Under new guidance issued by the Small Business Administration it seems non-profits and faith-based groups can apply for the Paycheck Protection Program loans designed to keep small business afloat during the COVID-19 epidemic, but most venture-backed companies are still not covered.
Late Friday night, the Treasury Department updated its rules regarding the “affiliation” of private entities to include religious organizations but keep in place the same rules that would deny most startups from receiving loans.
(b) If you are a faith-based organization, *no affiliation rules apply to you,* because the SBA just said so. Out of nowhere. At like 10pm on a Friday night.
— Doug Rand (@doug_rand) April 4, 2020
The NVCA and other organizations had pushed Treasury Secretary Steve Mnuchin to clarify the rules regarding startups and their potential eligibility for loans last week. And House Republican leader Kevin McCarthy even told Axios that startups would be covered under the revised regulations.
2/ There are rumors that the PPP Loan program may still fix the Affiliate Rule next week. Until fixed, it's nearly impossible for most VC-backed startups to apply because it would require huge legal lift to amend all of the charters of these companies to change control provisions
— Mark Suster (@msuster) April 4, 2020
At its essence, the issue for startups seems to be centered on the board rights that venture investors have when they take an equity stake in a company. For startups with investors on the board of directors, the decision-making powers that those investors hold means the startup is affiliated with other companies that the partner’s venture firm has invested in — which could mean that they’re considered an entity with more than 500 employees.
“[If] there’s a startup that’s going gangbusters right now, they shouldn’t apply for a PPP loan,” wrote Doug Rand, the co-founder of Seattle-based startup Boundless Immigration, and a former Assistant Director for Entrepreneurship in the Office of Science and Technology Policy during the Obama administration, in a direct message. “But most startups are getting killed because, you know, the economy is mostly dead.”
The $2 trillion CARES Act passed by Congress and signed by President Trump was designed to help companies that are adversely affected by the economic fallout resulting from the COVID-19 outbreak in the US and their employees — whether those businesses are directly affected because their employees can’t leave home to do their jobs or indirectly, because demand for goods and services has flatlined.
While some tech startups have seen demand for their products actually rise during these quarantined days, many companies have watched as their businesses have gone from one to zero.
The sense frustration among investors across the country is palpable. As the Birmingham-based investor, Matt Hottle, wrote, “After 4 days of trying to help 7 small businesses navigate the SBA PPP program, the program went to shit on launch. I’m contemplating how many small businesses, counting on this money, are probably locked out. I feel like I/ we failed them.”
After 4 days of trying to help 7 small businesses navigate the @SBAgov PPP program, the program went to shit on launch. I’m contemplating how many small businesses, counting on this money, are probably locked out. I feel like I/ we failed them.
— Matt Hottle (@MattRedhawk) April 4, 2020
And although the rules around whether or not many startups are eligible remain unclear, it’s probably wise for companies to file an application, because, as the program is currently structured, the $349 billion in loans are going to be issued on a first-come, first-served basis, as Suster flagged in his tweets on the subject.
General Catalyst is advising its companies that are also backed by SBIC investors to apply for the loans, because that trumps any other rules regarding affiliation, according to an interview with Holly Maloney Burbeck, a managing director at the firm.
And there’s already concerns that the money could run out. In a tweet, the President announced that he would request more money from Congress “if the allocated money runs out.”
I will immediately ask Congress for more money to support small businesses under the #PPPloan if the allocated money runs out. So far, way ahead of schedule. @BankofAmerica & community banks are rocking! @SBAgov @USTreasury
— Donald J. Trump (@realDonaldTrump) April 4, 2020
“Congress saw fit to allow Darden to get a forgivable small business loan—actually a taxpayer-funded grant—for like every Olive Garden in America. But Congress somehow neglected to provide comparable rescue measures for actual small businesses that have committed the sin of convincing investors that they have the potential to employ a huge number of people if they can only survive,” Rand wrote in a direct message. “The Trump administration has full authority to ride to the rescue, and they did… but only for large religious organizations.”
Modsy, an e-commerce company that creates 3D renderings of customized rooms, has confirmed to TechCrunch that it laid off a number of staff. In addition, several of its executives, including CEO Shanna Tellerman, will take a 25% pay cut. TechCrunch first heard about the layoffs from a source. The company’s confirmation of cuts comes amid a wave of layoffs in the technology and startup communities.
In a statement from the CEO Shanna Tellerman to TechCrunch, Modsy said that “[i]n an effort to maintain a sustainable business during these unprecedented circumstances, we made a round of necessary layoffs and ended a number of designer contracts this week.” The company reaffirmed belief in its “long-term growth plans” in the same statement.
Modsy did not immediately respond when asked about how many individuals were impacted by this layoff. Update: The company declined to share the number of employees impacted.
Modsy bets on individuals looking to glam up their homes by better visualizing the new furniture they want to buy. Users can enter the measurements of their living room and add budget and style preferences, and Modsy will help them with custom designs and finding furniture that fits — literally.
The layoffs show that customer appetite might be changing. Last week, home improvement platform Houzz confirmed that it has scratched plans to create in-house furniture for sale. It also laid off 10 people across three locations: the U.K., Germany and China. Houzz is comparatively larger than Modsy, with a roughly $4 billion valuation. But scratching its in-house plan that would have likely brought in more capital is yet another data point in how e-commerce companies are struggling right now to get consumers to spend on items other than beans, booze and bread starters.
In retrospect there were rumblings that the company was cutting staff. A number of recent reviews from its Glassdoor page note layoffs, with one review from March 25, 2020 calling them “mass” in nature; our original source on the company’s recent cuts also noted their breadth.
You can find other social media posts concerning the company’s layoffs, some noting more than one wave. TechCrunch has not confirmed if the recent layoffs are the first of two, or merely the first set of cuts.
A little over 10 months ago the company was in a very different mood. Back in May of 2019, flush with new capital, Modsy’s CEO said that the “home design space, the inspiration category is thriving.”
“Pinterest just IPO’d, and it seems as if every TV channel is entering the home design category,” she said. “Meanwhile, e-commerce sites have barely changed since the introduction of the Internet.”
As the global economy grinds to a halt, every business sector has been impacted, including the linked worlds of startups and venture capital.
But how much has really changed? If you read VC Twitter, you might think that nothing has changed at all. It’s not hard to find investors who say they are still cutting checks and doing deals. But as Q1 venture data trickles in, it appears that a slowdown in VC activity is gradually forming, something that founders have anecdotally shared with TechCrunch.
To get a better handle on how venture capitalists are approaching today’s market, TechCrunch corresponded with a number of active investors to learn how their investment selection process might be changing in light of COVID-19 and its related disruptions. We wanted to know how their investing cadence in Q1 2020 compared to the final quarter of 2019 and the prior-year period. We also asked if their focus had changed, how valuations have shifted and what their take on the LP market is today.
We heard back from Duncan Turner of SOSV, Alex Doll of TenEleven Ventures, Alex Niehenke of Scale Venture Partners, Paul Murphy of Northzone, Sean Park of Anthemis and John Vrionis of Unusual Ventures.
We’ll start with the key themes from their answers and then share each set of responses in detail.
The VCs who responded haven’t slowed their investing pace — yet.
There’s likely some selection bias at work, but the venture capitalists who were willing to answer our questions were quick to note that they wrote a similar number of checks in Q1 2020 as in both Q4 2019 (the sequentially preceding quarter) and Q1 2019 (the year-ago quarter). Some were even willing to share numbers.
The technology that runs our companies these days is staggering in its complexity. We have moved from a monolith to a microservices world, from boxes to SaaS, and while that has added agility to the enterprise, it has come at the cost of a metric f-ton of services and software platforms required by every team in the building.
CIOs need a place to commiserate — and get better recommendations on what tech works well and what should be placed in the proverbial recycle bin. Meanwhile, salespeople and investors want to hear these decision-makers’ views on emerging products to identify rich veins to invest in.
At the core of Pulse is a community of vetted CIOs and other tech procurers, currently numbering more than 15,000. On top of this core group of users, Pulse has built a series of products to help exploit their collective wisdom, including several new products the company is announcing today.
In addition to new product launches, the company is announcing a $6.5 million Series A round from AV8 Ventures, which is exclusively backed by mega-insurer Allianz Group and launched last year with a debut $170 million fund. This round closed in December according to the company, and brings the startup’s total funding to $10.5 million.
Pulse’s existing product offerings assist product marketers and investment researchers who want to get a “pulse” on the marketplace for tech products by polling CIOs and testing out language around new features and initiatives.
“As an example, Microsoft will come to us and say, ‘Hey, we want to test our messaging and positioning before we sort of blow it up as a campaign. We’d like to do that very quickly through your community.’ And then we facilitate that through a series of questions through surveys and get back the insights to them very quickly,” co-founder and CEO Mayank Mehta explained.
“We think about this as truly becoming a Bloomberg terminal for marketers and investors,” he said. Researchers “can use this as a great way to get a real-time pulse on their buyers and understand how the market is moving, so they can make appropriate investments and ship strategies in real time.”
He said that the company worked with 50 customers last year and delivered some 150 reports. As for the CIOs themselves, “The community is open so long as you are a director level or above,” Mehta said.
In addition to this product for investors and market researchers, the company is also announcing the launch of Product IQ today, which takes the needs of a particular CIO user into account to offer them “personalized” product recommendations for their companies. Those recommendations are surfaced from the continuous data that CIOs are adding into the system through polls and opinion surveys.
“We’re trying to imagine and rethink how decision-making is done for technology executives, especially in a world like this where teams are changing so dramatically,” Mehta said.
Crowdsourced research platforms in the tech industry have become a popular area for VC investment in recent years. StackShare, which raised $5.2 million from e.Ventures, has focused on helping engineers learn from other engineers about the tech they have chosen for their infrastructure. Meanwhile, startups like Wonder and NewtonX, which raised $12 million from Two Sigma Ventures, have focused less on technical solutions and instead answer business questions such as market sizing or competitive landscape.
Pulse was founded in 2017 and is based in San Francisco, and previously raised a seed from True Ventures according to Crunchbase.
Until very recently, it had begun to seem like anyone with a thick enough checkbook and some key contacts in the startup world could not only fund companies as an angel investor but even put himself or herself in business as a fund manager.
It helped that the world of venture fundamentally changed and opened up as information about its inner workings flowed more freely. It didn’t hurt, either, that many billions of dollars poured into Silicon Valley from outfits and individuals around the globe who sought out stakes in fast-growing, privately held companies — and who needed help in securing those positions.
Of course, it’s never really been as easy or straightforward as it looks from the outside. While the last decade has seen many new fund managers pick up traction, much of the capital flooding into the industry has accrued to a small number of more established players that have grown exponentially in terms of assets under management. In fact, talk with anyone who has raised a first-time fund and you’re likely to hear that the fundraising process is neither glamorous nor lucrative and that it’s paved with very short phone conversations. And that’s in a bull market.
What happens in what’s suddenly among the worst economic environments the world has seen? First and foremost, managers who’ve struck out on their own suggest putting any plans on the back burner. “I would love to be positive, and I’m an optimist, buut I would have to say that now is probably one of the toughest times” to get a fund off the ground,” says Aydin Senkut, who founded the firm Felicis Ventures in 2006 and just closed its seventh fund.
It’s a perfect storm for first-time managers,” adds Charles Hudson, who launched his own shop, Precursor Ventures, in 2015.
Hitting pause doesn’t mean giving up, suggests Eva Ho, cofounder of the three-year-old, seed-stage L.A.-based shop Fika Ventures, which last year closed its second fund with $76 million. She says not to get “too dismayed” by the challenges. Still, it’s good to understand what a first-time manager is up against right now, and what can be learned more broadly about how to proceed when the time is right.
Know it’s hard, even in the best times
As a starting point, it’s good to recognize that it’s far harder to assemble a first fund than anyone who hasn’t done it might imagine.
Hudson knew he wanted to leave his last job as a general partner with SoftTech VC when the firm — since renamed Uncork Capital — amassed enough capital that it no longer made sense for it to issue very small checks to nascent startups. “I remember feeling like, ‘Gosh, I’ve reached a point where the business model for our fund is getting in the way of me investing in the kind of companies that naturally speak to me,” which is largely pre-product startups.
Hudson suggests he may have overestimated interest in his initial idea to create a single GP fund that largely backs ideas that are too early for other investors. “We had a pretty big LP based [at SoftTech] but what I didn’t realize is the LP base that’s interested in someone who is on fund three or four is very different than the LP base that’s interested in backing a brand new manager.”
Hudson says he spent a “bunch of time talking to fund of funds, university endowments — people who were just not right for me until someone pulled me aside and just said, ‘Hey, you’re talking to the wrong people. You need to find some family offices. You need to find some friends of Charles. You need to find people who are going to back you because they think this is a good idea and who aren’t quite so orthodox in terms of what they want to see in terms partner composition and all that.'”
Collectively, it took “300 to 400 LP conversations” and two years to close his first fund with $15 million. (Its now raising its third pre-seed fund).
Ho says it took less time for Fika to close its first fund but that she and her partners talked with 600 people in order to close their $41 million debut effort, adding that she felt like a “used car salesman” by the end of the process.
Part of the challenge was her network, she says. “I wasn’t connected to a lot of high-net-worth individuals or endowments or foundations. That was a whole network that was new to me, and they didn’t know who the heck I was, so there’s a lot of proving to do.” A proof-of-concept fund instill confidence in some of these investors, though Ho notes you have to be able to live off its economics, which can be miserly.
She also says that as someone who’d worked at Google and helped found the location data company Factual, she underestimated the work involved in running a small fund. “I thought, ‘Well, I’ve started these companies and run these big teams. How how different could it be? Learning the motions and learning what it’s really like to run the funds and to administer a fund and all responsibilities and liabilities that come with it . . . it made me really stop and think, ‘Do I want to do this for 20 to 30 years, and if so, what’s the team I want to do it with?'”
Investors will offer you funky deals; avoid these if you can
In Hudson’s case, an LP offered him two options, either a typical LP agreement wherein the outfit would write a small check, or an option wherein it would make a “significant investment that have been 40% of our first fund,” says Hudson.
Unsurprisingly, the latter offer came with a lot of strings. Namely, the LP said it wanted to have a “deeper relationship” with Hudson, which he took to mean it wanted a share of Precursor’s profits beyond what it would receive as a typical investor in the fund.
“It was very hard to say no to that deal, because I didn’t get close to raising the amount of money that I would have gotten if I’d said yes for another year,” says Hudson. He still thinks it was the right move, however. “I was just like, how do I have a conversation with any other LP about this in the future if I’ve already made the decision to give this away?”
Fika similarly received an offer that would have made up 25 percent of the outfit’s debut fund, but the investor wanted a piece of the management company. It was “really hard to turn down because we had nothing else,” recalls Ho. But she says that other funds Fika was talking with made the decision simpler. “They were like, ‘If you sign on to those terms, we’re out.” The team decided that taking a shortcut that could damage them longer term wasn’t worth it.
Your LPs have questions, but you should question LPs, too
Senkut started off with certain financial advantages that many VCs do not, having been the first product manager at Google and enjoying the fruits of its IPO before leaving the outfit in 2005 along with many other Googleaires, as they were dubbed at the time.
Still, as he tells it, it was “not a friendly time a decade ago” with most solo general partners spinning out of other venture funds instead of search engine giants. In the end, it took him “50 no’s before I had my first yes” — not hundreds — but it gave him a taste of being an outsider in an insider industry, and he seemingly hasn’t forgotten that feeling.
Indeed, according to Senkut, anyone who wants to crack into the venture industry needs to get into the flow of the best deals by hook or by crook. In his case, for example, he shadowed angel investor Ron Conway for some time, working checks into some of the same deals that Conway was backing.
“If you want to get into the movie industry, you need to be in hit movies,” says Senkut. “If you want to get into the investing industry, you need to be in hits. And the best way to get into hits is to say, ‘Okay. Who has an extraordinary number of hits, who’s likely getting the best deal flow, because the more successful you are, the better companies you’re going to see, the better the companies that find you.”
Adds Senkut, “The danger in this business is that it’s very easy to make a mistake. It’s very easy to chase deals that are not going to go anywhere. And so I think that’s where [following others] things really helped me.”
Senkut has developed an enviable track record over time. The companies that Felicis has backed and been acquired include Credit Karma, which was just gobbled up by Intuit; Plaid, sold in January to Visa; Ring, sold in 2018 to Amazon, and Cruise, sold to General Motors in 2016, and that’s saying nothing of its portfolio companies to go public.
That probably gives him a kind of confidence that it’s harder to earlier managers to muster. Still, Senkut also says it’s very important for anyone raising a fund to ask the right questions of potential investors, who will sometimes wittingly or unwittingly waste a manager’s time.
He says, for example, that with Felicis’s newest fund, the team asked many managers outright about how many assets they have under management, how much of those assets are dedicated to venture and private equity, and how much of their allotment to each was already taken. They did this so they don’t find themselves in a position of making a capital call that an investor can’t meet, especially given that venture backers have been writing out checks to new funds at a faster pace than they’ve ever been asked to before.
In fact, Felicis added new managers who “had room” while cutting back some existing LPs “that we respected . .. because if you ask the right questions, it becomes clear whether they’re already 20% over-allocated [to the asset class] and there’s no possible way [they are] even going to be able to invest if they want to.”
It’s a “little bit of an eight ball to figure out what are your odds and the probability of getting money even if things were to turn south,” he notes.
Given that they have, the questions look smarter still.
In the wake of the financial crisis, Congress passed regulations limiting the types of investments that banks could make into private equity and venture capital funds. As cash strapped investors pull back on commitments to venture funds given the precipitous drop of public market stocks, loosening restrictions on the how banks invest cash could be a lifeline for venture funds.
That’s the position that the National Venture Capital Association is taking on the issue in comments sent to the chairs of the Federal Reserve, the Securities and Exchange Commission and the Federal Deposit Insurance Corp., and the Commodities Future Trading Commission.
The proposed revisions of the Volcker Rule would exclude qualifying venture capital funds from the covered fund definition.
“The loss of banking entities as limited partners in venture capital funds has had a disproportionate impact on cities and regions with emerging entrepreneurial ecosystems — areas outside of Silicon Valley and other traditional technology centers,” NVCA president and chief executive Bobby Franklin wrote. “The more challenging reality of venture fundraising in these areas of the country tends to require investment from a more diverse set of limited partners.”
Franklin cited the case of Renaissance Venture Capital, a Michigan-based regionally focused fund that estimated the Volcker Rule cost them $50 million in potential capital commitments resulting in the loss of a potential $800 million in capital invested in the state of Michigan.
“This narrative unfortunately repeats itself, as we have heard firsthand from investors about how the Volcker Rule has affected venture capital investment and entrepreneurial activity across the country,” wrote Franklin. “The majority of these concerns about the Volcker Rule have come from members located in regions with emerging ecosystems, including states like Ohio, Michigan, North Carolina, New Hampshire, Wisconsin, Georgia, and Virginia, to name a few.”
It’s not only small states that could be impacted by the decision to reverse course on banking investments into venture firms in these uncertain times.
There’s a growing concern among venture investors that — just like in 2008 — their limited partners might find that they’re over-allocated into venture investments given the decline in markets, which would force them to pull back on making commitments to new funds.
“Institutional LPs will run into the same issues they had in 2008. If you used to manage $10B and the market declines and you now manage $6B, the percentage allocated to private equity has now increased relative to the whole portfolio,” Hyde Park Ventures partner, Ira Weiss told a Forbes columnist in a March interview. “They’re really not going to look at new managers. If you’ve done really well as a manager, they will probably re-up but may reduce commitment amounts. This will bleed backwards into the venture market. This is happening at a time when Softbank has already had a lot of trouble and people had not really modulated for that yet, but now they will.”
Some of the largest investment funds have already closed on capital, insulating them from the worst hits. These include funds like New Enterprise Associates and General Catalyst . But newer funds are going to have a harder time raising. For them, giving banks the ability to invest in venture firms could be a big boon — and a confidence boost that the industry needs at a time when investors across the board are getting skittish.
“Fundraising for new funds in 2020 and 2021 might prove to be more difficult as asset managers think about rebalancing their portfolio and/or protecting their assets from the current volatility in the market,” Aaron Holiday told Forbes . “This means that VC investing could slow down in 12 – 24 months after the most recent wave of funds (i.e. 2018 and 2019 vintages) are fully deployed.”
A Notion spokesperson confirmed the raise and valuation to TechCrunch.
As startups across the board begin looking at layoffs or raising at less than favorable terms, Notion had been in the unusual position of turning interested investors away for years. With this raise, the firm has amassed $67 million in total funding, the company says. Their last raise of $10M valued them at $800 million.
The company’s highly customizable note-taking app allows enterprise customers to create linked networks of databases and documents.
In November, COO Akshay Kothari told TechCrunch that the company was hoping not to raise outside funding again, “So far one of the things we’ve found is that we haven’t really been constrained by money. We’ve had opportunities to raise a lot more, but we’ve never felt like if we had more money we could grow faster.”
What’s changed? Just the global economy. The firm told the Times that this new raise should put them in a more stable position and leave them with enough funding for “at least” ten years. That said, the startup’s team has expanded rapidly in recent months, growing 40 percent since November. Their user numbers appear to also be growing rapidly, with Kothari telling the Times that total users have “nearly quadrupled” from one million, a figure the company released in early 2019.
Notion offers free and paid accounts, ranging from $5 to $25 billed monthly.
On-demand shuttle startup Via has hit a $2.25 billion valuation following a Series E funding round led by Exor, the Agnelli family holding company that owns stakes in PartnerRe, Ferrari and Fiat Chrysler Automobiles.
The Series E funding round, which included other investors, totaled $400 million, according to a source familiar with the deal. Exor invested $200 million into Via as part of the round, both companies said in an announcement. Noam Ohana, who heads up Exor Seeds, the holding company’s early-stage investment arm, will join Via’s board.
New investors Macquarie Capital, Mori Building and Shell also participated in the round, as well as existing investors 83North, Broadscale Group, Ervington Investments, Hearst Ventures, Planven Ventures, Pitango and RiverPark Ventures.
Via, which employs about 700 people, plans to use most of these funds to expand its “partnerships,” the software services piece of its business. Via has two sides to its business. The company operates consumer-facing shuttles in Chicago, Washington, D.C. and New York. But the core of its business is really its underlying software platform, which it sells to cities and transportation authorities to deploy their own shuttles.
When the company first launched in 2012, there was little interest from cities in the software platform, according to co-founder and CEO Daniel Ramot . The company started by focusing on its consumer-facing shuttles. Over time, and using the massive amounts of data it collected through these services, Via improved its dynamic, on-demand routing algorithm, which uses real-time data to route shuttles to where they’re needed most.
Via landed its first city partnership with Austin in late 2017, after providing the platform to the transit authority for free. It was enough to allow Via to develop case studies and convince other cities to buy into the service. In 2019, the partnerships side of the business “took off,” Ramot said in a recent interview, adding that the company was signing on two to three cities a week before the COVID-19 pandemic.
Today, the Via platform is used by more than 100 partners, including cities such as Los Angeles and Cupertino, Calif., and Arriva Bus UK, a Deutsche Bahn company that uses it for a first and last-mile service connecting commuters to a high-speed train station in Kent, U.K.
Via managed to close the funding round during an inauspicious time for startups that have found it increasingly difficult to lock in capital due to the COVID-19 pandemic. COVID-19, a disease caused by the coronavirus, has upended markets, along with every industrial and business sector, from manufacturing and transportation to energy and real estate.
Via managed to raise a sizable fund, which just closed, despite the credit tightening and uncertainty. Ramot told TechCrunch that while he was worried the round might be delayed, he noted that Exor is a long-term and patient investor that shares the company’s “same vision of where transit is going.”
Even now, as nearly every category within transportation — including public transit, ride-hailing, shared micromobility and airlines — has seen ridership drop or dry up altogether, Ramot and Ohana see a promising future.
Ohana said that the market is starting to understand the limits of ride-hailing — hurdles such as poor unit economics and an uncertain path to profitability. “On the other hand, the size of the market for an on-demand dynamic shuttle service is large and underappreciated,” Ohana said. “When we look at public transit today, there is a significant opportunity for Via, which already has impressive experience working with municipal and public transit partners across the globe.”
That doesn’t mean Via is immune to the widespread tumult caused by the COVID-19 pandemic. Via’s consumer business has been negatively affected as ridership has dropped due to the spreading disease.
However, there has been some promise with its partnerships business, Ramot said.
Existing partners, a list that includes transit authorities in Berlin, Germany, Ohio and Malta, have worked with Via to convert or adapt the software to meet new needs during the pandemic. A city might dedicate its shuttle service to transporting goods or essential personnel. For instance, Berlin converted its 120-shuttle fleet transport to an overnight service that provides free transit to healthcare workers traveling to and from work.
“There has been a real interest in emergency services,” Ramot said, adding he expects to see more demand for the software platform and the flexibility it provides as the pandemic unfolds.
CRM has for years been primarily a story of software to manage customer contacts, data to help agents do their jobs, and tools to manage incoming requests and outreach strategies. Now to add to that we’re starting to see a new theme: apps to help agents track how they work and to work better.
Today comes the latest startup in that category, a Dutch company called Kaizo, which uses AI and gamification to provide feedback on agents’ work, tips on what to do differently, and tools to set and work to goals — all of which can be used remotely, in the cloud. Today, it is announcing $3 million in a seed round of funding co-led by Gradient — Google’s AI venture fund — and French VC Partech.
And along with the seed round, Kaizo (which rebranded last week from its former name, Ticketless) is announcing that Christoph Auer-Welsbach, a former partner at IBM Ventures, is joining the company as a co-founder, alongside founder Dominik Blattner.
Although this is just a seed round, it’s coming after a period of strong growth for the company. Kaizo has already 500 companies including Truecaller, SimpleSurance, Miro, CreditRepairCloud, Justpark, Festicket and Nmbrs are using its software, covering “thousands” of customer support agents, which use a mixture of free and paid tools that integrate with established CRM software from the likes of Salesforce, Zendesk and more.
Customer service, and the idea of gamifying it to motivate employees, might feel like the last thing on people’s minds at the moment, but it is actually timely and relevant to our current state in responding to and living with the coronavirus.
People are spending much more time at home, and are turning to the internet and remote services to get what they need, and in many cases are finding that their best-laid plans are now in freefall. Both of these are driving a lot of traffic to sites and primarily customer support centers, which are getting overwhelmed with people reaching out for help.
And that’s before you consider how customer support teams might be impacted by coronavirus and the many mandates we’ve had to stay away from work, and the stresses they may be under.
“In our current social climate, customer support is an integral part of a company’s stability and growth that has embraced remote work to meet the demands of a globalized customer-base,” said Dominik Blattner, founder of Kaizo, in a statement. “With the rise of support teams utilizing a digital workplace, providing standards to measure an agent’s performance has never been more important. KPIs provide these standards, quantifying the success, achievement and contribution of each team member.”
On a more general level, Kaizo is also changing the conversation around how to improve one’s productivity. There has been a larger push for “quantified self” platforms, which has very much played out both in workplaces and in our personal lives, but a lot of services to track performance have focused on both managers and employees leaning in with a lot of input. That means if they don’t set aside the time to do that, the platforms never quite work the way they should.
This is where the AI element of Kaizo plays a key role, by taking on the need to proactively report into a system.
“This is how we’re distinct,” Auer-Welsbach said in an interview. “Normally KPIs are top-down. They are about people setting goals and then reporting they’ve done something. This is a bottom-up approach. We’re not trying to change employees’ behaviour. We plug into whatever environment they are using, and then our tool monitors. The employee doesn’t have to report or measure anything. We track clicks on the CRM, ticketing, and more, and we analyse all that.” He notes that Kaizo is looking at up to 50 datapoints in its analysis.
“We’re excited about Kaizo’s novel approach to applying AI to existing ticket data from platforms like Zendesk and Salesforce to optimize the customer support workflow,” said Darian Shirazi, General Partner at Gradient Ventures, in a statement. “Using machine learning, Kaizo understands which behaviors in customer service tickets lead to better outcomes for customers and then guides agents to replicate that using ongoing game mechanics. Customer support and service platforms today are failing to leverage data in the right way to make the life of agents easier and more effective. The demand Kaizo has seen since they launched on the Zendesk Marketplace shows agents have been waiting for such a solution for some time.”
Kaizo is not the only startup to have identified the area of building new services to improve the performance of customer support teams. Assembled earlier this month also raised $3.1 million led by Stripe for what it describes as the “operating system” for customer support.
Early this morning, Fast, a startup building platform-agnostic login and checkout services, announced that Stripe has led a $20 million investment into its business. Prior investors Index Ventures and Susa Ventures took part in the round. Susa previously participated in the company’s late-2019 round that Index led.
Coming in late March, the new capital is a quick-follow to Fast’s November seed round. Such a rapid-fire deal would have felt right at home in mid-2019; to see two consecutive rounds in less than a half-year in 2020, in contrast, feels aggressive, though that’s more a testament to how the market has changed than Fast’s ability to attract capital.
As the venture capital market cools in the face of a global economic slowdown, let’s take a minute to unpack what Fast does to better understand why Stripe led its Series A so quickly after its preceding venture round.
Let’s explain Fast’s product by way of analogy. You and I read the news, and we buy things online. Logging into news services is a colossal pain in the backside, and if you’re buying something other than on Amazon, you probably have to relog. Which is irksome and slow and generally annoying.
Fast, per its name, wants to make logging in far quicker, and also wants to help you check out at online stores more simply, and, as before, rapidly. In an interview with TechCrunch, CEO Domm Holland said that Fast wants “to be the intermediary for all consumer interactions,” which he broke down as a “fancy way of saying we want to give you one-click login, one-click payments, one-click data everywhere.”
In short, Fast wants to be your profile for signing into services and buying goods online, everywhere that it can be. You can now begin to see why Stripe led the company’s Series A. If Stripe has built a way for lots of digital stores and businesses to accept payments, Fast wants to build the equivalent consumer solution for the other side of those transactions.
Notably, Fast wants to be a platform, allowing other companies to bring its service to other niches; my example of media before wasn’t idle, it was an example that I chewed over with Holland and Fast’s CEO Barr Allen during a call discussing how the company’s service might be used in the future.
At this point you’re probably wondering how Fast works in practice. Holland explained the process to TechCrunch using online shopping as the example. According to the CEO, the first time a user sees a Fast checkout button while buying a good or service, they are able to click it, at which point they’ll be prompted with a “short, optimized checkout form” that asks for five pieces of information (email, name, phone number, address and credit card information). After the user finishes inputting those details, Fast wraps the transaction and saves the consumer’s information. Per Holland, those credentials are stored so that the next time that same user sees a Fast button, they can power through the sale rapidly, because the company already knows who they are and how they pay. (Note: You’ll have to relog if you change devices, natch.)
You can see how the more places Fast is available the more useful it becomes; picking up money from Stripe then has advantages for Fast, as its new benefactor is integrated around the Web, a footprint that its new investment might be able to leverage to gain distribution of its own. And the deal bakes Stripe’s service even more deeply into a payment gateway of sorts that has ambitions to be work across the internet. (Fast makes money on a spread between the payment cost it charges its customers and what it pays Stripe.)
Today, however, Fast’s login product is in-market, while its payments service has yet to see a wide rollout. With 20 million new dollars, however, we expect to see the firm’s checkout service in-market quickly. Indeed, the startup noted in a release that it intends to use its new capital to “accelerate the global rollout of Fast Checkout” and grow it staff.
Jumping from a $2.5 million raise to a $20 million investment in a few months is quick; Fast should have all the capital it could possibly need to build its vision for the next year. This brings us to our final point. Namely that if Fast succeeds, and its payments-and-login service does take off, it could provide a reasonable bulwark against whole-scale consumption of digital identity by major tech companies, and the siloing of identity amongst media companies that we see today.
Long have I dreamed of having a central login for my media accounts. Fast could, in theory, power such a service. That is, if no one snaps up the company first. On that point, Index’s Jan Hammer, the investor who led the company’s seed round, cited the company’s independence as a net-plus for Fast, saying that “many merchants would tell you they don’t trust Amazon, and many shoppers would admit that they don’t trust Google to store their credit cards because they both have different agendas.” There we agree.
More when we see Fast around the Web.
Four years ago, mathematician Vlad Voroninski saw an opportunity to remove some of the bottlenecks in the development of autonomous vehicle technology thanks to breakthroughs in deep learning.
Now, Helm.ai, the startup he co-founded in 2016 with Tudor Achim, is coming out of stealth with an announcement that it has raised $13 million in a seed round that includes investment from A.Capital Ventures, Amplo, Binnacle Partners, Sound Ventures, Fontinalis Partners and SV Angel. More than a dozen angel investors also participated, including Berggruen Holdings founder Nicolas Berggruen, Quora co-founders Charlie Cheever and Adam D’Angelo, professional NBA player Kevin Durant, Gen. David Petraeus, Matician co-founder and CEO Navneet Dalal, Quiet Capital managing partner Lee Linden and Robinhood co-founder Vladimir Tenev, among others.
Helm.ai will put the $13 million in seed funding toward advanced engineering and R&D and hiring more employees, as well as locking in and fulfilling deals with customers.
Helm.ai is focused solely on the software. It isn’t building the compute platform or sensors that are also required in a self-driving vehicle. Instead, it is agnostic to those variables. In the most basic terms, Helm.ai is creating software that tries to understand sensor data as well as a human would, in order to be able to drive, Voroninski said.
That aim doesn’t sound different from other companies. It’s Helm.ai’s approach to software that is noteworthy. Autonomous vehicle developers often rely on a combination of simulation and on-road testing, along with reams of data sets that have been annotated by humans, to train and improve the so-called “brain” of the self-driving vehicle.
Helm.ai says it has developed software that can skip those steps, which expedites the timeline and reduces costs. The startup uses an unsupervised learning approach to develop software that can train neural networks without the need for large-scale fleet data, simulation or annotation.
“There’s this very long tail end and an endless sea of corner cases to go through when developing AI software for autonomous vehicles, Voroninski explained. “What really matters is the unit of efficiency of how much does it cost to solve any given corner case, and how quickly can you do it? And so that’s the part that we really innovated on.”
Voroninski first became interested in autonomous driving at UCLA, where he learned about the technology from his undergrad adviser who had participated in the DARPA Grand Challenge, a driverless car competition in the U.S. funded by the Defense Advanced Research Projects Agency. And while Voroninski turned his attention to applied mathematics for the next decade — earning a PhD in math at UC Berkeley and then joining the faculty in the MIT mathematics department — he knew he’d eventually come back to autonomous vehicles.
By 2016, Voroninski said breakthroughs in deep learning created opportunities to jump in. Voroninski left MIT and Sift Security, a cybersecurity startup later acquired by Netskope, to start Helm.ai with Achim in November 2016.
“We identified some key challenges that we felt like weren’t being addressed with the traditional approaches,” Voroninski said. “We built some prototypes early on that made us believe that we can actually take this all the way.”
Helm.ai is still a small team of about 15 people. Its business aim is to license its software for two use cases — Level 2 (and a newer term called Level 2+) advanced driver assistance systems found in passenger vehicles and Level 4 autonomous vehicle fleets.
Helm.ai does have customers, some of which have gone beyond the pilot phase, Voroninski said, adding that he couldn’t name them.
Seasoned secondary players were expecting it. As the markets began to plummet in recent weeks, shareholders who’d turned down earlier offers to buy this or that holding were suddenly curious to see if those interested parties might still be interested. Alas, it was too late. The market was moving too fast. It still is.
“Up until last week, everyone was calling to get old pricing,” says Hans Swildens, the founder of 20-year-old Industry Ventures in San Francisco, an investment firm that invests in hundreds of venture funds and is also among the industry’s biggest buyers of secondary shares. “It was, ‘Hey, we reconsidered this offer. Could you pay me what the market was paying last month?’ ”
Swildens says that everybody in the secondaries market said no. They had no choice. “It’s almost impossible to buy when you don’t know what numbers you’re buying against. Buyers don’t know how far the [net asset value] of funds will go down. No one wants to buy something for $10 million that might be worth $5 million [in the not-too-distant future].”
Such is the state of affairs in the venture-backed world of startups right now. Though 2020 once promised to be a year of splashy IPOs and long-awaited liquidity for players across the ecosystem — from employees to founders to venture firms to the limited partners that invest in venture firms — it may well be remembered instead as the year that time stood still.
Certainly, everyone seems stuck in place right now.
While limited partners are largely avoiding their phones, and hoping the venture managers in their portfolio will stop asking for capital, venture firms that didn’t push their portfolio companies to go public are now feeling pressured to produce liquidity somewhere in their holdings, and that’s tougher than ever right now. With some exceptions, cash-rich companies are in no hurry to go shopping (they also have to worry about looking monopolistic). With some exceptions, companies aren’t merging just yet (though expect a lot of this soon).
Now, secondary shops have hit the pause button, too, as everyone on the ground tries to get a better sense of where the bottom might be.
It could take one to three quarters to assess, say those in the know. For one thing, a lot of nontraditional players have propped up the venture market over the last decade, and some, including hard-hit corporations and family offices, might not have the wherewithal to support their venture managers, even if that’s not obvious today.
On the company level, there are also plenty of questions that are unanswerable at the moment. “Right now, everything is on pause in terms of activity,” says Swildens, adding that, “in a month, we’ll know more. Are people going back to work or not? What were Q1 numbers like? How does April look? Did this company miss revenue by 10% or 80%? Did it beat revenue in March or April? For the buy side, in a month, we’ll have data from the companies and the funds, while right now, no one knows how bad it is.”
In the meantime, secondary players are in the catbird’s seat, seemingly, even while they have to sit tight for what insiders say could be one to three quarters.
Chris Douvos, a longtime investor in venture funds, observes that there’s an “immense amount of capital looking for fund stakes,” meaning from outfits like Industry Ventures and roughly 75 other players in the market. “If I’m a VC right now, I’m wondering when [these] investors — folks who have billions of dollars in committed capital and love to buy fund stakes at 65 cents on the dollar — start capitulating, but that’s like six to nine months out when you really see [these transactions] happen.”
Swildens suggests that’s about right. “Sellers have to reset pricing expectations, then buyers have to come up with a price they are willing to pay, and those things have to meet. And that takes one to two quarters.”
What’s happening between now and then are calls, more calls, and endless number-crunching. Some of it is proving dismal, with a lot of those numbers shrinking as revenue slows and sales cycles grow harder. Some of it, around pre-IPO companies, is likely particularly agonizing. “All the boards and CEOs are trying to work out pro forma plans now,” says Swildens. “If they cut spending too much, growth slows too much and they can’t take the company public next year. They can’t cut to the bone, or they can’t list it.”
There are bright spots, however. As Swildens observes, “Everybody is being negatively impacted right now, with the exception of some bandwidth, infrastructure, fintech and edtech investments. For some of these, [this shutdown] has been kind of a good thing. Edtech companies’ prices are probably going to go up with tens of millions of people suddenly signing up for their services.”
Now to hurry up and wait.
The coronavirus demand crunch has taken another bite: Palo Alto-based corporate travel-focused unicorn, TripActions, reportedly laid off hundreds of staff yesterday.
Per this post on Blind — written by someone with a verified TripActions email address — the company fired 350 people. Business Insider reported the same figure yesterday. While the Wall Street Journal said the layoffs amount to between one-quarter to one-fifth of the startup’s total staff, citing a person familiar with the situation.
In an email to CrunchBase News TripActions confirmed it has axed jobs in response to the COVID-19 global health crisis — saying it has “cut back on all non-essential spend”. Although it did not confirm exactly how many employees it has fired.
“[We] made the very difficult decision to reduce our global workforce in line with the current climate,” TripActions wrote in the statement. “We look forward to when the strength of the global economy and business travel inevitably return and we can hire back our colleagues to rejoin us in our mission to make business travel effortless for our customers and users.”
“This global health crisis is unlike anything we’ve ever seen in our lifetimes, and our hearts go out to everyone impacted around the world, including our own customers, partners, suppliers and employees,” it added. “The coronavirus has had [a] wide-reaching effect on the global economy. Every business has been impacted including TripActions. While we were fortunate to have recently raised funding and secured debt financing, we are taking appropriate steps in our business to ensure we are here for our customers and their travelers long into the future.”
Per the post on Blind, TripActions is providing one week of severance to sacked staff and medical cover until end of month. “With [the coronavirus pandemic] going on you think they would do better,” the OP wrote. The layoffs were made by Zoom call, they also said.
We’ve reached out to TripActions for comment.
Travel startups are facing an unprecedented nuclear winter as demand has fallen off a cliff globally — with little prospect of a substantial change to the freeze on most business travel in the coming months as rates of COVID-19 infections continue to grow exponentially outside China.
However TripActions is one of the highest valued and best financed of such startups — securing a $500M credit facility for a new corporate product only last month, when we noted Crunchbase had more than $480M in tracked equity funding for the company, including a $250M Series D TripActions raised in June from investors including a16z, Group 11, Lightspeed and Zeev Ventures.
Ahead of making the layoffs the company had already paused all hiring, per one former technical sourcer for the company writing on LinkedIn.
The COVID-19 pandemic has already triggered a number of layoffs across industries, from travel companies to scooter startups. But, as a gray footnote to all tragedies, we’re starting to see innovation pop through the cracks — and hopefully help some people, as well.
Back in November, Alexander Taub and Michael Schonfeld launched Upstream, a social media platform for professionals, to a small group of roughly 800 beta testers. The goal was to give folks a place to network and ask for introductions in a more digitally friendly, mobile-first platform than LinkedIn groups. The company counts Hunter Walk of Homebrew, Olivia Benjamin of Bain Capital Ventures and D’Arcy Coolican of Andreessen Horowitz as beta users. The plan was to launch publicly this summer.
However, as companies have cut staff, the co-founders are launching Upstream to the public earlier than expected, with a specific goal to discuss layoffs from COVID-19.
“When the coronavirus hit, we were like, oh my god we’re gonna have crazy unemployment,” Taub tells me. “It’s one thing to have a recession depression, but there’s also going to be a zero demand curve because like, we can’t go outside. So this is going to be bad.”
As a result, Taub decided to double down on something he was already seeing happen organically on the platform: job hiring and role recommendations.
Once a user signs up to the platform, they can join the COVID-19 group. They can then choose what they want to post: looking to hire; looking for a job; or looking to help. Being able to only originate these three types of posts, noted Taub, is part of the reason Upstream is different from a Slack group or LinkedIn.
Once a note is posted, users can directly message other users in the group to follow up on a job posting or warm intro. When I asked Taub how he’s preparing for a potential uptick in usage, he said that “if this blows up…we will put up a gate” to limit the amount of posts that go live each minute.
Other groups on the platform that are not yet open to the public include Jews in Tech, Business Development and Earlybirds.
Taub said he and Schonfeld launched Upstream with a view to focus on individuals in tech. But in recent months, Taub says he’s noticed group members outside of tech have used it, including small business owners and teachers.
There has been little innovation in support for layoffs. Most layoff solutions exist in the form of job searching groups on Facebook, communities on Slack and even a plain-old spreadsheet that includes a list of people to hire. Taub is betting that “people want a dedicated place to be more vulnerable…because it’s a little uncomfortable asking for help on Facebook.”
If you’re looking for toothbrushes, skin-care face masks, mattresses, glasses or even socks, there’s a digitally-native, direct-to-consumer (D2C) company or two that can help you out.
And thanks to smart digital marketing, the cult followings that ensue and the economics of e-commerce, D2C has changed how we relate to consumer goods (while attracting a waterfall of investment dollars).
Globally, D2C startups have raised between $8 billion to $10 billion in known venture capital across more than 600 deals since the start of 2019, according to Crunchbase data. The industry was catalyzed by a number of nine-figure deals for companies like Glossier, which sells makeup products, and Ro, which is a telehealth startup.
Indeed, when prepping this post for publication, our list of notable D2C rounds since the start of 2019 grew long enough that we abandoned the idea of including a digest. The sector has been active across a host of verticals, making it hard to sum up in terms other than rounds and dollars invested.
But those are trailing indicators of what is going on between D2C startups and their investors. TechCrunch was curious, especially in the wake of the troubled Casper IPO, how investor sentiment might have shifted and what venture capitalists are looking for in the category.
To get a grip on the matter, we caught up with Nicole Quinn from Lightspeed Venture Partners, Ben Lerer and Caitlin Strandberg from Lerer Hippeau, Gareth Jefferies from Northzone, Matthew Hartman of Betaworks Ventures, Alexis Ohanian of Initialized Capital and Luca Bocchio of Accel.
We got into advice for founders looking to raise, whether influencer marketing is worth it and which channel one investor says is an “all-but-closed door for most D2C companies.” We’ll start with a summary of the three trends that stood out the most from our collected answers and then share the full investor digests.
Several months ago, we surveyed more than 20 leading real estate VCs to learn about what was exciting them most in the real estate tech sector and hear their opinions on proptech trends like co-working, flexible office space and remote office space.
Since we published our survey, COVID-19 has flipped the real estate sector on its head as more companies move toward mandatory remote work, retail businesses are forced to temporarily shut their doors and high-traffic properties thin out. Suddenly, the traditionally predictable world of real estate is more chaotic and unclear than ever.
What are the short and long-term impacts of pandemic-induced volatility? Does this open up opportunities for proptech startups or shutter them? What does this mean from an investing point of view? We asked several of the VCs that participated in our last survey to update us on how COVID-19 is impacting real estate startups, non-proptech companies in general and the broader real estate market overall:
Despite its banner year in 2019, proptech will not be immune to the pressures venture-backed companies face in a market pullback, and we are preparing ourselves and our portfolio companies for a bumpy year.
April Underwood, who until early last year was Slack’s chief product officer, has joined Obvious Ventures as a venture partner, she announced on Twitter today.
Underwood said that as part of the firm’s team, she will “invest in great companies seeking to solve the big problems facing humanity: our climate, human health and wellness, and how we work.” Of Obvious’s focus on “backing company with world positive impact,” she said its mission “couldn’t possibly feel more needed than it does in this particular moment.”
For Underwood, the role is one of several that she is currently juggling. She founded a startup advisory outfit called Wise Owl last year. She is also a cofounder of #Angels, an organization that focuses on investing in female founders and to which Underwood remains very committed, she said today, tweeting that her focus on “getting more women on the cap tables of successful startups will continue unabated.”
Underwood is now among a growing number of #Angels cofounders — powerful women at Twitter who introduced the initiative in 2015 — to be investing on pretty much a full-time basis.
In addition to Underwood, who spent nearly five years as a director of product at Twitter before joining Slack, #Angels was founded by Jana Messerschmidt, who is now a partner with Lightspeed Venture Partners; Jessica Verrilli, who is now a general partner with GV; and Katie Stanton Jacobs, who recently closed her own first venture fund with $25 million for a debut fund under the brand Moxie Ventures.
Another #Angels founder Vijaya Gadde, was and remains the General Counsel at Twitter. Meanwhile, Chloe Sladden, a former VP of Media at Twitter, last year cofounded a seed-stage startup making collaborative parenting tools called Honeycomb Labs.
Underwood was in charge of much of Slack’s strategy and product decisions during her nearly four years with the company.
A member of the board of directors of ZIllow, Underwood is now one of three venture partners who are working with Obvious Ventures .
The others include serial entrepreneur, investor and advisor Julie Hanna, and Di-Ann Eisnor, who was previously the Director of Urban Systems at Google’s Area 120 and, before that, started the U.S. office of Waze in 2009.
Obvious Ventures — cofounded very notably by Twitter cofounder Ev Williams — closed its third fund with roughly $270 million in capital commitments earlier this year.
SouSmile is a direct to consumer dental company based in São Paulo. SouSmile has raised $10 million in Series A funding from Global Founders Capital, Kaszek Ventures and Canary, bringing the company’s total funding to $11.4 million. The two-year-old startup sells an invisible aligner and whitening gels through five retail stores in shopping malls across São Paulo and Rio.
SouSmile is a new option for Brazilians hoping to get started on orthodontic work. The process consists of an evaluation by a licensed dentist that includes a panoramic X-ray, 3D scan and a clinical exam. Then, the company approves customers for treatment. SouSmile’s follow-up process includes bimonthly appointments, and costs approximately $1,000, which co-founder Michael Ruah says is 60% cheaper than comparable treatments, and can be paid in installments. Treatment is fast, taking between three to nine months.
SouSmile has a six-person co-founding team. The 100-person startup is made up of 50% licensed dentists.
Ruah anticipates that the coronavirus pandemic will have a negative short-term revenue impact for the company, as they anticipate less foot traffic in retail stores over the coming weeks, possibly months. He hopes that because the business is still young, macro indicators won’t have a huge impact on the bottom line in the medium-to-long term. Ruah says that the most important thing is that SouSmile employees and customers are safe and healthy at this point.
With 2 million orthodontic cases per year, highly populous Brazil is one of the largest dental markets globally, yet the penetration of invisible aligners is less than 2% due to prohibitive prices. Ruah compares this to the 40% penetration in the U.S. for adults, citing Invisalign’s numbers. There’s still a dent to be made, as SouSmile says it saw more than 10,000 bookings last year.
Ruah also cites a cultural reason as to why Brazil is a smart market for a product like this: Brazilians care a lot about both beauty and their oral health. “Brazilians brush their teeth three times a day. They’ll go out for lunch, they’ll come back to the office and brush their teeth. Everybody has their toothbrush and toothpaste with them all the time,” he explains.
SouSmile’s invisible aligner costs around $1,200. Treatment lasts between 3-9 months.
SmileDirectClub raised nearly $440 million at a $3.2 billion valuation before going public in 2019. The teeth-straightening company build its brand by leveraging the celebrity beauty angle with Instagram influencer campaigns that marketed the visual results of its product. While SouSmile hopes to see big numbers like its U.S.-based predecessor, it wants to take more of a healthcare-first approach to its branding, rather than cosmetic.
SouSmile is up against some big challenges. Physical retail costs are expensive. Manufacturing is hard, and the company doesn’t appear to be particularly tech-enabled, relying mainly on physical retail presence for customer acquisition.
SouSmile isn’t the only Latin American startup working on an anti-braces dental solution, either. Moons, a Mexican invisible aligner startup that just launched out of Y Combinator, may have a head start. Moons delivers a similar product as SouSmile for around the same cost, and is also using 3D printing to manufacture its aligners. Moons is targeting the Latin America market with $5 million in funding and the Y Combinator stamp of approval. Moons has already opened 18 locations across Mexico and Colombia.
But Brazillian tech can operate like a separate ecosystem apart from adjacent Spanish-speaking Latin America due to country regulations, language barriers and shipping complications. Consumer startups that can deliver products that improve the daily lives of Brazil’s massive middle class are the ones that succeed, and SouSmile now has the capital to shoot its shot.
The Houston -based, venture-backed company has signed a contract with SpaceX for a Crew Dragon flight which will transport a commander trained by Axiom along with three private astronauts to and from the International Space Station.
The mission is set to launch in the second half of 2021 and will allow the three-person crew to live on board the ISS for and “experience at least eight days of microgravity and views of the Earth that can only be appreciated in the large, venerable station,” according to a statement from the company.
For company chief executive, Michael Suffredini, the trip is an extension of his previous work as a previous manager of the ISS for the National Aeronautics and Space Administration.
“This history-making flight will represent a watershed moment in the march toward universal and routine access to space,” Suffredini said in a statement. “This will be just the first of many missions to ISS to be completely crewed and managed by Axiom Space – a first for a commercial entity. Procuring the transportation marks significant progress toward that goal, and we’re glad to be working with SpaceX in this effort.”
The trip marks the first of several “precursor missions” to the Space Station under the Space Act Agreement Axiom signed with NASA . Discussions are underway between the agency and the company to establish agreements for other private astronaut missions to the ISS.
Axiom wants to offer passengers two flights per year — aligning with the schedule of opportunities that NASA is making available, while building it works to build its own privately funded space station.
The company has already tapped institutional investors to achieve its goal, with $16 million collected from various individual and institutional investors including Balfour Capital and Starbridge Venture Capital, according to information in Crunchbase.
“Since 2012, SpaceX has been delivering cargo to the International Space Station in partnership with NASA and later this year, we will fly NASA astronauts for the first time,” said SpaceX President and Chief Operating Officer Gwynne Shotwell, in a statement. “Now, thanks to Axiom and their support from NASA, privately crewed missions will have unprecedented access to the space station, furthering the commercialization of space and helping usher in a new era of human exploration.”
Axiom said it will provide all the training, planning, hardware, life support, medical support, crew provisions, safety certifications and on-orbit operations for travelers willing to take the jump into spaceflight.
And the company was selected by NASA to attach its space station modules to the ISS beginning in the second half of 2024. The goal there is to create a private segment of the space station and extend its usable and habitable volume. When the space station is decommissioned, Axiom wants to detach its segment and operate as a free-flying commercial space station.
For SpaceX, the Axiom deal extends the commercial operations of its Crew Dragon craft beyond just NASA astronauts and offers a nice additional revenue stream.
This is actually the second deal between SpaceX and a commercial manned space tourism company. Last month the company inked an agreement with space Advnetures for a trip that would fly four passengers on a five day trip using a Crew Dragon vehicle.
Another afternoon, another round of funding for a mobile banking app. This time, it’s Empower Finance a San Francisco-based company that is headed up by former Sequoia Capital partner Warren Hogarth and which just closed on $20 million in Series A funding from Icon Ventures and Defy Ventures. David Velez, who is the founder and CEO of Nubank, the largest fintech in Latin America, also joined the round.
We’d first written about the company in 2017, when Hogarth was just getting the business of the ground. Today, Empower employs 35 people and has attracted more than 600,000 active users to its platform, says Hogarth. How: by combining AI and actual human financial planners to help millennials in particular accrue some wealth, including, more newly, through its own checking account product and a savings account that’s currently promising 1.60% in annual percentage yield with no minimums, no overdraft fees, and unlimited withdrawals.
It’s all part of an overall offering that crunches through an account holder’s bank and credit card accounts, and recommends how much they save into which account, how much they should spend given their overall pictures, various ways they can cut costs, and send users alert when they’ve surpassed their pre-configured budget.
Of course the company has so much competition it’s dizzying, but like the various upstarts against which it’s battling for mindshare, the opportunity it’s chasing is enormous, too. Though companies like Chime can seem overpriced given how fast investors have marked up their rounds — Chime’s newest financing, announced in December, was done at a $5.8 billion post-money valuation, which was four times more than the company was worth at the outset of 2019 — digital banks are still tiny fish in an ocean of institutional financial services, representing something like 3% of the market.
They’re gaining more market share by the day, too, including by charging far lower fees for much more. In Empower’s case, users pay $6 a month, but Hogarth says they also save on $300 a year in additional fees they would pay a brick-and-mortar bank and that it helps them save $1,300 more annually, too.
As for all those other companies, Hogarth sounds surprisingly sanguine. “If you look at it from the outside, it looks crowded,” he acknowledges. “But the consumer financial services in the U.S. is a $2 trillion business, and we haven’t had a fundamental shift since maybe Schwab came along 30 years ago.”
Indeed, says Hogarth, because Empower and its rivasl are mobile and branchless and don’t have legacy software to contend with, they’re able to take 60 to 70 percent of the cost structure out of the business. What that means to them? That even if they can attract 2 to 3 million customers, “you can have a multibillion-dollar market cap,” he says. “That’s why there’s so much interest in this space.”
It’s also why people like Nubank’s Velez who have seen this story play out in Europe and Latin America and who are seeing the early phases of it in the U.S. are apparently keeping the money spigot open for now.
Empower had earlier raised an undisclosed amount of seed funding from Sequoia, followed by a $4.5 million round led by Initialized Capital.