Credit Karma, it’s been a tough period for the startup world. Layoffs abound, centered perhaps on SoftBank’s Vision Fund portfolio but hardly exclusive to it. Startups, both infamous and unheard of, are shutting their doors. And that doesn’t even being to factor in the global macro concerns like coronavirus that will drive investor sentiment this year.
There’s a bit of a malaise underway in the startup world, a sense that possibilities are closing, that everything that will be built has been built, that tech itself is under an excruciating microscope by the public that makes innovation impossible.
All of that may well be true. And yet, there remains so, so much more to get done.
Whole sectors of the economy still need to be completely rebuilt from the ground up. Health care is barely digital, never personalized, and based on almost no evidence or data whatsoever. Construction costs for housing and infrastructure have skyrocketed, with almost no real benefit to the end user whatsoever. Millions of people are facing student debt crises, and yet our school system doesn’t look all that much different from a century ago.
Climate change itself is going to eat away at more and more of the planet, just as several billion more people come online, join the industrial and knowledge economies, and demand the same amenities offered in the developed world. How do we offer air conditioning, housing, transportation, health care, and more to every human on the planet? We need to 100x the global GDP while cutting carbon emissions, and billions of people are counting on us.
Within organizations, we are still just beginning to figure out how design, data, and decisions work together to drive product innovation and growth. I just wrote about a prototyping tool yesterday, following up on my colleague Jordan Crook’s look at what has been happening in the design world. Yes, the tools are getting better, but what would happen if a million more people could effortlessly design? Or what would happen if billions of people had access to no code platforms more broadly? What could we empower them to create?
Or just take our general experience with digital products. Our phones are faster, the photos they take are at exquisite resolutions, and their svelte materiality remains superb. But do they really offer a seamless experience? I am still syncing files, tracking emails, attempting to connect a lunch meeting to my calendar and not dropping the details while flicking my fingers back and forth. The mundane nature of our daily software usage belies the reality that we use ridiculously elementary tools compared to what is possible even with today’s technology, no hand waving required.
And then there is data. The data revolution in business, entertainment, government, and more is barely in its infancy. Data may be slushing around large enterprises, but it hardly makes a dent on decision-making, even today. What would happen if we could use data more effectively? What if we could explore data even faster than today’s clunky BI tools? What if the best patterns for exploring data were readily available to every single person on Earth? What if we could instantly and easily build best-of-breed AI models to solve even our simplest decision-making problems?
I could go on for pages and pages. From specific markets, to the dynamics within communities, and societies, and companies, to the end users and the products they are offered, we are nowhere near the end of the innovation cycle. This isn’t Detroit circa a century ago, when hundreds of auto manufacturers and related companies eventually combined into a handful of today’s behemoths. There is still so much to do, and FAANG can’t do it all.
What’s crazy is that within the right circles, there has never been a wider sense of awe at the gap between what we know to do and what we know we need to do. There are so many unsolved challenges today worth exploring that could not only help the lives of tens of millions of people, but that could also be multi-billion dollar economies themselves.
And so we need to bifurcate our sentiments. We do need to memorialize the failed startups, the ambitions that never quite made it. We need to recognize when mistakes are made, and have empathy for those affected by them. We shouldn’t ignore the negative news of our industry at all lest we repeat the same blunders.
Yet, a positive sentiment in the face of this avalanche of negative news and critical analysis is vital. You have to keep your eye on the future, on the change, on the power that still rests with all of us to make a difference right now. So much needs to be done, and the day is still young.
The night before the Robotics + AI event at UC Berkeley, TechCrunch is hosting a private Pitch Night, featuring innovative startups in robotics and artificial intelligence. After reviewing hundreds of applications, TechCrunch selected the early-stage startups below to pitch in front of industry executives, TC writers and our expert panel of judges: Brian Heater (TC’s own Hardware Editor), Aaron Jacobson (NEA), Jennifer Roberts (Grit Ventures) and Rob Coneybeer (Shasta Ventures).
Founders will pitch in front of the crowd followed by a tough Q&A from the judges. After all companies have pitched, the judges will select the top five teams to demo onstage at the main event on March 3: TC Sessions: Robotics + AI.
Check out the featured companies here:
To see the startups pitching at the main event, book your $345 General Admission ticket today and save $50 before prices go up at the door. But no one likes going to events alone. Why not bring the whole team? Groups of four or more save 15% on tickets when you book here.
Six weeks after we broke the news that cannabis startup Eaze was running out of money, laying off more employees and scrambling to pay its bills and stay afloat as it worked on a pivot to selling its own supply rather than just that of third-party providers, the company has finally closed some funding and appears to be moving forward with its plans.
Today Eaze — which claims to have 600,000 registered customers and completed 5 million legal deliveries — confirmed a bridge round of $15 million, plus a further $20 million as part of a Series D round of funding, totaling $35 million in funding. It will be using the money to help steer the company away from its original pure-marketplace model — where it worked with third parties to source cannabis products, which it then sold on and delivered to users — and into a strategy based around the idea of “verticalization,” where Eaze itself will be running a retail and distributor operation of its own, alongside the resale of some 100 licensed brands via retail partners.
“Verticalization is Eaze’s second act,” said CEO Ro Choy in a statement. “Until now, we’ve invested in proving our market fit, building an enormous and loyal customer base, and becoming California’s biggest marketplace for legal cannabis delivery. Now, we’re proving we can make this business work in a more sustainable and profitable way, while continuing to grow Eaze’s existing services.”
We had reported that the fundraising was in the works in January. The Series D portion of the funding is coming from a group of investors led by a firm called FoundersJT LLC, and the bridge round is coming from Rose Capital and DCM, both previous investors. Eaze said that it has the facility to extend the Series D by another $20 million. It’s not disclosing its valuation.
The news brings some resolution to a very troubled period at the startup, which has been through through several executive changes, a couple of rounds of layoffs, and general employee attrition — losing key people like its chief strategy officer, its chief of staff and a number of engineering staff — while struggling to build out a sustainable business working with cannabis retailers to use the Eaze platform to resell and deliver their products.
Eaze’s big promise was to come out early and build a brand in the cannabis market, a very emerging area of consumer goods that had only relatively recently been decriminalised in California (and is still not completely legal everywhere).
Tapping a new opportunity to sell cannabis products to a new class of consumers — those who might not have been keen to purchase products when they were illegal, or already regular or semi-regular cannabis users who were happy to pay more for the convenience of using an app to shop and get delivery — Eaze believed that California’s move was just the beginning of a bigger swing and it projected growth across the US accordingly. With one of its co-founders formerly an executive from Yammer, it became the first cannabis startup to raise money from Silicon Valley VCs, and positioned itself as the “Uber of pot.”
But as we’ve seen time and again, being an early mover is not always the best position in the tech world.
The legalisation swing has not played out quite as Eaze predicted, and so the startup’s national expansion plans were curtailed. Meanwhile, in addition to dealing with the basic struggles that every e-commerce company faces — customer acquisition, logistics and scaling a company’s business, talent and so on — Eaze has had a number of challenges particular to its specific industry.
They included issues around payment acceptance — credit card companies didn’t want to allow the company to accept card payments, so for a while it operated on a cash-only model, prone to error, fraud and more — through to poor (negative) margins reselling other retailers’ products. And ultimately, legalisation meant a lot of price and product competition when it came to capturing customers.
The funding Eaze finally announced today (which it has been trying to close for months) will be used in part to help specifically with a few of these challenges: margins and supply.
We reported in January that Eaze was in the process of buying assets from a bankrupt former partner, DionyMed (which had, at one point, also been involved in a complicated lawsuit against Eaze), and that deal now has closed.
Eaze will now resell product from DionyMed’s former subsidiary Hometown Heart (HTH), which has depots in Oakland and San Francisco, and Eaze said it will expand that with its own consumer brands “in partnership with local licensees while continuing to support a broad array of independent, world-class California brands and independent licensed retailers across the state.”
Despite all of the above problems, Eaze’s basic business appears to have been growing, which is likely the reason why the company and its investors believe there is something worth saving and restructuring.
Eaze said that in 2019 it had a 97% annual increase in new sign-ups; 74% annual increase in first-time deliveries; a 71% annual increase in overall deliveries; and 104% annual increase in customers age 50+. Notably, it did not disclose today how many repeat, loyal customers it has amassed in that growth, so that is one to watch going forward.
Along with the funding news it announced today, Eaze also said that Megan Miller, who had formerly been in finance, was appointed its new COO, while John Curtis became the new CFO.
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
Over the past three months, a number of financial events have occurred in the fintech and finservices world that have caught our eye. Between two rounds at $500 million and two exits in the billions of dollars, financial technology and services startups have been on fire.
Today I’d like to rewind and go over the four largest events from the past three months in fintech and finservices (total value: $13.4 billion) and pull in data on other rounds that have happened recently. This will help us get a handle on what’s going on in the two heated startup sectors.
Recall that our last look into fintech’s venture activity wrapped up its Q4 2019 results. Today, thanks to the punishing news cycle that the sector has kept up over the last few weeks, we’re going a bit further. Into the breach!
We have two rounds ($500 million rounds for Revolut and Chime) and two sales (exits for Plaid and Credit Karma) to wrap up today. Here’s what each of those deals might tell us about the current market for money-focused startups and investment, starting with our two rounds and followed by our two exits:
CoolBitX, a blockchain security startup based in Taiwan, announced today it has raised $16.75 million in Series B funding, led by returning investor SBI Holdings, a Japanese financial group.
Korean cryptocurrency exchange Bitsonic, Monex Group, another Japanese financial group, and Taiwan’s National Development Fund also participated.
Founded in 2014, CoolBitX makes two products. One is CoolWallet S, a Bluetooth-enabled hardware wallet for cryptocurrency. The other is called called Sygna, a solution created to help virtual asset service providers (VASPs) become compliant with a new rule passed last year by the Financial Action Task Force (FATF).
Referred to as the “travel rule,” it is meant to prevent money laundering and the financing of terrorist acts by requiring virtual asset service providers to collect personally identifiable information (PII) from customers during transactions. All virtual asset service providers in FATF member countries need to comply by June.
With its new funding, CoolBitX plans to expand Sygna’s presence beyond the Asia-Pacific region. The startup says that 12 cryptocurrency exchanges have already signed memorandums of understanding with it and are currently using or testing Sygna, including SBI VC Trade, Coincheck, Bitbank, DMM Bitcoin, BITpoint, MaiCoin, BitoPro and Ace.
CoolBitX founder and CEO Michael Ou told TechCrunch in an email that Sygna’s deployment helps differentiates it from competitors like Shyft and Ciphertrace, which also offer travel rule compliance solutions, because it has been tested and proven by users.
“In addition, Sygna ensures that VASPs can quickly comply with new regulations with minimal disruptions to their day-to-day operations,” he added. “By focusing on seamless user experience, maximum security during the transmission of data, Sygna aims t facilitate the mainstream adoption of the crypto currency.”
In a press statement, SBI Holdings president and CEO Yoshitaka Kitao said, “As one of the early investors in CoolBitX, SBI Holdings is happy to see the breakthroughs made by the CoolBitX team to drive cryptocurrency adoption forward. As such, we are delighted to participate in our second tranche of investment in CoolBitX. The borderless nature of digital assets requires a solution that isn’t bound by geographical boundaries and we are proud to partner with CoolBitX on their journey to bring a secure and easy-to-implement system to the world.”
Southeast Asian on-demand transport startup Gojek denies that it is involved in talks to merge with Grab but today Grab announced a piece of news that — at the very least — will divert attention from that story, or more likely stoke the fires of speculation that it is indeed gearing up for a deal: Grab said that it has raised $856 million more in funding, in two tranches from strategic Japanese investors, specifically to help grow the other arm of its business, in payments and financial services. Grab did not disclose its valuation with the latest investments.
The news comes directly on the heels of rumors that Grab is in talks to merge with its big regional rival, Gojek . Gojek has denied the reports directly to TechCrunch, while Grab declined to comment (but pointedly did not deny) although a source close to one of them confirms that they have been talking for 3.5 months — starting just after Gojek founder and former CEO left the company in October to join Indonesian president Joko Widodo’s cabinet.
Ever since GoJek founder left the startup, there has been internal tension at the firm, the source said. The tension escalated after GoJek failed to secure new funds from SoftBank, the talks of which have not been previously reported, the source said. This led the startup’s board to push for a merger.
The funding is coming in two tranches that were actually announced separately.
The first, from Mitsubishi UFJ Financial Group, Inc, will see the firm invest “up to $706 million into Grab to jointly develop next generation bespoke financial services in Southeast Asia to boost financial inclusion in the region,” the two said in a joint statement. MUFG and its regional affiliates will also become “First Choice Bank” to Grab, meaning that Grab will use MUFG first in countries where it operates when it requires a banking partnership for payments or other financial services.
The second tranche is coming from TIS INTEC, an IT solutions business out of Japan, which is putting in $150 million along with a strategic deal to help Grab develop the infrastructure needed to run is growing financial services business, starting with digital payments by way of GrabPay.
Both deals are important not just for Grab but its new investors, which are looking for more opportunities and customer channels into a wider region of Asia beyond their common home market of Japan.
Grab’s growth of its “super app” — in which it (like others pursuing a similar strategy) provides a one-stop shop for consumers to both see to their transportation needs, but also other aspects of their connected consumer life, such as eating, entertainment and managing their money — has involved the company partnering with a number of other financial giants, including Mastercard, Credit Saison, Chubb, and ZhongAn Online P&C Insurance Co. Ltd.
“MUFG’s investment into Grab is a vote of confidence in our super app strategy and our ability to build a long-term, sustainable business. Together with MUFG, we look forward to playing a key role in driving financial inclusion in Southeast Asia and offering greater and affordable access to financial products and services to millions of customers across the region,” said Ming Maa, President, Grab, in a statement.
“MUFG has been developing business in Southeast Asia by building a platform centered on our partner banks. We are excited to be able to provide customers with next-generation financial services by combining Grab’s advanced technologies and data management expertise with our financial knowledge and know-how,” said Hironori Kamezawa, Deputy President, Group COO & Group CDTO, MUFG, in a statement. “We believe that this alliance will also generate additional momentum for our ongoing digital transformation of MUFG.”
The financing development looks like it may have been precipitated by the report that surfaced on Monday from The Information, which reported that it is in merger discussions with Gojek, a ride-hailing business based out of Indonesia and also a big player in on-demand transportation and related services in the region.
A Gojek spokesperson told TechCrunch that “there are no plans for any sort of merger, and recent media reports regarding discussions of this nature are not accurate.” A Grab representative, meanwhile, said that the company declines to comment on market rumors and speculation.
A merger is one possible solution to the costly rivalry being waged by the two companies in Southeast Asia and the statements may be an effort to ward off attention before a deal nears completion.
With a $14 billion valuation and investors including SoftBank, Uber and Didi Chuxing, Grab is the larger company, but it competes head-to-head in Indonesia with Gojek, which has financial backing from Tencent, Google and Visa, among others. Both companies have expanded beyond ride-hailing into a wide range of services, including food deliveries and payments, through their apps.
The logic here is that while ride-hailing has proven to be a very popular business (both in terms of attracting drivers and passengers in the two-sided marketplace), the unit economics of ride-hailing on their own have nevertheless proven time and again to be disastrous — largely because the operational costs needed to build and run these kinds of businesses are just too high when you take into account the competitive landscape.
The biggest companies in the space, such as Uber, have reported billions of dollars in operating losses, leading them to divest of some of the most unprofitable efforts to once-rivals — Grab for example has become involved in Uber’s business in Southeast Asia — and, parallel to that, invest big in expanding to other services to capitalise on their economies of scale.
Thus, with Grab and Gojek, the pair have expanded into delivering other things besides passengers — such as food — and using the financial relationships they already have with users paying for transport in the app to provide other financial services.
But even that may not be enough to tip into the black — a need that investors would have eventually called in, after handing over billions in funding and waiting sometimes for many years to get a return. And that, most likely, is why we are now hearing about deals like this, and will probably hear about more in other regions, too.
According to the Information, executives from Gojek and Grab have met occasionally over the past several years, and began to discuss a merger more seriously recently. But for now it’s the usual story: the two disagree over the businesses’ valuations and how control of the combined company would be split, with Grab telling its major investors that Gojek wants its shareholders to hold 50% of its combined Indonesian operations, and wish to avoid Gojek’s operations getting absorbed by Grab.
If these talks don’t find their way to a signed contract, it’s not clear whether Gojek will have to go out for more funding, or if either/both will look for other strategic partners. One thing is certain: the bigger consolidation trend does mean the field of players is getting smaller.
If they agree to merge, the two companies would potentially also deal with regulatory challenges similar to the ones Grab had to deal with when it bought Uber’s Southeast Asia operations in 2018.
Speedinvest, the European seed-stage VC that was started from Vienna but has since added offices in London, Berlin, Munich and San Francisco, has raised a new €190 million fund. It brings the firm’s total assets under management to more than €400 million.
Describing its third fund as “oversubscribed” and ahead of schedule, SpeedInvest’s remit remains largely the same. The VC writes first cheques of between €50,000 and €1.5 million, but has also set aside €100 million of the fund for follow-on investments in its most promising portfolio companies.
Sector-wise, Speedinvest says it is targeting fintech, “deep tech”, marketplaces, industrial tech, digital health and consumer tech startups — so a pretty wide brief. To make this possible, the firm has what it describes as 40 investment professionals divided into teams working across these five sectors.
In addition, the VC claims 20 “operational experts” providing portfolio companies with “full-service HR, growth marketing, business development, and U.S. expansion support”.
Cue statement from Speedinvest CEO Oliver Holle: “Having been a founder myself, I have a clear view on value creation by investors. You need to deliver sector-specific, operationally relevant input that goes far beyond boardroom advice and cash. In our experience, the best way to do that is to be face-to-face with our founders”.
Meanwhile, Speedinvest’s portfolio includes a number of Europe’s fast-growing tech companies, such as insurtech Wefox (€235 million Series B), e-scooter rentals company Tier Mobility (€55 million Series B), and fintech Curve (€50 million Series B). Other notable investments include Coachhub, TWAICE, Billie, Tourradar, Inkitt and Luko.
In fact, Speedinvest says it has already invested in over ten startups from this new fund.
Separately, it says it will be increasing its on the ground presence in France this Spring, where it has already invested in companies such as Luko, Lemon Way, Actiondesk and FairMoney.
Fintech startup Revolut is raising a large Series D round of funding. TCV is leading the $500 million round, valuing the company at $5.5 billion. Over the past few years, Revolut has raised $836 million in total.
If you’re not familiar with Revolut, the company is building a financial service to replace traditional bank accounts. You can open an account from an app in just a few minutes. You can then receive, send and spend money from the app or using a debit card.
On top of that, Revolut has added a ton of features that it has built in-house or through partnerships. You can insure your phone, get a travel medical insurance package, buy cryptocurrencies, buy shares, donate to charities, save money and more.
Revolut currently has more than 10 million customers, mostly in Europe and the U.K. The company doesn’t share specific numbers when it comes to transaction volume and monthly active customers, but here are some percentage-based metrics:
With the new influx of cash, the company says that it’ll focus on improving its product for existing users as well as revenue. It’s all about making Revolut more useful and stickier going forward.
In particular, you can expect new lending services for both retail customers as well as companies using Revolut for Business. While Revolut provides a ton of services in the U.K., customers in other markets don’t have the same feature set. For instance, Revolut recently launched savings vaults in the U.K. — customers in other markets will be able to open savings sub-accounts in the future, as well.
Other than that, Revolut wants to double down on the core features. The company will improve its two subscription tiers (Premium and Metal) and improve banking operations across Europe — you can expect full bank accounts in Europe in the future.
There are currently 2,000 people working for Revolut. “We’re on a mission to build a global financial platform — a single app where our customers can manage all of their daily finances, and this investment demonstrates investor confidence in our business model. Going forward, our focus is on rolling-out banking operations in Europe, increasing the number of people who use Revolut as their daily account, and striving towards profitability,” Revolut co-founder and CEO Nik Storonsky said in the release.
Revolut is currently live in the U.K., Europe, Singapore and Australia (in beta). While the company has announced plans to expand to a handful of countries, the main focus is on launching in the U.S. and Japan in the coming months.
Oxx, a European venture capital firm co-founded by Richard Anton and Mikael Johnsson, this month announced the closing of its debut fund of $133 million to back “Europe’s most promising SaaS companies” at Series A and beyond.
Launched in 2017 and headquartered in London and Stockholm, Oxx pitches itself as one of only a few European funds focused solely on SaaS, and says it will invest broadly across software applications and infrastructure, highlighting five key themes: “data convergence & refinery,” “future of work,” “financial services infrastructure,” “user empowerment” and “sustainable business.”
However, its standout USP is that the firm says it wants to be a more patient form of capital than investors who have a rigid Silicon Valley SaaS mindset, which, it says, often places growth ahead of building long-lasting businesses.
I caught up with Oxx’s co-founders to dig deeper into their thinking, both with regards to the firm’s remit and investment thesis, and to learn more about the pair’s criticism of the prevailing venture capital model they say often pushes SaaS companies to prioritize “grow at all costs.”
TechCrunch: Oxx is described as a B2B software investor investing in SaaS companies across Europe from Series A and beyond. Can you be more specific regarding the size of check you write and the types of companies, geographies, technologies and business models you are focusing on?
Richard Anton: We will lead funding rounds anywhere in the range $5-20 million in SaaS companies. Some themes we’re especially excited about include data convergence and the refining and usage of data (think applications of machine learning, for example), the future of work, financial services infrastructure, end-user empowerment and sustainable business.
Boris Renski, the co-founder of Mirantis, one of the earliest and best-funded players in the OpenStack space a few years ago (which then mostly pivoted to Kubernetes and DevOps), has left his role as CMO to focus his efforts on a new startup: FreedomFi. The new company brings together open-source hardware and software to give enterprises a new way to leverage the newly opened 3.5 GHz band for private LTE and — later — 5G IoT deployments.
“There is a very broad opportunity for any enterprise building IoT solutions, which completely changes the dynamic of the whole market,” Renski told me when I asked him why he was leaving Mirantis. “This makes the whole space very interesting and fast-evolving. I felt that my background in open source and my existing understanding of the open-source landscape and the LTE space […] is an extremely compelling opportunity to dive into headfirst.”
Renski told me that a lot of the work the company is doing is still in its early stages, but the company recently hit a milestone when it used its prototype stack to send messages across its private network over a distance of around 2.7 miles.
Mirantis itself worked on bringing Magma, a Facebook-developed open-source tool for powering some of the features needed for building access networks, into production. FreedomFi is also working with the OpenAirInterface consortium, which aims to create an ecosystem for open-source software and hardware development around wireless innovation. Most, if not all, of the technology the company will develop over time will also be open source, as well.
Renski, of course, gets to leverage his existing connections in the enterprise and telco industry with this new venture, but he also told me that he plans to leverage the Mirantis playbook as he builds out the company.
“At Mirantis, our journey was that we started with basically offering end-to-end open-source cloud buildouts to a variety of enterprises back when OpenStack was essentially the only open-source cloud project out there,” he explained. “And we spent a whole bunch of time doing that, engaging with customers, getting customer revenue, learning where the bottlenecks are — and then kind of gradually evolving into more of a leveraged business model with a subscription offering around OpenStack and then MCP and now Kubernetes, Docker, etc. But the key was to be very kind of customer-centric, go get some customer wins first, give customers a services-centric offering that gets them to the result, and then figure out where the leveraged business model opportunities are.”
Currently, enterprises that want to attempt to build their own private LTE networks — and are willing to spend millions on it — have to go to the large telecom providers. Those companies, though, aren’t necessarily interested in working on these relatively small deployments (or at least “small” by the standards of a telco).
Renski and his team started the project about two months ago and for now, it remains self-funded. But the company already has five pilots lined up, including one with a company that produces large-scale events and another with a large real estate owner, and with some of the tech falling in place, Renski seems optimistic that this is a project worth focusing on. There are still some hurdles to overcome and Renski tells me the team is learning new things every day. The hardware, for example, remains hard to source and the software stack remains in flux. “We’re probably at least six months away from having solved all of the technology and business-related problems pertaining to delivering this kind of end-to-end private LTE network,” he said.
David Renteln, the Los Angeles-based co-founder of Soylent and the co-founder and chief executive of new nicotine gum manufacturer Lucy Goods, thinks there should be a better-tasting, less-medicinal offering for people looking to quit smoking.
That’s why he founded Lucy Goods, and that’s why investors, including RRE Ventures, Vice Ventures and FundRX joined previous investors YCombinator and Greycroft in backing the company with $10 million in new funding.
“We reformulated nicotine gum and the improvements that we made were to the taste, the texture and the nicotine release speed,” said Renteln.
These days, any startup that’s working on smoking cessation or working with tobacco products can’t avoid comparisons to Juul — the multi-billion-dollar startup that’s at the center of the surge in teen nicotine consumption.
“The Juul comparison is something that’s obviously top of people’s minds,” Renteln said. “It’s important to note that there’s a huge difference in nicotine products.”
Renteln points to statements from former Food and Drug Administration chief, Scott Gottlieb (who’s now a partner at the venture firm New Enterprise Associates), which drew a distinction between combustible tobacco products on one end and nicotine gums and patches on the other.
“Nicotine isn’t the principle agent of harm associated with these tobacco products,” said Rentlen. “It’s addictive but not inherently bad for you.”
Lucy Goods also doesn’t release its nicotine dosage in a concentrated burst like vapes, which are designed to replicate the head rush associated with smoking a cigarette, said Renteln.
“It is a stimulant and they will get a sensation, but it’s not as intense as taking a very deep drag of a cigarette,” Renteln said.
The company’s website also doesn’t skew to young, lifestyle marketing images. Instead, there are testimonials from older, ex-smokers hawking the Lucy gum.
“I don’t want anyone underage using any nicotine product or any drug in general… [and] the flavors have been around for a long time.”
Joining Renteln in the quest to create a better nicotine gum is Samy Hamdouche, a former business development executive at several Southern California biotech startups and the previous vice president of research at Soylent.
For both men, the idea is to get a new product to market that can help people quit smoking — without a social stigma — Renteln said.
“Smoking is the leading cause of preventable death in the United States claiming over 480,000 lives every year and costing the U.S. an estimated $300 billion in direct health costs and lost productivity. Lucy is committed to bringing innovative nicotine products to the market to eliminate tobacco related harm and we’re proud to be part of their journey,” said RRE investor, Jason Black in a statement.
[Editor’s note: Want to get this weekly review of news that startups can use by email? Just subscribe here.]
How well do Robinhood’s financials stack up against incumbent online brokerages? While we wait for the seven-year-old company’s long-planned IPO, Alex Wilhelm examined Morgan Stanley’s big $13 billion purchase of E-Trade for fresh data comparison points. Robinhood has 10 million accounts — twice what E-Trade has — but it also appears to make much less money per user and has far fewer assets under management, as he covered for Extra Crunch. So while its fee-free approach has destroyed a key revenue stream for competitors, it still has to grow its own “order-flow” business into its private-market valuation.
One solution is to make the platform stickier via social features. On the same day as the E-Trade deal announcement, Robinhood launched a new Profiles feature to encourage users to share stock tips. Josh Constine explored the offering and where it is headed on TechCrunch, concluding that “Profiles and lists, and then eventually more social features, could get Robinhood’s users trading more so there’s more order flow to sell and more reason for them to buy subscriptions.”
Alex also took a look at a new report on fintech funding, which found last year was a peak overall — but skewed towards later-stage companies. Certainly, the wealth management segment is looking mature.
But the category is massive, with many more incumbents left to disrupt. What are fintech investors looking for? Check out our popular investor survey on this topic from November.
“Our mandate is any technology that can be strategic to the real estate industry,” the prolific investor told Connie Loizos in an extended interview for Extra Crunch this week. While WeWork may have depressed some investor interest, plenty of models are working great across various segments — so he and his partners are raising more funds. One of the hottest sectors, perhaps surprisingly, is in sustainable buildings. As Wallace details, public pressure, large-tenant pressure, large-investor pressure and new metro requirements have removed any choice that the industry has in the matter:
Make no mistake; we are front-and-center to what is happening in the real estate industry and the collision with technology, and this is the single-most-important thing that has happened to the real estate industry in the last five decades. The real estate industry is going to have to go carbon-neutral and that is brand-new.
Is this sector also your focus? Be sure to check out our survey of investors in construction robotics from last week to find out some of the latest opportunities, plus our overview survey of real estate and prop tech investors from November.
Ahead of our big robotics conference at UC Berkeley in early March, we have been producing a whole series of surveys on robotics verticals. This week, our resident financial analyst Arman Tabatabai teamed up with our hardware editor turned conference organizer, Brian Heater, to do a series of interviews with VCs who are focused on warehouse and manufacturing robotics. Investors include:
Our media columnist Eric Peckham wants to feature your advice in two upcoming articles. If you have relevant expertise, click the links below and share your opinions.
This week was a fun combination of early-stage and late-stage news, with companies as young as seed stage and as old as PE-worthy joining our list of topics.
This week the team argued about org-chart companies, debt raises, some of the items mentioned above, and much more. Details here.
Financial services startups raised less money in 2019 than they did in 2018 as VC firms looked to back late stage firms and focused on developing markets, a new report has revealed.
According to research firm CB Insights’ annual report published this week, fintech startups across the world raised $33.9 billion* in total last year across 1,912 deals*, down from $40.8 billion they picked up by participating in 2,049 deals the year before.
It’s a comprehensive report, which we recommend you read in full here (your email is required to access it), but below are some of the key takeaways.
Early-stage deals dropped to a 12-quarter low as deal share globally shifts to mid- and late-stages (CB Insights)
The fintech market globally today has 67 unicorns as of earlier this month (CB Insights)
2019 saw 83 mega-rounds totaling $17.2B, a record year in every market except Europe
*CB Insights report includes a $666 million financing round of Paytm . It was incorrectly reported by some news outlets and the $666 million raise was part of the $1 billion round the Indian startup had revealed weeks prior. We have adjusted the data accordingly.
Some of Latin America’s leading venture capital investors are now backing hotel chains.
In fact, Ayenda, the largest hotel chain in Colombia, has raised $8.7 million in a new round of funding, according to the company.
Led by Kaszek Ventures, the round will support the continued expansion of Ayenda’s chain of hotels in Colombia and beyond. The hotel operator already has 150 hotels operating under its flag in Colombia and has recently expanded to Peru, according to a statement.
Financing came from Kaszek Ventures and strategic investors like Irelandia Aviation, Kairos, Altabix and BWG Ventures.
The company, which was founded in 2018, now has more than 4,500 rooms under its brand in Colombia and has become the biggest hotel chain in the country.
Investments in brick and mortar chains by venture firms are far more common in emerging markets than they are in North America. The investment in Ayenda mirrors big bets that SoftBank Group has made in the Indian hotel chain Oyo and an investment made by Tencent, Sequoia China, Baidu Capital and Goldman Sachs, in LvYue Group late last year, amounting to “several hundred million dollars”, according to a company statement.
“We’re seeking to invest in companies that are redefining the big industries and we found Ayenda, a team that is changing the hotel’s industry in an unprecedented way for the region”, said Nicolas Berman, Kaszek Ventures partner.
Ayenda works with independent hotels through a franchise system to help them increase their occupancy and services. The hotels have to apply to be part of the chain and go through an up to 30-day inspection process before they’re approved to open for business.
“With a broad supply of hotels with the best cost-benefit relationship, guests can travel more frequently, accelerating the economy,” says Declan Ryan, managing partner at Irelandia Aviation.
The company hopes to have more than 1 million guests in 2020 in their hotels. Rooms list at $20 per-night, including amenities and an around the clock customer support team.
Oyo’s story may be a cautionary tale for companies looking at expanding via venture investment for hotel chains. The once high-flying company has been the subject of some scathing criticism. As we wrote:
The New York Times published an in-depth report on Oyo, a tech-enabled budget hotel chain and rising star in the Indian tech community. The NYT wrote that Oyo offers unlicensed rooms and has bribed police officials to deter trouble, among other toxic practices.
Whether Oyo, backed by billions from the SoftBank Vision Fund, will become India’s WeWork is the real cause for concern. India’s startup ecosystem is likely to face a number of barriers as it grows to compete with the likes of Silicon Valley.
The Business of Fashion, which first reported the news, said the transition follows a previously unreported capital injection from Outdoor Voices’ investors at a lower valuation than previous rounds. It says the company tried raising new funding late last year but “had difficulty.”
We reached out to Haney directly earlier today, as well as board members from the venture firms that have backed the company, including General Catalyst and Forerunner Ventures. We have yet to hear back from those investors, but the company sent us the following: “As we look to grow and to scale, Tyler Haney has transitioned from her role as Chief Executive of Outdoor Voices to a new position as Founder. We have raised another round of financing from our current investor group to support our growth and expansion moving forward. Tyler will remain a member of the Board of Directors and will assist with the search for a new CEO. Until we fill that role, Cliff Moskowitz will serve as the Company’s Interim CEO.”
Moskowitz comes from InterLuxe, an online auction platform for luxury homes, residential and real estate properties where, according to LinkedIn, he has served as president for the last six years.
BoF cites executive turnover as an earlier indicator that not all was well within the company, suggesting that mismanagement was one factor that Nike and Under Armour veteran Pamela Catlett joined the company a year ago as president but left months later.
Retail legend Mickey Drexler, formerly of J.Crew fame — who was named chairman of Outdoor Voices’ board in the summer of 2017 as part of a $9 million convertible debt round led by Drexler’s family office — also resigned his position last year, though he maintained a director’s seat.
Operational challenges aside, according to BoF, Outdoor Voices has had trouble replicating the kind of excitement that met its earliest offerings, including flattering, color-blocked athleisure wear, like leggings, sports bras, tees and tanks.
The company has since rolled out an exercise dress that has gained traction with some consumers, but newer offerings meant to extend the brand’s reach, including solidly colored hoodies and terrycloth jogging pants that are less distinguishable from other offerings in the market, have apparently failed to boost sales.
Indeed, according to the BoF report, the brand was losing up to $2 million per month last year on annual sales of around $40 million.
The BoF story doesn’t mention the company’s brick-and-mortar locations and how they factor into the company’s narrative. But certainly, as with a growing number of direct-to-consumer brands that have been encouraged by their backers to open real-world locations, they’ve become a major cost center for the outfit. Outdoor Voices now has 11 locations around the U.S., including in Austin, LA, Soho in New York, Boston, Nashville, Chicago and Washington, D.C.
Even with (at least) $64 million in funding that Outdoor Voices has raised from investors over the years, it’s also going head-to-head with very powerful, very entrenched and endurably popular brands, including Nike and Adidas. While Outdoor Voices is still in the fight, the shoe and apparel giants have vanquished plenty of upstarts over the years.
What happens next to Haney — a former track athlete from Boulder who first launched the business with a Parsons School of Design classmate — isn’t yet clear. Still, she isn’t going far, reportedly. BoF says she still owns 10% of Outdoor Voices and will remain engaged with the company in some capacity.
Featured above, left to right, Emily Weiss of Glossier and Tyler Haney of Outdoor Voices at a 2017 Disrupt event.
A few days ago, Andreessen Horowitz’s Martin Casado and Matt Bornstein published an interesting piece digging into the world of artificial intelligence (AI) startups, and, more specifically, how those companies perform as businesses. Core to the argument presented is that while founders and investors are wagering “that AI businesses will resemble traditional software companies,” the well-known venture firm is “not so sure.”
Given that TechCrunch cares a lot about startup business fundamentals, the notion that one oft-discussed and well-funded category of venture-backed startup might sport materially less attractive economics than we expected captured our attention.
The Andreessen Horowitz (a16z) perspective is straightforward, arguing that AI-focused companies have lesser gross margins than software companies due to cloud compute and human-input costs, endure issues stemming from “edge-cases” and enjoy less product differentiation from competing companies when compared to software concerns. Today, we’re drilling into the gross margin point, as it’s something inherently numerical that we can get other, informed market participants to weigh in on.
If a16z is correct about AI startups having slimmer gross margins than SaaS companies, they should — all other things held equal — be worth less per dollar of revenue generated; or in simpler terms, they should trade at a revenue multiple discount to SaaS companies, leaving the latter category of technology company still atop the valuation hierarchy.
This matters, given the amount of capital that AI-focused startups have raised.
Is a16z correct about AI gross margins? I wanted to find out. So this week I spoke to a number of investors from firms that have made AI-focused bets to get a handle on their views. Read the full a16z piece, mind. It’s interesting and worth your time.
Today we’re hearing from Rohit Sharma of True Ventures, Jeremy Kaufmann of Scale Venture Partners, Nick Washburn of Intel Capital and Ben Blume of Atomico. We’ll start with a digest of their responses to our questions, with their unedited notes at the end.
We asked our group of venture investors (selected with the help of research from TechCrunch’s Arman Tabatabai) three questions. The first dealt with margins themselves, the second dealt with resulting valuations and, finally, we asked about their current optimism interval regarding AI-focused companies.
DSP Concepts — a startup whose Audio Weaver software is used by companies as varied as Tesla, Porsche, GoPro and Braun Audio — is announcing that it has raised $14.5 million in Series B funding.
The startup goal, as explained to me by CEO Chin Beckmann and CTO Paul Beckmann (yep, they’re a husband-and-wife founding team), is to create the standard framework that companies use to develop their audio processing software.
To that end, Chin told me they were “picky about who we wanted on the B round, we wanted it to represent the support and endorsement of the industry.”
So the round was led by Taiwania Capital, but it also includes investments from the strategic arms of DSP Concepts’ industry partners — BMW i Ventures (which led the Series A), the Sony Innovation Growth Fund by Innovation Growth Ventures, MediaTek Ventures, Porsche Ventures and the ARM IoT Fund.
Paul said Audio Weaver started out as the “secret weapon” of the Beckmanns’ consulting business, which he could use to “whip out” the results of an audio engineering project. At a certain point, consulting customers started asking him, “Hey, how about you teach me how to use that?,” so they decided to launch a startup focused on the Audio Weaver platform.
Paul described the software as a “graphical block diagram editor.” Basically, it provides a way for audio engineers to combine and customize different software modules for audio processing.
“Audio is still in the Stone Ages compared to other industries,” he said. “Suppose you’re building a product with a touchscreen — are you going write the graphics from scratch or use a framework like Qt?”
Similarly, he suggested that while many audio engineers are still “down in the weeds writing code,” they can take advantage of Audio Weaver’s graphical interface to piece everything together, as well as the company’s “hundreds of different modules — pre-written, pre-tested, pre-optimized functions to build up your system.”
For example, Paul said that by using the Audio Weaver platform, DSP Concepts engineers could test out “hundreds of ideas” for algorithms for reducing wind noise in the footage captured by GoPro cameras, then ultimately “hand the algorithms over to GoPro,” whose team could them plug the algorithms into their software and modify it themselves.
The Beckmanns said the company also works closely with chip manufacturers to ensure that audio software will work properly on any device powered by a given chipset.
Other modules include TalkTo, which is designed to give voice assistants like Alexa “super-hearing,” so that they can still isolate voice commands and cancel out all the other noise in loud environments, even rock concerts. (You can watch a TalkTo demo in the video below.)
DSP Concepts has now raised more than $25 million in total funding.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
This week was a fun combination of early-stage and late-stage news, with companies as young as seed stage and as old as PE-worthy joining our list of topics.
Here’s what the team argued about this week:
Equity is nearly three years old, and we have some neat stuff coming up that you haven’t heard about yet. Stay tuned, and thank you for sticking with us for so long.