More than two years after Julie Bornstein–Stitch Fix’s former chief operating officer–mysteriously left the subscription-based personal styling service only months before its initial public offering, she’s taking the wraps off her first independent venture.
Shortly after departing Stitch Fix, Bornstein began building The Yes, an AI-powered shopping platform expected to launch in the first half of 2020. She’s teamed up with The Yes co-founder and chief technology officer Amit Aggarwal, who’s held high-level engineering roles at BloomReach and Groupon, and most recently, served as an entrepreneur-in-residence at Bain Capital Ventures, to “rewrite the architecture of e-commerce.”
“This is an idea I’ve been thinking about since I was 10 and spending my weekends at the mall,” Bornstein, whose resume includes chief marketing officer & chief digital officer at Sephora, vice president of e-commerce at Urban Outfitters, VP of e-commerce at Nordstrom and director of business development at Starbucks, tells TechCrunch. “All the companies I have worked at were very much leading in this direction.”
Coming out of stealth today, the team at The Yes is readying a beta mode to better understand and refine their product. Bornstein and Aggarwal have raised $30 million in venture capital funding to date across two financings. The first, a seed round, was co-led by Forerunner Ventures’ Kirsten Green and NEA’s Tony Florence. The Series A was led by True Ventures’ Jon Callaghan with participation from existing investors. Bornstein declined to disclose the company’s valuation.
“AI and machine learning already dominate in many verticals, but e-commerce is still open for a player to have a meaningful impact,” Callaghan said in a statement. “Amit is leading a team to build deep neural networks that legacy systems cannot achieve.”
Bornstein and Aggarwal withheld many details about the business during our conversation. Rather, the pair said the product will speak for itself when it launches next year. In addition to being an AI-powered shopping platform, Bornstein did say The Yes is working directly with brands and “creating a new consumer shopping experience that helps address the issue of overwhelm in shopping today.”
As for why she decided to leave Stitch Fix just ahead of its $120 million IPO, Bornstein said she had an epiphany.
“I realized that technology had changed so much, meanwhile … the whole framework underlying e-commerce had remained the same since the late 90s’ when I helped build Nordstrom.com,” she said. “If you could rebuild the underlying architecture and use today’s technology, you could actually bring to life an entirely new consumer experience for shopping.”
The Yes, headquartered in Silicon Valley and New York City, has also brought on Lisa Green, the former head of industry, fashion and luxury at Google, as its senior vice president of partnerships, and Taylor Tomasi Hill, whose had stints at Moda Operandi and FortyFiveTen, as its creative director. Other investors in the business include Comcast Ventures and Bain Capital Ventures
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.
The Australian scene industry has, in the last few years, started to generate a swathe of startups that have broken through internationally. Prior to this current era, Australia was scene has very much a local market in tech terms, with only occasional breakouts, like Atlassian . In fact, it’s now gaining a reputation as a serial producer of high-quality tech platforms, the hottest of which right now is Canva, which recently raised an additional $85 million to bring its valuation to $3.2 billion, up from $2.5 billion in May. Investors in the company include Bond, General Catalyst, Bessemer Venture Partners, Blackbird and Sequoia China. Notably, Sydney-based AirTree Ventures also invested early.
So that momentum is further confirmed by the news that Airtree has closed its 3rd fund of $275m. This new fund comes after AirTree’s $250m fund in 2016 and a $60m fund in 2014. You can clearly see the buildup in these numbers.
John Henderson, Partner said: “The interest from investors in our fund is a stunning reflection on the performance of the entrepreneurs we’ve been lucky enough to back. We were humbled by overwhelming demand, but felt it was the right thing for our investors to maintain discipline and a consistent fund size across vintages.”
Australian venture capital was less than fashionable after the dotcom boom and bust, and local institutional capital in Australia and New Zealand all but disappeared, hence why we saw so few startups form the region.
AirTree’s $60m fund in 2014, broke that drought and Australia now boasts over 50 tech startups valued at $100 million, 14 over $500 million and produces one ‘unicorn’ per year on average.
Airtree has gone on to invest in Australian and Kiwi startups like Canva, Prospa, Secure Code Warrior, Athena, Flurosat, Brighte, Joyous, Thematic and A Cloud Guru. Prospa, Australia’s main online lender to small businesses, IPO’ed on the Australian Stock Exchange in June 2019.
Airtree can invest as little as $200k, but now has the firepower to own the pipeline all the way up the investment stack.
Craig Blair, Managing Partner commented: “As ex-founders, we have experienced the tough, lonely road ourselves. This empathy with the founder journey helps us focus on when to provide support and when to get out of the way. In our next fund, we’ll be expanding our suite of services and our network of connections, all designed to give our founders an unfair advantage.”
The VC also announced two promotions and a new executive hire:
• Elicia McDonald promoted to Principal, with a mandate to lead new investments
• Emily Close joining the investment team, promoted to Associate
• Melissa Ran leading AirTree’s Community and Advocacy efforts
AirTree’s latest fund is backed by six institutional investors from Australia including AustralianSuper, SunSuper and Statewide. The rest of the new fund comes from a range of successful entrepreneurs and family offices.
Henderson added: “An important portion of our portfolio is already in New Zealand and we remain very focused on supporting that market. We’ve been investing meaningful resources and funds in New Zealand since 2014 and we’ll have more Kiwi news to share soon.”
The fund raise follows news that AirTree portfolio company Property-tech start-up :Different has raised a second round of capital from AirTree, alongside Brisbane-based real estate fund PieLAB, as it expands into Queensland.
Spiff, a Salt Lake City-based company pitching a new service for calculating sales commissions for salespeople around the world, has raised $6 million in funding to sell its own product to the millions of Willie Lohman’s looking for an end to needless paperwork.
“Amazing as it may seem, there isn’t an effective, modern SaaS solution for managing incentive compensation,” said Jeron Paul, Spiff’s founder and chief executive. “Most companies use Excel or decades-old tech that’s really just professional services masquerading as software.”
Spiff’s own data indicates that 90% of businesses rely on spreadsheets alone to calculate commissions and it can take up to one month for sales representatives to learn about their commissions after they’ve closed deals.
Paul has had a long career starting and selling businesses before he launched Spiff in 2018. The serial entrepreneur previously sold Capshare to a subsidiary of Morgan Stanley; launched and sold Scalar Analytics, and Boardlink, which was bought by ThomsonReuters, according to the company.
Spiff projects that the market for sales commissions in the U.S. is roughly $800 billion, with the incentive compensation market numbering in the trillions of dollars. It’s a big, niche, problem for customers that the company thinks its solution can address.
It echoes the same message from Kik’s chief executive Tim Livingston last week when he rebuffed earlier reports that the company would shut down amid an ongoing battle with the U.S. Securities and Exchange Commission. Livingston had tweeted that Kik had signed a letter-of-intent with a “great company,” but that it was “not a done deal.”
“Kik is one of those amazing places that brings us back to those early aspirations,” the blog post read. “Whether it be a passion for an obscure manga or your favorite football team, Kik has shown an incredible ability to provide a platform for new friendships to be forged through your mobile phone.”
MediaLab is a holding company that owns several other mobile properties, including anonymous social network Whisper and mixtape app DatPiff. In acquiring Kik, the holding company is expanding its mobile app portfolio.
MediaLab said it has “some ideas” for developing Kik going forwards, including making the app faster and reducing the amount of unwanted messages and spam bots. The company said it will introduce ads “over the coming weeks” in order to “cover our expenses” of running the platform.
Buying the Kik messaging platform adds another social media weapon to the arsenal for MediaLab and its chief executive, Michael Heyward .
Heyward was an early star of the budding Los Angeles startup community with the launch of the anonymous messaging service, Whisper nearly 8 years ago. At the time, the company was one of a clutch of anonymous apps — including Secret and YikYak — that raised tens of millions of dollars to offer online iterations of the confessional journal, the burn book, and the bathroom wall (respectively).
In 2017, TechCrunch reported that Whisper underwent significant layoffs to stave off collapse and put the company on a path to profitability.
At the time Whisper had roughly 20 million monthly active users across its app and website, which the company was looking to monetize through programmatic advertising, rather than brand-sponsored campaigns that had provided some of the company’s revenue in the past. Through widgets, the company had an additional 10 million viewers of its content per-month using various widgets and a reach of around 250 million through Facebook and other social networks on which it published posts.
People familiar with the company said at the time that it was seeing gross revenues of roughly $1 million and was going to hit $12.5 million in revenue for that calendar year. By 2018 that revenue was expected to top $30 million, according to sources at the time.
The flagship Whisper app let people post short bits of anonymous text and images that other folks could like or comment about. Heyward intended it to be a way for people to share more personal and intimate details — to be a social network for confessions and support rather than harassment.
The idea caught on with investors and Whisper managed to raise $61 million from investors including Sequoia, Lightspeed Venture Partners, and Shasta Ventures . Whisper’s last round was a $36 million Series C back in 2014.
Fast forward to 2018 when Secret had been shut down for three years while YikYak also went bust — selling off its engineering team to Square for around $1 million. Whisper, meanwhile, seemingly set up MediaLab as a holding company for its app and additional assets that Heyward would look to roll up. The company filed registration documents in California in June 2018.
According to the filings, Susan Stone, a partner with the investment firm Sierra Wasatch Capital, is listed as a director for the company.
Heyward did not respond to a request for comment.
Zack Whittaker contributed reporting for this article.
Pendo, the late stage startup that helps companies understand how customers are interacting with their apps, announced a $100 million Series E investment today on a valuation of $1 billion.
The round was led by Sapphire Ventures . Also participating were new investors General Atlantic and Tiger Global, and existing investors Battery Ventures, Meritech Capital, FirstMark, Geodesic Capital and Cross Creek. Pendo has now raised $206 million, according to the company.
Company CEO and co-founder Todd Olson says that one of the reasons they need so much money is they are defining a market, and the potential is quite large. “Honestly, we need to help realize the total market opportunity. I think what’s exciting about what we’ve seen in six years is that this problem of improving digital experiences is something that’s becoming top of mind for all businesses,” Olson said.
The company integrates with customer apps, capturing user behavior and feeding data back to product teams to help prioritize features and improve the user experience. In addition, the product provides ways to help those users either by walking them through different features, pointing out updates and new features or providing other notes. Developers can also ask for feedback to get direct input from users.
Olson says early on its customers were mostly other technology companies, but over time they have expanded into lots of other verticals including insurance, financial services and retail and these companies are seeing digital experience as increasingly important. “A lot of this money is going to help grow our go-to-market teams and our product teams to make sure we’re getting our message out there, and we’re helping companies deal with this transformation,” he says. Today, the company has over 1200 customers.
While he wouldn’t commit to going public, he did say it’s something the executive team certainly thinks about, and it and has started to put the structure in place to prepare should that time ever come. “This is certainly an option that we are considering, and we’re looking at ways in which to put us in a position to be able to do so, if and when the markets are good and we decide that’s the course we want to take.”
In August, after receiving a cease-and-desist letter from the venture-backed shoe startup Rothy’s, shoe giant Steven Madden filed a pre-emptive lawsuit asking a federal court to rule that its Rosy Flat shoes don’t copy design elements of the Point ballet flat that Rothy’s began selling soon after its 2015 launch.
More, it asked that seven related patents that Rothy’s has been issued — and that Rothy’s has accused Madden of infringing — be declared invalid.
Now, Rothy’s is batting back again, today filing counterclaims of design patent and trade dress infringement, trademark dilution and unfair competition, while also managing to get in a sick burn, writing in its filing that instead of “pursuing independent product development, Madden has chosen to slavishly copy Rothy’s product design in violation of Rothy’s valuable intellectual property rights.”
It’s hard to argue they aren’t copycats once you see both shoes. Nearly as galling to Rothy’s, Steve Madden’s shoes retail for half the price. (Rothy’s charges $145 for its shoes. Steve Madden sells its version for $70, and, unlike Rothy’s, which are never discounted, Steve Madden’s version of the shoe is currently on sale at Nordstrom Rack for $39.99.)
Steve Madden — now a 29-year-old company that’s publicly traded, valued by investors at $3 billion and largely still run by Steve Madden himself (he’s its creative and design chief) — is known for finding inspiration in the work of other brands that wish it would not. Among a handful of companies to tangle legally with the shoe titan in recent years is venture-backed Allbirds, which accused Steve Madden of copying its wool trainer in 2017.
AllBirds soon settled its lawsuit with the company. Alas, now AllBirds is reportedly fighting an Austrian footwear company, Giesswein Walkwaren, for making and selling sneakers that are “identical in all material respects” to Allbirds’s wool runners.
Meanwhile, Rothy’s just last month settled with a company, OESH, against which it had separately filed a patent and trade dress infringement lawsuit alleging its round-toe ballet flats are too similar to Rothy’s own.
Neither is an uncommon situation. Instead, both underscore that for young retail brands, fending off competitors both big and small can prove both expensive and distracting. Indeed, the question begged is whether it’s worth engaging.
While that’s something that’s often determined in hindsight, not everyone thinks it makes sense to spend the time and resources battling knock-offs. When we talked earlier this year with the venture-backed slipper-shoe startup Birdies, co-founder Bianca Gates noted that Target had already begun offering a similar slipper at a cheaper price point. “Everybody copies everybody,” she said.
The company could use some of its funding to wage war, but she thought focusing on the company’s product made more sense. “It’s our job to create a brand beyond the silhouette of a slipper, because that can be knocked off, it’s not defensible. What is defensible is why [a customer] is buying Birdies, and why she is telling her friends to shop us.”
Contentstack, a startup that offers a headless CMS platform for enterprises, today announced that it has raised a $31.5 million Series A round led by Insight Partners. Existing investors Illuminate Ventures and GingerBread Capital also participated in this round.
The company says that it saw its revenue grow by 4x in the first half of 2019 compared to the same time period last year. Without a baseline, that’s not exactly a meaningful number for a startup founded in 2018, of course, but sales cycles in the enterprise are notoriously long and the company does have a number of marquee customers like Shell, Walmart and Cisco.
The Contentstack founding team, Neha Sampat, Nishant Patel and Matthew Baier, recently sold Built.io to Software AG . “With Contentstack, the opportunity feels even larger, but there is also a strong sense of urgency,” said Sampat when I asked her about why she decided to raise at this point, which comes relatively late for a company with Contentstack’s ambitions. “Being able to do more right now and scale the company’s operations to match the opportunity right in front of us required more resources than the company’s organic growth would provide us.”
Sampat also noted that she believes that brands are not realizing that their customers don’t want billboards but customized experiences across channels. Yet, at the same time, they often don’t know what’s working and how to get the most value out of the content they create.
“The belief that a single platform or product can ‘do it all’ is being replaced with the realization you can do more, better by bringing together the best technologies the market has to offer,” she said. “This wasn’t an option before, because integrations were so complex and clunky. But now, with the emergence of extensible content experience platforms, companies can actually get to market FASTER using this approach, compared to using a single-vendor approach that wasn’t built for the modern era.”
The company tells me that it is getting traction across industries, but retail, travel/hospitality, sports/entertainment and tech are doing especially well.
Like most companies at the Series A stage, Contentstack says it will use the new funding to scale its sales and marketing team and build out its partner ecosystem and community around the product. Sampat also tells me that the company plans to expand beyond its core regions of the U.S., India and Europe by moving into the APAC region in the first half of 2020, mostly with a focus on Australia and New Zealand.
All over the globe, the population of people who are aged 65 and older is growing faster than every other age group. According to United Nations data, by 2050, one in six people in the world will be over age 65, up from one in 11 right now. Meanwhile, in Europe and North America, by 2050, one in four people could be 65 or over.
Unsurprisingly, startups increasingly recognize opportunities to cater to this aging population. Some are developing products to sell to individuals and their family members directly; others are coming up with ways to empower those who work directly with older Americans.
BrainCheck, a 20-person, Houston-based startup whose cognitive healthcare product aims to help physicians assess and track the mental health of their patients, is among the latter. Investors like what it has put together, too. Today, the startup is announcing $8 million in Series A funding round co-led by S3 Ventures and Tensility Venture Partners.
We talked earlier today with BrainCheck cofounder and CEO Yael Katz to better understand what her company has created and why it might be of interest to doctors who don’t know about it. Our chat has been edited for length and clarity.
TC: You’re a neuroscientist. You started BrianCheck with David Eagleman, another neuroscientist and the CEO of NeoSensory, a company that develops devices for sensory substitution. Why? What’s the opportunity here?
YK: We looked across the landscape, and we realized that most cognitive assessment is [handled by] a subspecialty of clinical psychology called neuropsychology, where patients are given a series a tests and each is designed to probe a different type of brain function — memory, visual attention, reasoning, executive function. They measure speed and accuracy, and based on that, determine whether there’s a deficit in that domain. But the tests were classically done on paper and it was a lengthy process. We digitized them and gamified them and made them accessible to everyone who is upstream of neuropsychology, including neurologists and primary care doctors.
We created a tech solution that provides clinical decision support to physicians so they can manage patients’ cognitive health. There are 250,000 primary care physicians in the U.S. and 12,000 neurologists and [they’re confronting] what’s been called a silver tsunami. With so many becoming elderly, it’s not possible for them to address the need of the aging population without tech to help them.
TC: How does your product work, and how is it administered?
YK: An assessment is all done on an iPad and takes about 10 minutes. They’re typically administered in a doctor’s office by medical technicians, though they can be administered remotely through telemedicine, too.
TC: These are online quizzes?
YK: Not quizzes and not subjective questions like, ‘How do you think you’re doing?’ but rather objective tasks, like connect the dots, and which way is the center arrow pointing — all while measuring speed and accuracy.
TC: How much does it cost these doctors’ offices, and how are you getting word out?
YZ: We sell a monthly subscription to doctors and it’s a tiered pricing model as measured by volume. We meet doctors at conferences and we publish blog posts and white papers and through that process, we meet them and sell products to them, beginning with a free trial for 30 days, during which time we also give them a web demo.
[What we’re selling] is reimbursable by insurance because it helps them report on and optimize metrics like patient satisfaction. Medicare created a new code to compensate doctors for cognitive care planning though it was rarely used because the requirements and knowledge involved was so complicated. When we came along, we said, let us help you do what you’re trying to do, and it’s been very rewarding.
TC: Say one of these assessments enables a non specialist to determine that someone is losing memory or can’t think as sharply. What then?
YZ: There’s phrase: “Diagnose and adios.” Unfortunately, a lot of doctors used to see their jobs as being done once an assessment was made. It wasn’t appreciated that impairment and dementia are things you can address. But about one third of dementia is preventable, and once you have the disease, it can be slowed. It’s hard because it requires a lot of one-on-one work, so we created a tech solution that uses the output of tests to provide clinical support to physicians so they can manage patients’ cognitive health. We provide personalized recommendations in a way that’s scalable.
TC: Meaning you suggest an action plan for the doctors to pass along to their patients based on these assessments?
YZ: There are nine modifiable risk factors found to account for a third of [dementia cases], including certain medications that can exacerbate cognitive impairment, including poorly controlled cardiovascular health, hearing impairment, and depression. People can have issues for many reasons — multiple sclerosis, epilepsy, Parkinson’s — but health conditions like major depression and physical conditions like cancer and treatments like chemotherapy can cause brain fog. We suggest a care plan that goes to the doctor who then uses that information and modifies it. A lot of it has to do with medication management.
A lot of the time, a doctor — and family members — don’t know how impaired a patient is. You can have a whole conversation with someone during a doctor’s visit who is regaling you with great conversation, then you realize they have massive cognitive deficits. These assessments kind of put everyone on the same page.
TC: You’ve raised capital, how will you use it to move your product forward?
YK: We’ll be combining our assessments with digital biomarkers like changing voice patterns and a test of eye movements, and we have developed an eye-tracking technology and voice algorithms, but those are still in clinical development; we’re trying to get FDA approval for them now.
TC: Interesting that changing voice patterns can help you diagnose cognitive decline.
YK: We aren’t diagnosing disease. Think of us as a thermometer that [can highlight] how much impairment is there and in what areas and how it’s progressive over time.
TC: What can you tell readers who might worry about their privacy as it relates to your product?
YK: Our software is HIPAA compliant. We make sure our engineers are trained and up to date. The FDA requires that we we put a lot of standards in place and we ensure that our database is built in accordance with best practices. I think we’re doing as good a job as anyone can.
Privacy is a concern in general. Unfortunately, companies big and small have to be ever vigilant about a data breach.
Income share agreements (ISAs) rose to public awareness this year — if measured in press articles and discussion on “VC Twitter” — after several years of niche experimentation among a small community of education advocates. An ISA in a financing model where the student participates in an education program without paying tuition, then pays a certain percentage of their income for a set time term in return.
As I mentioned in my analysis of ISAs back in April, there is rapid growth in ISA pilots by traditional universities in the US and by vocational training programs but there’s also a lot of regulatory uncertainty. All stakeholders in the US want the federal government to provide a regulatory framework for the ISA market since the current lack of policy creates market uncertainty and opportunities for unethical actors.
I asked several of the entrepreneurs, investors, and policy experts at the forefront of ISAs to share their perspectives on the current state of the ISA movement:
Here’s what they had to say…
“What’s been really fascinating, in recent years, is the innovation that is occurring at colleges and universities that are using ISAs to support and improve student success.
In a wide-ranging conversation at TechCrunch Disrupt San Francisco last week, Postmates co-founder and chief executive officer Bastian Lehmann made light of the company’s lack of IPO documents.
The San Francisco-based on-demand delivery business was expected to publicly file its IPO prospectus in September in preparation for a fall exit, sources familiar with the matter told TechCrunch this summer. September, however, has come and gone and we’re still waiting on Postmates to release the critical document.
“The reality is that we will IPO when we believe we find the right time for the business and the right time for the markets,” Lehmann told TechCrunch. “And if you look at the markets right now, I believe they are a little choppy. They are a little choppy when it comes to growth companies specifically … We are hopeful that we find a good window to get out there.”
Lehmann made reference to Uber and other companies to recently float, citing market conditions as IPO deterrents. Uber, Lyft, Slack and other fast-growing unicorns have struggled since entering the public markets earlier this year despite sky-high private market valuations. WeWork, a money-losing endeavor, recently decided to delay its IPO after demand from Wall Street devalued the business by the billions. Whether Postmates will complete its debut by the end of the year is unclear.
Postmates confidentially filed with the U.S. Securities and Exchange Commission for an IPO in February. Shortly after, Postmates held M&A talks with DoorDash, another food delivery unicorn, according to people familiar with the matter, but failed to come to mutually favorable terms. DoorDash has previously declined to comment on these reports. On stage last week, Lehmann declined to confirm the reports.
“I don’t think it does any good to speculate on M&A,” he said. “I think you have four well-funded players here in the U.S. in this space. I think everyone is well aware of the strengths and the weaknesses of each other and you know at some point down the line, if we take Europe for example, you will see consolidation in the market. People have conversations all the time but I wouldn’t read too much into it.”
Postmates operates its on-demand delivery platform, powered by a network of local gig economy workers, in more than 3,500 cities across all 50 states. The company does not yet operate in any international markets aside from Mexico City, however, Lehmann’s comments suggest the business could be plotting a foray into Europe, where Deliveroo, Just Eat and others dominate the market.
Postmates has raised about $900 million to date, including a $225 million round announced last month that valued the company at $2.4 billion. DoorDash, on the other hand, reached a $12.6 billion valuation in May with a $600 million Series G and has raised more than double that of Postmates. When asked why DoorDash, a similar and competing business, needed that much more capital, Lehmann joked “Maybe [DoorDash CEO Tony Xu] needs a jet, I don’t know.”
Postmates, founded in 2011 by Lehmann, is backed by Spark Capital, Founders Fund, Uncork Capital, Slow Ventures, Tiger Global, Blackrock and others. In our interview with Lehmann, the long-time CEO discussed the ‘choppy’ public markets, competitors, the company’s autonomous robotics delivery efforts and more.
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.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where each week we discuss other people’s copious dollars and lacking sense.
This week was special! Kate and Alex at Disrupt where they recorded live in front of an audience. Equity has recorded at Disrupt before. Equity has taped before an audience before. But this was the first time that we taped it at Disrupt and in front of an audience that actually had chairs. Progress!
Thanks so much to everyone that came to our live episode of #EquityPod today at #TCDisrupt. It was my first live podcast and hopefully not the last. @alex @chudson @TechCrunch pic.twitter.com/XqUk2DeTXf
— Kate Clark (@KateClarkTweets) October 4, 2019
Charles Hudson of Precursor Ventures joined us as well, making for an excellent show. Astute listeners among us will recall that Hudson is a former guest on the show, having taken part back in mid-2017.
Next, we turned to a trio of startup stories, starting with Rhino, a company that is working to shake up the rental deposit market. Hate paying deposits for an apartment? Would you rather pay a small, regular fee? Rhino hopes that you would, and has raised $21 million to build out the idea.
Also on our list of topics was a small upstart by the name of Knowable, our colleague Josh Constine profiled the business here. The company sells educational audio bits, and they want you to know, they are not a podcasting business. We’re still a bit unclear of the difference between educational audio and podcast but VCs seem confident enough in the company’s prospects, funneling $3.75 million in the project.
The last startup we riffed on is called oollee. The company provides people with an unlimited supply of filtered drinking water for a small monthly fee. It’s raised $1 million in pre-seed funding from investors, including Mission Gate Inc. and Columbus Holdings, and, of course, we have thoughts!
After that we touched on the most valuable Y Combinator companies, including Stripe (more here and here), Airbnb and DoorDash. The list of YC’s hits is getting long. And, it provided the perfect segue to Airbnb.
Airbnb intends to go public via a direct listing, according to a whole bunch of recent reports. Every VC in town seems to have opinions about direct listings as the next best path to the public markets, maybe they’re right. Finally, WeWork is selling off a bunch of stuff that it bought recently. Here’s a list of what it bought, but SpaceIQ, Teem, Conductor and more are said to be on the chopping block.
All that and we had fun! Back to normal next week.
A lot of talk has been made about verifying valuable items on an immutable blockchain, but the main pioneer in this space has been Verisart, which appeared a few years ago to use a blockchain to create certification for the fine art and collectibles market. But despite the blockchain hype of the last few years, Verisart eschewed the fundraising bonanza, preferring instead to perfect its model and build partnerships.
That changes today with the news that it has raised $2.5 million in seed financing in a round led by Galaxy Digital EOS VC Fund. Further investment has come from existing investors Sinai Ventures and Rhodium. The funding will be used to expand Verisart’s commercial platform for authentication and further expand in the art world.
Co-founder and CEO Robert Norton commented: “With this new round of funding, we’re able to scale our business and ramp up our partnership integrations. The art world is quickly realizing that blockchain provides a new standard in provenance and record-keeping and we’re looking forward to extending these services to the industry.”
The $325mm Galaxy EOS VC Fund is a partnership between Galaxy Digital, a blockchain-focused merchant bank, and Block.one, the publisher of EOSIO, the blockchain protocol.
The funding will go towards extending the product and engineering team and launching a suite of premium services aimed at artists, galleries and collectors. The company recently appointed Paul Duncan, formerly the founding CTO of Borro, the online lending platform for luxury assets, to lead the engineering team.
In 2015, Verisart was the first company to apply blockchain technology to the physical art and collectibles market. It’s also working with some of the world’s best-known artists including Ai Wei Wei and Shepard Fairey to certify their works of art. In 2018, Verisart won the ‘Hottest Blockchain DApp’ award at The Europas, the European tech startup awards.
It’s also been the first blockchain certification provider on Shopify to offer digital certification for limited editions, artworks and collectibles.
Other players are now entering this growing blockchain-for-art market. Codex Protocol is a new startup also putting art on the blockchain.
Halle Tecco is no stranger to conception struggles. The Rock Health founder and former CEO has been public about her journey on social media, including two rounds of IVF, eventually leading to a healthy baby boy. Now, she wants to help others make babies, too.
To get there, Tecco has joined a class of new fertility tech companies that have popped up in the last few years. Taking from her years of experience building Rock Health, she’s now launched a new company called Natalist, which offers conception products “inspired by beauty and backed by science” to help those hoping to get pregnant in the near future.
You can pick and choose various products in Natalist’s pretty packaging or opt for the basic “Get Pregnant” bundle, which includes 7 ovulation and 3 pregnancy tests, a one-month supply of prenatal vitamins and Omega DHA, plus the company’s Conception 101 book.
Of course, that package merely provides the basics for any healthy woman with a regular period and no other fertility issues — and, besides the book, its all something you could find in your local pharmacy. But, as Tecco was quick to point out, not every woman is keen on going into their local CVS, grabbing a pregnancy test and taking it up to the register. In fact, many women Tecco polled before starting her company mentioned the need in the market for discretion. Buying online from a trusted brand would provide them with both privacy and security in the product.
While Natalist’s first offerings are the minimum for anyone trying to make a baby, Tecco has already raised a cool $5 million to build out products addressing more serious fertility concerns like PCOS and endometriosis, which combined affect one out of every five women in their child bearing years and can make it a lot harder to get pregnant or make a pregnancy stick.
“We plan to use the funding to bring new products to market but we wanted to start with products that are sort of tried and true,” Tecco told TechCrunch, further explaining she’d like to see Natalist be more than just physical products and become more of a platform to help women through their pregnancy journey.
“We really want to have a support platform for women who have questions or concerns, really creating a great customer experience and helping them troubleshoot if things aren’t going the way that they want them to and also arm them with information and knowledge around getting pregnant,” Tecco said.
While she doesn’t see herself creating something like the app Glow, which both offers information and data through various stages of pregnancy and a community of women working on becoming pregnant, she does see the value of collaboration with these types of communities on various fertility apps and would like to reach out to those founders to see if there might be something there they can work on in the future as well.
For those interested in checking out Natalist’s products, the “Get Pregnant” bundle starts at $90 for a one time purchase or $75 per month for the subscription plan. You can also add products from the site à la carte, should you want more tests or vitamins than what’s in the one-month package.
And for those of you TechCrunch readers interested in the funding details, Natalist took in seed money from Collaborative Fund, Cowboy Ventures, Fuel Capital, Rock Health and xFund, as well as several well-known angel investors, including Katrina Lake, Julia Cheek, Christine Lemke, John Doerr, Malay Gandhi, David Vivero and R. Martin Chavez.
It’s been four years since TechCrunch published my blog post The SaaS Adventure, which introduced the concept of a “T2D3” roadmap to help SaaS companies scale — and, as an aside, explored how well my mom understood my job as an “adventure capitalist.” The piece detailed seven distinct stages that enterprise cloud startups must navigate to achieve $100 million in annualized revenue. Specifically, the post encouraged companies to “triple, triple, double, double, double” their revenue as they hit certain milestones.
I was blown away by the response to the piece and gratified that so many founders and investors found the T2D3 framework helpful. Looking back now, I think a lot of the advice has stood the test of time. But plenty has also changed in the broader tech and software markets since 2015, and I wanted to update this advice for founders of hyper-growth companies in light of the market shifts that have occurred.
Perhaps the most notable change in the last four years is that the number of playbooks for companies to follow as they sell software has expanded. Today, more companies are embracing product-led growth and a less-formal, bottoms-up model — employees are swiping credit cards to buy a product, and not necessarily interacting with a human salesperson.
Many of the most high-profile, recent software IPOs structure their go-to-market operations this way. T2D3’s stages, by contrast, focus quite a bit on scaling a company’s internal sales function to grow. Indeed, both a product-led and a sales-led approach are viable in today’s growing B2B-tech market.
What’s more, the revenue needed for a software company to go public has increased dramatically in the last four years. This means that software founders need to focus not only on building a scalable product and finding scalable go-to-market channels, but also building a scalable org chart. These days, what is scarce for software founders isn’t money from investors; it’s great human talent.
So in addition to T2D3, my firm and I are now focusing on another founder journey: F2C, or the transition from founder/CEO to CEO/founder. This journey can take many paths, but ideally it starts with the traditional hustle to find early product/market fit.
Education is a $4 trillion market globally in urgent need of overall — so where within education are top venture capitalists optimistic about startups building large businesses by providing new solutions?
According to EdSurge, $1.45 billion of venture capital (a mere 1.1% of the $130 billion in US venture funding) was invested in education startups in the US in 2018; there were only 112 education-focused deals. In line with the trend in venture capital overall, this represented an increase in overall capital but a concentration in fewer deals (mainly large late-stage rounds).
Education is regarded as a tough market for achieving VC scale returns. Selling into school districts and universities is difficult and slow, and freemium models that go direct-to-teachers have struggled to monetize.
New software, content, and financing solutions for learning outside the traditional school system are more compelling business opportunities. This is particularly the case in vocational training where the return on investment of an educational program or tool can be quantitatively measured in job offers and salary increases
I asked four leading edtech VCs and six of the top generalist VCs (who have a track record of education investments) to share where they see opportunity in this sector:
Here are their answers…
Jennifer Carolan, General Partner at Reach Capital (an education-focused VC firm in Palo Alto with investments including Abl, BetterLesson, Epic!, Handshake, Holberton School, Newsela, Outschool, and Tinkergarten):
“Human-centered learning has been traditionally limited to one’s physical geography but technology is unlocking learning opportunities that never before existed. We’re particularly interested in the marketplaces that are better matching supply and demand across experiential learning, educator coaching, tutoring, and online small groups.
There’s been a heap of China in Africa coverage over the last decade, but very little of it is focused on tech. In part, because the country’s engagement with African startups is light compared to its deal-making on infrastructure and commodities. Now, that all looks to be shifting.
TechCrunch has tracked moves by a number of Chinese actors in Africa’s tech sector over the past year. This could signal the next chapter in China’s influence in Africa — one more digital than bricks and mortar.
To the former, the government of China has designated Africa a strategic priority in its foreign relations and has pursued policies and programs accordingly.
Catalyte, the Baltimore-based coding training and placement service, has launched a new software service designed to take its machine learning-based skills-assessment and training program to companies around the country.
With revenues already approaching nearly $100 million for its outsourced software development services, Catalyte is hoping to take the lessons and tools it has learned and developed over the course of its 18-year history as a staffing and training company for the tech industry and sell them to companies looking to retrain or provide additional skills development opportunities for their employees.
“Even if we were the largest employer in the world we still would not be able to move the needle on the labor economy,” says Catalyte’s chief executive, Jacob Hsu.
He sees the company’s mission as providing a critical step for companies to identify the employees in their workforce with the skills to become coders and an opportunity for those employees to then receive the training they need to move into higher-paying roles as software eats into low-skilled, repetitive labor.
“We’re encouraging all of these employers to deploy these up-leveling skills,” Hsu says.
At Catalyte, the company’s success has hinged on practicing what it preaches (and what it’s now selling). Launched in 2000 as a staffing service in Baltimore called Catalyst Devworks by a former White House economist, Michael Rosenbaum, the company expanded to locations in Chicago and Portland and offers training and workforce development through contracted consulting projects with companies.
Photo courtesy of Getty Images
The company’s recruits come from anywhere and everywhere and hiring hinges on a skills test would-be employees have to perform that is monitored by software that tracks how test-takers respond to the company’s questions.
Once an applicant passes the test, they’re brought in for training and given a two-year contract during which time they’re put to work on development projects Catalyte has won from customers like Under Armor, Aetna, AT&T and Microsoft .
Catalyte’s developers are paid roughly $40,000 per year (less than half of what a developer typically makes) while they’re working under the two-year contract and are then allowed to seek employment outside of the company. Any employee that breaks the mandatory two-year contract is subject to a $25,000 penalty, according to a report in “Fast Company.” As they enter the third year, their contract with Catalyte gets renegotiated and employees who stay with the company can earn at least $75,000.
“We’re taking people from all walks of life,” says Hsu. “The average salary is $25,000 for people who have come in to the program… But within five years from working with the company, the average salary is $98,000.”
In 2018, Catalyte raised roughly $27 million in a round of funding from Palm Drive Capital, Cross Culture Ventures, Expon Capital and the Rise of the Rest Seed Fund.
The relatively novel approach to training and hiring (with some of the company’s recruits even coming in through Craigslist ads that pitch getting paid for learning to code) has netted Catalyte some impressive statistics when it comes to the diversity of its workforce — another important criteria for Case’s Rise of the Rest fund.
“When you use this approach to hiring [in a city]… you end up with a workforce that’s similar to the demographics of a city,” says Hsu.
In Baltimore, the company’s workforce is about 29% African American and 30% of the developers are women. The average age of a programmer in the company’s workforce is 33 years old and education levels range from about one quarter with only a college degree to college-educated candidates.
Catalyte’s growth over the past three years has been nothing short of explosive. The company went from 50 employees in 2016 to around 800 people on staff now.
That staff is critical not just to the company’s current business model, but also served as a training tool for the machine learning and assessment tools that Catalyte is now trying to sell. “We spent over a decade collecting outcome data from engineering projects,” says Hsu. And that data was what was used to create the company’s metrics for whether or not a candidate for a programming job at the company would be successful.
The company intends to bring its assessment tool to market in the fourth quarter, but on the back of its recent fundraising, Catalyte has been ramping up its research and development activities. It wants to begin putting together a curriculum around cybersecurity and site reliability engineers. The software will cost roughly $1,000 per seat for every employee that receives its training regime.
“One of the fundamental ways our economy is going to both remain competitive on the international level and expand opportunities to more Americans is by changing the way we identify talent,” said Case in a statement discussing Catalyte’s financing last year. “Catalyte proved to us that not only can it bring new and underrepresented groups into the fold, it can do so while helping its own clients grow.”
While the company is growing its product pipeline, it also intends to expand the number of development and training centers it operates. The plan, according to an interview Hsu gave to the local technology news site Technically Baltimore in February, is to have 20 development centers around the country by 2020.
Streamlit, a new machine learning startup from industry veterans who worked at GoogleX and Zoox, launched today with a $6 million seed investment and a flexible new open-source tool to make it easier for machine learning engineers to create custom applications to interact with the data in their models.
The seed round was led by Gradient Ventures with participation from Bloomberg Beta. A who’s who of solo investors also participated, including Color Genomics co-founder Elad Gil, #Angels founder Jana Messerschmidt, Y Combinator partner Daniel Gross, Docker co-founder Solomon Hykes and Insight Data Science CEO Jake Klamka.
As for the product, Streamlit co-founder Adrien Treuille says as machine learning engineers, he and his co-founders were in a unique position to understand the needs of engineers and build a tool to meet their requirements. Rather than building a one-size-fits-all tool, the key was developing a solution that was flexible enough to serve multiple requirements, depending on the nature of the data with which the person is working.
“I think that Streamlit actually has, I would say, a unique position in this market. While most companies are basically trying to systemize some part of the machine learning workflow, we’re giving engineers these sort of Lego blocks to build whatever they want,” Treuille explained.
Customized self-driving car data application built with Streamlit that enables machine learning engineers to interact with the data
Treuille says that highly trained machine learning engineers that have a unique set of skills actually end up spending an inordinate amount of their time building tools to understand the vast amounts of data they have. Streamlit is trying to help them build these tools faster using the kind of programming tools with which they are used to working.
He says that with a few lines of code, a machine learning engineer can very quickly begin building tools to understand the data and help them interact with it in whichever way makes sense based on the type of data. That may mean building a set of sliders with different variables to interact with the data, or simply creating tables with subsets of data that make sense to the engineer.
Treuille says that this toolset has the potential to dramatically transform the way machine learning engineers work with the data in their models. “As people who are machine learning engineers and have seen this and know what it’s like to go through these challenges, it was really exciting for us to say, there’s a better way of doing this and not just a little bit better, but something that will turn a project that would have taken four weeks and 15,000 lines of code into something that you can do in an afternoon.”
The toolkit is available on GitHub for download starting today.