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
SoftBank, a long-time WeWork investor, plans to invest between $4 billion and $5 billion in exchange for new and existing shares, according to CNBC . The deal, expected to be announced as soon as tomorrow, represents a lifeline for WeWork, which is said to be mere weeks from running out of cash and has been shopping several of its assets as it attempts to lessen its cash burn.
WeWork declined to comment.
To be clear, it is reportedly the Vision Fund’s parent company, SoftBank Group Corp. that is taking control, with SoftBank International chief executive officer Marcelo Claure stepping in to support company management, per reports.
The Japanese telecom giant’s move comes precisely four weeks after co-founder and former CEO Adam Neumann relinquished control of the company and transitioned into a non-executive chairman role, and about three weeks after WeWork decided to delay its highly anticipated initial public offering. WeWork’s vice chairman Sebastian Gunningham and the company’s president and chief operating officer Artie Minson are currently serving as WeWork’s co-CEOs.
In addition to those personnel shake-ups, WeWork has lost its communications chief, Jimmy Asci, its chief marketing officer, Robin Daniels and several others. Meanwhile, the company has slashed hundreds of jobs, and opted to shut down its school, WeGrow, in 2020.
Now expected to go public in 2020, WeWork was also said to be in negotiations with JPMorgan for a last-minute cash infusion. The company, now a cautionary tale, will surely continue to reduce the sky-high costs of its money-losing operation in the upcoming months.
WeWork revealed an unusual IPO prospectus in August after raising more than $8 billion in equity and debt funding. Despite financials that showed losses of nearly $1 billion in the six months ending June 30, the company still managed to accumulate a valuation as high as $47 billion, largely as a result of Neumann’s fundraising abilities.
“As co-founder of WeWork, I am so proud of this team and the incredible company that we have built over the last decade,” Neumann said in a statement confirming his resignation last month. “Our global platform now spans 111 cities in 29 countries, serving more than 527,000 members each day. While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive. Thank you to my colleagues, our members, our landlord partners, and our investors for continuing to believe in this great business.”
The founder of one of 2019’s most buzzworthy startups is putting on his VC hat.
Rahul Vohra, the creator of the $30/month subscription emailing service Superhuman, and Todd Goldberg, the founder of the marketing business Mailjoy, are circulating a pitch deck to potential limited partners, with plans to raise a $4 million debut angel fund, TechCrunch has learned.
Goldberg declined to comment. Vohra did not respond to a request for comment.
San Francisco-based Superhuman has raised millions in venture capital funding, attracting a $260 million valuation with a $33 million investment led by the respected firm Andreessen Horowitz earlier this year. Quickly, Superhuman developed a loyal fan base and inspired a new wave of startups building for the “prosumer.”
“Superhuman has become an aspirational brand and product that many SaaS companies want to emulate,” Vohra and Goldberg write in the deck, obtained by TechCrunch. “Founders of these companies seek out Rahul as an investor. This helps us get into the hottest rounds — even the closed ones.”
Vohra and Goldberg have been seeding startups for the past four years, according to the deck. Both men have completed the Y Combinator startup accelerator and funded other graduates of the program, including Tandem, which emerged from YC this summer with funding from a16z, Vohra and several others. One or both of the pair have also invested in Command E, a tool that enables instant cloud search; Mercury, a bank tailored to the needs of startups; and Sandbox VR, which is developing premium virtual reality experiences in retail locations.
Many of Vohra and Goldberg’s existing investments, such as Sandbox VR, Tandem and Mercury, are also a16z portfolio companies, as is Superhuman. We’re guessing Vohra has served as a sort of scout for the firm, bringing in attractive deals for a16z to lead, with room for him to nab a friendly allocation.
Vohra and Goldberg are hoping to collect capital from LPs to scale their investment activity. According to the deck, they will make 25 to 35 deals with check sizes ranging between $50,000 to $150,000. The fund will invest in the “prosumerization” of the enterprise, business infrastructure, health, fitness & wellness, “devsumer” & low-code/no-code, audio-first products, creator tools and “enterprization” of consumers.
Indeed, the deck is packed with buzzwords. The “prosumerization” of the enterprise is tech-speak for work products with nicer interfaces and more premium features. A “devsumer” tool is one that enables consumers to complete developer tasks on their own, i.e. without coding — devsumer products on the market include Airtable, Notion and Retool. Finally, the “enterprization” of consumers simply means the rise of business tools built for consumers first.
Vohra and Goldberg cite their experience as operators as one of their “unfair advantages,” along with their ability to secure large allocations (a decent piece of the pie) in startups, their YC network, relationships with other angels & funds and their ability to get pro rata access in later rounds.
Founders often search for established operators to join their cap tables for exactly these reasons. Someone like Vohra can help startups foster relationships with big-name venture capital backers and make critical introductions to their own rapidly growing pool of customers.
The rise of micro-funds led by networked entrepreneurs, including Niv Dror’s Shrug Capital or Brianne Kimmel’s new outfit, Work Life Ventures, for example, could pose a threat to existing institutional seed investors, who may not be as well-versed in specific sectors or able to offer as much time to potential founders. On the other hand, many micro-funds co-invest with or are backed by VCs, which means returns from the fund end up in the same pockets, in essence.
Deploying capital from a fund, however, is time consuming. How Vohra can balance building a Series B startup and investing in upwards of 35 businesses remains to be seen.
Though Superhuman was founded in 2014 — Vohra incorporated the business immediately after the LinkedIn acquisition of his previous startup, Rapportive — the company is essentially still in closed beta (those looking for access must be approved for the service in iOS’s TestFlight, where constant beta updates are delivered). Today, it’s popular in the Bay Area tech scene where the tagline “sent via Superhuman” has become a status symbol of sorts. But many are uncertain non-techies will be willing to shell out $30 per month for a luxury email tool.
With that said, Superhuman has a wait list of 180,000 people, according to The New York Times, which spoke to Vohra in June. With a large and growing valuation, an email tool with rave reviews and a set of loyal followers, Vohra will likely have no trouble navigating his way into Silicon Valley’s hottest deals.
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.
Hello and welcome back to Startups Weekly, a weekend newsletter that dives into the week’s noteworthy news pertaining to startups and venture capital. Before I jump into today’s topic, let’s catch up a bit. Last week, I wrote about Revel, a recent graduate of Y Combinator that’s raised a small seed round.
Uber the TV show
Is anyone surprised Mike Isaac’s “Super Pumped” is set to become a TV show? Travis Kalanick’s notorious journey to CEO of Uber and subsequent ouster was made for television. This week, news broke that Showtime’s Brian Koppelman and David Levien, the creators and showrunners of “Billions,” would develop the project, with Isaac himself on board to executive produce. I will be watching.
All Raise expansion
All Raise, an 18-month-old nonprofit organization that seeks to amplify the voices of and support women in tech, announced new chapters in Los Angeles and Boston this week. I spoke with leaders of the organization about expansion plans, new hires, product launches and more. “Women are hungry for the support and guidance we provide. I think the movement is just gathering momentum,” All Raise CEO Pam Kostka told me.
VCThe unicorn from down under
You’ve probably heard of Canva by now. The Australian tech company, which has developed a simplified graphic design tool, is worth a whopping $3.2 billion as of this week. Investors in the company include Bond, General Catalyst, Bessemer Venture Partners, Blackbird and Sequoia China. Alongside a fresh $85 million funding, Canva is also making its foray into enterprise with the launch of Canva for Enterprise. Read about that here.
NASA astronauts Christina H. Koch and Jessica Meir
Startup spotlight: Petalfox. I discovered the business earlier this week. Basically, it’s a super easy way to order flowers, coffee and others goods via SMS. I’m trying it out. That’s all.
This week was honestly a treat. We had myself in the studio along with Alex Wilhelm and a special guest, Sarah Guo from Greylock Partners, a venture firm (obviously). Guo has the distinction of having the best-ever fun fact on the show. We kicked off with Grammarly, a company that recently put $90 million into its accounts. Then chatted about Lattice, Tempest, WeWork, SaaS, the future of valuations in Silicon Valley and more if you can believe it. Listen here.
Despite early-stage virtual reality market and augmented reality market valuations softening in a transitional period, total global AR/VR startup valuations are now at $45 billion globally — include non-pure play AR/VR startups discussed below, and that amount exceeds $67 billion. More than $8 billion has been returned to investors through M&A already, with the remaining augmented and virtual reality startups carrying more than $36 billion valuations on paper. Only time will tell how much of this value gets realized for investors.
(Note: this analysis is of AR/VR startup valuations only, excluding internal investment by large corporates like Facebook . Again, this analysis is of valuation, not revenue.)
Selected AR/VR companies that have raised funding or generated significant revenue, plus selected corporates as of September 2019.
There is significant value concentration, with just 18 AR/VR pure plays accounting for half of the $45 billion global figure. Some of the large valuations are for Magic Leap (well over $6 billion), Niantic (nearly $4 billion), Oculus ($3 billion from exit to Facebook), Beijing Moviebook Technology ($1 billion+) and Lightricks ($1 billion). While there are unicorns, the market hasn’t seen an AR/VR decacorn yet.
Across all industries — not just AR/VR — around 60% of VC-backed startups fail, not 90% as often quoted. That doesn’t mean this many startups crash and burn, but that 60% of startups deliver less than 1x return on investment (ROI) to investors (i.e. investors get less back than they put in). To better understand what’s happening in AR/VR, let’s analyze the thousands of startup valuations in Digi-Capital’s AR/VR Analytics Platform to see where the smart money is by sector, stage and country.
Free charts do not include numbers, axes and data from subscriber version, with underlying hard data sourced directly from companies and reliable secondary sources. Methodology in Digi-Capital’s companion Augmented/Virtual Reality Report Q4 2019
A rising tide lifts all boats, while an ebb tide reveals the rocks beneath the waves. Similarly, the AR/VR industry sectors in which startups operate have a big impact on how they deliver value. Across the 30+ AR/VR sectors that Digi-Capital tracks, some sectors appear to be more equal than others.
Core AR/VR tech startups have delivered the most value to date, with “picks and shovels” businesses supporting the entire market while avoiding customer risk in any one sector. The largest valuations are for core tech companies that operate across either augmented reality and computer vision markets (particularly in China), or games and AR/VR markets. These startups are not AR/VR pure plays, showing how revenue diversification can be highly valuable in early stage markets.
Smartglasses make up the next AR/VR sector in terms of valuation, with around two-thirds of that locked up in smartglasses platform company Magic Leap (again, this analysis is of startups only, excluding internal corporate investment like Microsoft mixed reality).
VR headsets come in at number three, due to Facebook’s acquisition of Oculus back in 2014. While that deal was arguably the catalyst for the current wave of AR/VR, other VR headset startups haven’t delivered similar levels of value to investors yet.
AR/VR games follow, with startup valuations dominated by Pokémon Go developer Niantic and smaller exits like Osmo. AR/VR photo/video is next, with a large chunk of that value having been realized for investors through exits such as Shenzhen Lianmeng Technology, Replay Technology and Magic Pony Technology. There are also ongoing startups like Goldman Sachs-backed Lightricks.
The long tail of 25 other AR/VR market sectors each make up a decreasing proportion of remaining startup valuations today. There are individual later-stage startups such as Beijing Moviebook Technology in AR/VR categories like social, but these are in the minority today (Note: this does not mean there isn’t significant value across remaining sectors or companies within them, but that value has not been quantified by exit value or investment round valuations yet).
Source: Digi-Capital AR/VR Analytics Platform
The highest valuations on paper tend to be in later-stage startups for most tech markets, so it’s no surprise that companies at Series D and Series C stage in China and the USA make up around 45% of valuations in today’s AR/VR market. In terms of realized returns to investors, M&A has delivered over 12% of total global value. While the $3 billion Oculus exit to Facebook back in 2014 stands out, there have been a significant number of exits over the $100 million mark since that time.
When looking at all the different investment stages from Angel through to Series F, their valuation order is slightly jumbled. Series B, A, E and F (in that order) are a similar order of magnitude, followed by Seed, Pre-Seed, Angel and Accelerator at a much lower level. This is a product of the number and valuation of individual startups in each of these stages.
Source: Digi-Capital AR/VR Analytics Platform
The geographic distribution of value in AR/VR is extreme, with the USA and China accounting for more than 80% of all AR/VR startup valuations worldwide. These are followed at a much lower level by the UK, Israel, Switzerland and Canada, with a long tail of around 50 other countries. At the regional level, the running order is North America, Asia and Europe, with Latin America and MEA making up the balance. It’s worth noting that while a lot of stored valuation has been in US startups historically, Chinese AR/VR startups have raised far more money in recent years. However, Chinese VC investment dropped dramatically this year across sectors — not AR/VR specifically.
Augmented reality, virtual reality and mixed reality (XR) remain early stage, with both consumer and enterprise markets looking for an inflection point to help them truly scale. During a transitional period with many VC and corporate investors taking a wait-and-see approach, startups might need to focus on generating revenue and controlling costs rather than seeing VC funding rounds and exits delivering valuation/value increases. This could end up being a good thing in the long run, as the strongest AR/VR startups rise to the top. For those that do, there’s a lot more value to come.
Bloomberg Beta, a San Francisco-based outfit that uses Bloomberg LP’s money to make bets on startups, has closed its third fund with $75 million, according to Roy Bahat, who’d previously run the online media company IGN and who operates the fund as an equal partnership with Karin Klein and James Chan. (Klein formerly ran Bloomberg’s new initiatives; Chan was formerly a principal with Trinity Ventures.)
We talked with Bahat briefly last night about the new vehicle to ask how its capital will be deployed. Bahat stressed that the idea is to continue on the firm’s current path, which is to write checks of between $500,000 to $1 million initially; to loosely target ownership of around 10% in the startups it backs; and to fund companies that are focused on the future of work, which has long been an area of interest for Bahat and his colleagues.
That can mean an instant messaging platform like Slack, in which Bloomberg Beta had and continues to have a small stake, following its direct offering. It also can mean backing a company like Flexport, a San Francisco-based freight forwarding and customs brokerage company that appears to be among Bloomberg Beta’s biggest bets. (According to Crunchbase, the outfit has backed Flexport — valued most recently at $3.2 billion — at its seed, Series A and Series B rounds.)
Others of Bloomberg Beta’s portfolio companies include the augmented writing platform Textio; the insurance broker Newfront Insurance; the continuous delivery platform LaunchDarkly; and Netlify, a cloud computing company that sells hosting and serverless backend services for static websites.
What it won’t back: financial tech startups. Given where its money comes from, it’s “too close to home,” says Bahat.
In late August, California Governor Gavin Newsom announced that Bahat would be part of his Future of Work Commission, which will be “tasked with making recommendations to help California leaders think through how to create inclusive, long-term economic growth and ensure workers and their families share in that success.”
As part of his role on that commission, and as an investor in some companies that cater to independent contractors, we asked Bahat what he makes of AB 5, the new California law for contract workers that aims to address inequality in the workplace but has been met with resistance from numerous industries and players. Uber, Lyft and DoorDash are even preparing to file a ballot initiative to exempt themselves from the law.
Bahat suggested he’s not sure what to think quite yet, either. “How workers get classified is one of the issues” the commission will be studying, he said.
“We haven’t figured out how to make it all work; this story is still unfolding.”
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where each week we discuss other people’s money and what sense their investment choices make (or don’t).
This week was honestly a treat. We had Kate Clark in the studio along with Alex Wilhelm and a special guest, Sarah Guo from Greylock Partners, a venture firm (obviously). Guo has the distinction of having the best-ever fun fact on the show.
We kicked off with Grammarly, a company that recently put $90 million into its accounts. We chatted about for whom it was built, and if we use it today. One thing that felt clear was that consumers are more willing than before to pay for their tooling. And that means that companies like Grammarly may prove strong investment candidates.
Next, we hit on two more rounds, namely Tiger Global’s investment into Lattice and Clari’s $60 million Series D. Starting with Lattice, a performance management company founded by none other than Sam Altman’s brother, Jack. The startup raised $25 million from Tiger Global, read more about that here.
Clari led us a to a discussion of vertical SaaS, and Guo’s views on the future of SaaS products (she’s bullish). Alex and Guo had a lot to say on this subject.
After talking over a few rounds the discussion turned to the Q3 venture market. A few things stood out from the data and projections. First, that early-stage fundraising was a little light in the quarter. It could be a single-quarter wobble, but the data was worth chewing on all the same. And, second, that Seed deal and dollar volume were hot once again.
And we wrapped with a discussion of Tempest, a new sobriety-focused startup that raised a $10 million round. Honestly, we aren’t sure how we feel about the business model. Please let us know if you have thoughts.
It was a good time. A big thanks to Guo for coming on the show, and a shoutout to the team that makes Equity happen: Chris Gates, and Henry Pickavet.
Over the past few years, gig economy companies and the treatment of their labor force has become a hot button issue for public and private sector debate.
At our recent annual Disrupt event in San Francisco, we dug into how founders, companies and the broader community can play a positive role in the gig economy, with help from Derecka Mehrens, an executive director at Working Partnerships USA and co-founder of Silicon Valley Rising — an advocacy campaign focused on fighting for tech worker rights and creating an inclusive tech economy — and Amanda de Cadenet, founder of Girlgaze, a platform that connects advertisers with a network of 200,000 female-identifying and non-binary creatives.
Derecka and Amanda dove deep into where incumbent gig companies have fallen short, what they’re doing to right the ship, whether VC and hyper-growth mentalities fit into a sustainable gig economy, as well as thoughts on Uber’s new ‘Uber Works’ platform and CA AB-5. The following has been lightly edited for length and clarity.
Arman Tabatabai: What was the original promise and value proposition of the gig economy? What went wrong?
Derecka Mehrens: The gig economy exists in a larger context, which is one in which neoliberalism is failing, trickle-down economics is proven wrong, and every day working people aren’t surviving and are looking for something more.
And so you have a situation in which the system we put together to create employment, to create our communities, to build our housing, to give us jobs is dysfunctional. And within that, folks are going to come up with disruptive solutions to pieces of it with a promise in mind to solve a problem. But without a larger solution, that will end up, in our view, exacerbating existing inequalities.
Editor’s note: James Buckhouse is design partner at Sequoia.
James Buckhouse: We partner from idea to IPO and beyond, but it’s partnering at the idea stage that we love the most — that moment when anything is possible. And it’s happened throughout Sequoia’s history. YouTube incubated in our office. Dropbox was an unreleased demo. Stripe didn’t have a single line of code. Apple was just two dudes named Steve. And so our favorite place to be is in the earliest moments.
We’re not here tonight to share with you lessons of our great wisdom on how company building ought to go. We’re here tonight to say that we understand how hard it is. And the three partners that you’ve got here to talk with tonight — Roelof Botha, Jess Lee and Mike Vernal — are people who have actually been in the trenches building companies themselves.
James Buckhouse: Great companies like Apple, Amazon and Zoom all have this one thing in common: customer obsession. That’s an easy thing to think about when you already have a billion customers, and you already have a bunch of money. But what do you do when you’re at the pre-seed stage and you want to be customer-obsessed but you don’t even have a product yet, let alone any customers? How do you even begin?
Jess Lee: I think at the very earliest of stages, all that really matters is product market fit. A common mistake we see is that a founder is only obsessed with the product, and then goes on to think, “I have my product. Let me go find a market that works for this,” when it should actually be the other way around. You should look at the market first, and then get to know the customers in that market by doing customer research.
There’s a great book by Erika Hall where she discusses how to ask the right questions to customers in order to really understand their pain points, their motivations and their needs. That’s a hallmark of some of the best companies that we’ve seen, even at the earliest stages. They spend a lot of time talking to customers and understanding what they want. Something we at Sequoia like to recommend when we work with seed and pre-seed-stage companies is to actually take the time to write down a set of customer personas. Who are your prototypical or your archetypes of different types of customers? In the very early days, you might think, “I know the customer. I can remember this. I don’t need to write it down.” But as soon as you add one new team member, who maybe isn’t as familiar with your customer, a lot of things get lost in translation.
For my company Polyvore, which was in the women’s fashion space, I had a lot of engineers on my team who were men and didn’t understand women’s fashion very well. I would always beat my head against the wall wondering why a feature they designed didn’t quite make sense, and it’s because we did the personas exercise a little bit too late. It made me wish we’d done it earlier. Once we had three very clear personas, I started to notice everything ran more smoothly. I found, whether it was the sales team or the engineering team, people started to clearly communicate the idea of what our customer really wanted. People made better decisions at all levels. That’s why at Sequoia we always encourage even our earliest-stage companies to write their customer research down immediately, way before they think they need it.
James Buckhouse: How does an early-stage startup make sure that they’re on the right track and building the right product?
Mike Vernal: The key thing to me is actually not being data-driven; it’s much more about being hypothesis-driven. The problem is people think about product as art. But I actually think of product as being equal parts art and science. And I think the science part of it, which is really important, especially at an early stage, is being clear about what your hypotheses are, what you think is going to work, why you think it’s going to work and really sort of pressure-testing that on a logical level. And, if you are able to, actually pressure-testing it with real data.
One of Jess’s techniques, which I think is great, is the notion of fake doors. If you want to know whether something’s actually going to hum in the market, whether people are going to care about it, build a landing page for it. Build a sign-up button for it. Run a bunch of ads for it. Test a bunch of different marketing copy and see if people actually want the product. I’ve seen a bunch of companies use this to great effect.
I think that in general the mistakes people make with product is, one, being too artistic and not scientific enough about things. And then two, to Jess’s point, the most important thing before you have a product is finding product market fit. Usually, finding product market fit in a category is a function of two or three important things. Identifying those important things and testing them to get clarity around that first, then designing the full product, is way better than just starting with a masterpiece, and then slowly painting over and over the masterpiece until you get to something that is great.
James Buckhouse: For enterprise companies, Roelof, can you talk a little bit about the Sales Ready Product and Templeton compression approach?
Roelof Botha: If you go to our website and search for Sequoia Sales Ready Product or Templeton, you’ll find very useful content that we put together. The insight came from one of the best leaders that we’ve worked with, in a variety of companies, who argued to not just go for an MVP, a Minimal Viable Product, if you’re building an enterprise company, but what he termed a Sales Ready Product, an SRP.
The difference is that a Minimal Viable Product just gets over the hurdle but doesn’t convince your customer to jump out of their seats to buy your product. When we invested in Cisco in the late 1980s, the first product they shipped had so many bugs it didn’t work. But the product solved such an important need for the customer that they came back to Cisco and asked if they could fix it since they needed the product to work so badly because there was a fundamental problem in trying two networks at the time. And that to me was a Sales Ready Product. You’ve got something that, even if it’s not perfect, really solves your customer’s pain point.
And so to condense the whole theory behind this: Spend a little bit more time, probably another three months, maybe another four, five months, from when you would otherwise ship an MVP to ship an SRP. The reason it matters for an enterprise company is that your sales organization will be so much more effective. Your sales team will ramp up a curve far more steeply and you’ll get sales momentum much, much faster if you sell an SRP.
James Buckhouse: I’m going to do something a little bit unexpected here and call on Alfred in the back. Could you talk a little bit about what it was like at Airbnb, where they started with culture very early on?
Alfred Lin: Brian, Joe and Nate came and visited Zappos, where we offered tours, to see what the culture was all about (Alfred was COO of Zappos). At Zappos, we started writing down our core values a little late, when we were at about 300 people. And I told Brian, Joe and Nate that that was too late.
After that trip, they went back and wrote down their core values, before hiring their first employee. They knew that they had to create a new category. Home-sharing was not something that people really thought about. And so they needed people who were willing to champion the mission. And that was one of the first core values that they wrote down.
James Buckhouse: Oftentimes, people think that culture is the thing you do later on, once your business has grown large and suddenly you have a lot of people. But that’s not true. Culture matters a lot more than people think. And it matters earlier than people think. Jess, can you talk about your framework on core values?
Jess Lee: This is something we spend a lot of time on with seed and pre-seed companies, who think, “Oh, I already know my culture. I’ll wait to write it down later.” But it’s important to get it right up front. We encourage people to not pick too many core values. Generally, you want a framework that’s a core value and the behaviors you want that exemplify that core value. And most importantly, you need a story. You need some legendary anecdote or example from inside the company that really brings the core value to life.
To use Airbnb as an example, one of its core values is to be a cereal entrepreneur. The reason it’s cereal with a “C” is because at the time, Airbnb was running out of money. They weren’t sure they had product market fit, but they went to the Democratic National Convention to try the Airbnb idea when they were down to the wire in terms of money. In order to just get the word out about the business they made boxes of cereal that said “Obama-Os” and “Captain McCain.” It’s a good example of rolling up your sleeves and doing whatever it takes to get your business launched. Somehow, they actually managed to generate revenue that they put back into the business. The really memorable part of that is the cereal anecdote. Whatever it might be at your company, make sure that the lore lives on. That’s really what brings culture to life. It’s not just the value itself.
James Buckhouse: Roelof, can you talk a little bit about the culture at PayPal in the early days?
Roelof Botha: There are a couple of elements in that. One is this idea of intercept versus slope. For those of you that are fans of math or science, it comes naturally, but sometimes you get to hire people who have a high intercept. They have a lot of experience. In our case, we needed to hire people who knew a lot about financial services, because we as the early, young team didn’t. You hire people with intercept, but then you want people with slope. People who are going to learn very quickly. And at the end of the day, part of what made PayPal successful was that we had a good slope and we learned very, very quickly.
Our culture was very hard-working. We faced a bit of a crunch in June of 2000. We’d raised a bunch of money during the dot-com era, and then we were sitting with seven months of runway and no revenue, burning $10 million a month. It was a “you’re all-in” culture. Management meetings were on Saturdays, because that’s the kind of sacrifice we were going to make as a team to get to the other side. Culture was really important to the success of the company. We had a strong bond between us as team members because we were in the trenches. We had to figure out how to make this business work when the odds were against us and the press had given up on us.
Most people on the outside are going to think that you’re going to fail. Expect that. Don’t be surprised by that. Draw strength from that, and rally your team around your cause. You should ignore that kind of feedback.
James Buckhouse: How do you discern a strong founding team?
Roelof Botha: My favorite, especially with companies at the seed stage, is to have no slides and to have a conversation with you about your business. What I find compelling is, the more I dig, the more excited I get, because your depth of knowledge, of understanding the problem that you’re trying to solve, shows itself. There are a lot of people who start companies for the wrong reasons, and they have very superficial knowledge. So as soon as you start to pressure test it, it’s clear that there’s no depth.
The founders who are the best are the ones that are so motivated to solve the problem they’re working on, they’ve researched everything. You would have found a simpler solution to the problem if you could, and you didn’t. That inspired you to start this company. As I ask you questions, you just have this depth of knowledge. You’ve thought about it so many levels deep. Those founders are the ones that keep coming up with new ideas, and that’s why their imitators don’t do so well. We see this in our industry. You come up with a great idea, TechCrunch writes about it, everybody around the world reads about it and now you’ve got 15 competitors in other countries going after what you’re doing. But guess what? They didn’t have the idea, you did. Since you had the original idea, you’ve thought about it more deeply and you can iterate faster than they can.
James Buckhouse: Jess, how about you? What do you look for to discern a strong founding team?
Jess Lee: I do agree, and I think different investors look for very different things. There is probably a notion of founder/investor fit to some extent. For me, I especially appreciate a unique insight and depth of understanding of that customer and that market. But on top of that, the other thing I think about is grit. I think that being a founder is so hard. I felt like I was on the struggle bus the entire time. Either we weren’t doing well, which was a struggle, or we were doing really well and then we were in a state of hyper-growth, and that’s also really hard. Your job changes underneath you every six months. Because even if you’re successful, everything that used to work for you as the CEO or founder is now broken because your team is now 50 people instead of 10.
What is it driving you, to either solve this problem or just driving you in general? Because it’s just not easy, and folks who give up too easily or came into this because they thought being a founder was going to be really cool, it’s not that cool all the time, so I look for that. Sometimes it shows up in the form being really mission-driven, and you have some burning desire to solve the problem. Sometimes it’s just that you’ve been underestimated your whole life and you’re really mad about it, and you want to prove yourself. There are a lot of different ways to suss out grit, but that’s one big thing that I look for.
One thing I also like to see, that is not a must-have but I find very compelling, is if you’re a good storyteller. I think that at the end of the day you have to convince your family that you’re not crazy for quitting your job to pursue this thing. You’ve got to convince early employees to join you when you can’t pay them any money. You’ve got to convince early-stage seed investors to take a chance on you and give you money when there is nothing there yet. And you’ve got to convince customers. Being able to tell a good story, both taking something complicated and making it sound simple, as well as being able to influence and talk about why your approach is interesting and different, not just better than the competitors. I look for that as well. I think that’s important.
One area where I do disagree with Roelof is that I do prefer to see slides. I think it showcases your storytelling ability. I look at a lot of consumer companies and your attention to design and detail is also an interesting thing that you can suss out with slides.
James Buckhouse: How about you, Mike?
Mike Vernal: If you can’t describe the business in a minute or two, then you need to keep iterating. Some bad meetings end up as the following: Someone will come in with 40 slides and want to convey all of the knowledge in the 40 slides in excruciating detail.
I think a couple of things. One is, many investors look at a lot of companies all day long so they might actually know more about your space than you might think. Then two, if you need 40 minutes to explain the business, marketing and all of these other things, then for an investor meeting that might work because you have that time scheduled, but for the random engineer you meet at a party who you want to get excited about joining your company, that’s going to be really hard.
The best pitch is when I’m two minutes in and I’m like, “I get the business. This is super interesting. Let’s ask all these questions.” The tough ones are 40 minutes of being talked at, where there is no real interaction.
James Buckhouse: Different types of companies need different types of capital strategies. How do you all think about how founders ought to think about their strategy for capital?
Jess Lee: It’s really important to think about three things: First, what is the actual cash you need for your business? If you’re a pure software business you don’t usually need as much as if you’re building hardware or you’re making physical goods.
Second, what is the valuation that actually makes sense? True valuation, when you become a public company, when you do M&A, is actually a function of your free cash flow, or a multiple of your revenue, so just being able to understand in the long, long-term what is a likely five, 10-year-out valuation, and then making sure you don’t overshoot that just because you can. That’s another first principle.
The third thing is ownership. Doing the math, if you don’t need to raise a lot of money, if you don’t need to raise as many rounds, at the end of the day when ideally your company is acquired for hundreds of millions of dollars, or billions of dollars, or you IPO, what is your ownership at that moment? We have founders like Dropbox, that when they went public, Drew and Arash owned nearly 40% of the company. So you have to think — would you rather have 40% of a $10 billion company, or would you rather have 2% of a $20 billion company? That ownership at the end of the day is really important. So you have to think about those three things, which is a pretty complicated equation.
It really hit home for me when my company, Polyvore, went through the M&A process and it suddenly hit me that all the acquirers were not using funny VC math. They were looking at our cash flow and the multiple of revenue. Luckily, we hadn’t raised that much money, as I’d wanted to keep as much ownership as possible. I was optimizing for ownership for the team. Because of that, we actually had a really nice outcome, where everybody made money because we hadn’t over-raised since we didn’t need to. We were a pure software-based, capital-efficient kind of company, but I think not enough founders think about that from first principles, starting from the early days. They just look at who’s raising what, and how much they could possibly get. They want to maximize that, when in reality, it’s not actually the right way to think about it.
Roelof Botha: When you raise money, you’re recruiting a partner. I see too many companies, especially seed-stage companies, make the mistake of accepting funding from whoever shows up, when that’s probably the most expensive equity you’ll ever sell in your business. You could potentially be selling it to people that are not going to be there six months or six years from now, helping you close a candidate, helping you wrestle with an important strategic decision or helping you refine your business model. Those people aren’t going to be there, so it’s a recruiting decision. Take it seriously. It’s also important to check their references. Your investor is going to do references on you. Why aren’t you doing references on them?
London and Tel Aviv based VC firm 83North has closed out its fifth fund at $300 million, as we reported earlier. It last raised a $250 million fund in 2017 and expects to continue the same investment mix, while tracking developments in emerging areas like healthcare AI and autonomous vehicles.
In a conversation with general partner Laurel Bowden, the veteran investor shared a few further thoughts with Extra Crunch — talking about the tech scene in Europe vs Israel, what the firm looks for in a team and tips on scaling globally.
The interview has been lightly edited for clarity.
TechCrunch: Is Europe starting to catch up to Israel when it comes to deep tech startups?
Laurel Bowden: We clearly think we have in our portfolio some deep tech. And in other VC portfolios too — there’s clearly some deep tech [coming out of Europe]. And then on the reverse side you’ve seen more consumer-related stuff coming out of Israel. But still if you take a blanket look, we see more data infrastructure, security, storage coming out of Israel than we see in Europe — that’s for sure.
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.
83North has closed its fifth fund, completing an oversubscribed $300 million raise and bringing its total capital under management to $1.1BN+.
The VC firm, which spun out from Silicon Valley giant Greylock Partners in 2015 — and invests in startups in Europe and Israel, out of offices in London and Tel Aviv — last closed a $250M fourth fund back in 2017.
It invests in early and growth stage startups in consumer and enterprise sectors across a broad range of tech areas including fintech, data centre & cloud, enterprise software and marketplaces.
General partner Laurel Bowden, who leads the fund, says the latest close represents investment business as usual, with also no notable changes to the mix of LPs investing for this fifth close.
“As a fund we’re really focused on keeping our fund size down. We think that for just the investment opportunity in Europe and Israel… these are good sized funds to raise and then return and make good multiples on,” she tells TechCrunch. “If you go back in the history of our fundraising we’re always somewhere between $200M-$300M. And that’s the size we like to keep.”
“Of course we do think there’s great opportunities in Europe and Israel but not significantly different than we’ve thought over the last 15 years or so,” she adds.
83North has made around 70 investments to date — which means its five partners are usually making just one investment apiece per year.
The fund typically invests around $1M at the seed level; between $4M-$8M at the Series A level and up to $20M for Series B, with Bowden saying around a quarter of its investments go into seed (primarily into startups out of Israel); ~40% into Series A; and ~30% Series B.
“It’s somewhat evenly mixed between seed, Series A, Series B — but Series A is probably bigger than everything,” she adds.
It invests roughly half and half in its two regions of focus.
The firm has had 15 exits of portfolio companies (three of which it claims as unicorns). Recent multi-billion dollar exits for Bowden are: Just Eat, Hybris (acquired by SAP), iZettle (acquired by PayPal) and Qlik.
While the fund has a pretty broad investment canvas it’s not locked to it — moving into IoT (with recent investments in Wiliot and VDOO), and also taking what it couches as a “growing interest” in healthtech and vertical SaaS.
“Some of my colleagues… are looking at areas like lidar, in-vehicle automation, looking at some of the drone technologies, looking at some even healthtech AI,” says Bowden. “We’ve looked at a couple of those in Europe as well. I’ve looked, actually, at some healthtech AI. I haven’t done anything but looked.
“And also all things related to data. Of course the market evolves and the technology evolves but we’ve done things related to BI to process automation through to just management of data ops, management of data. We always look at that area. And think we’ll carry on for a number of years. ”
“In venture you have to expand,” she adds. “You can’t just stay investing in exactly the same things but it’s more small additional add-ons as the market evolves, as opposed to fundamental shifts of investment thesis.”
Discussing startup valuations, Bowden says European startups are not insulated from wider investment dynamics that have been pushing startup valuations higher — and even, arguably, warping the market — as a consequence of more capital being raised generally (not only at the end of the pipe).
“Definitely valuations are getting pushed up,” she says. “Definitely things are getting more competitive but that comes back to exactly why we’re focused on raising smaller funds. Because we just think then we have less pressure to invest if we feel that valuations have got too high or there’s just a level… where startups just feel the inclination to raise way more money than they probably need — and that’s a big reason why we like to keep our fund size relatively small.”
On the heels of Bird closing a $275 million round to help put itself in pole position in the electric scooter market, a smaller European rival has also raised some money to grow its own business. Tier Mobility, a Berlin-based startup that operates a fleet of 20,000 scooters across 40 cities in 12 countries, has raised $60 million, funding that Tier’s co-founder and CEO Lawrence Leuschner said it would invest in further geographical expansion and its technology.
Tier earlier this year started to describe itself as a “micro mobility” player, with plans to augment scooters with other transportation options, but in an interview Leuschner declined to say what those might be, or when they will come online. In the meantime, it’s been upgrading its fleet to a more robust hardware to cut down on maintenance costs (which has typically been one of the biggest strains on scooter startups): these newer scooters have lifespans of around 18 months and now make up some 80% of Tier’s current fleet, Leuschner said.
This latest funding, a Series B, is being co-led by Mubadala Capital and Goodwater Capital. Mubadala, for background, is the state fund for Abu Dhabi, which is currently the only non-European market where Tier operates. Mubadala made some headlines earlier this year when it was revealed that SoftBank was backing its $400 million fund for European investments. (Indirectly, this also means that SoftBank is backing Tier.)
“We firmly believe that micro-mobility as a form of transportation is here to stay, especially in Europe,” said Amer Alaily from Mubadala Capital in a statement. “We are confident that Tier Mobility is best positioned to become the leading player in Europe and globally. We are excited and look forward to building a global category leading company out of Europe.”
Others in this round include insurance giant Axa Germany, Evli Growth Partners, White Star Capital, Northzone, Speedinvest, Point9, Indico, Kibo Ventures, Market One Capital and — an ironic twist when you consider the reputation of scooter users being somewhat on the reckless side — Formula One racing champion Nico Rosberg. The valuation is not being disclosed.
The scooter market is a crowded one, but Tier’s rapid growth points both to the opportunity for those building services in it, and Tier’s own success.
Since raising its Series A (initially €25 million, but expanded to €32 million in February of this year), Tier has grown to 10 million rides, adding 8 million in the last four months both through its direct services and by way of partnerships with others, such as car rental company Sixt. That growth has led Tier to claim that it is currently the fastest-growing mobility company “in the world.” Leuschner — who co-founded the company with Matthias Laug (now CTO) — said the aggressive goal now is to hit between 3 million and 5 million rides weekly.
That’s impressive growth, but it comes with challenges. The funding today takes the total raised by Tier to around $95 million. However, relatively speaking, that is actually a modest amount when you consider the hundreds of millions raised by the likes of Bird (capital that it’s using in part to grow in Europe in direct competition with Tier) and Lime.
Tier has taken the view, so far, that big money isn’t the only way to build a big service.
“With our Series A funding of €32 million, we built the fastest-growing mobility company,” Leuschner said. “We achieved that with a fraction of the capital of Bird and Lime. That shows how efficiently we are operating. With this round we will now accelerate the growth based on our scalable infrastructure and positive unit economics.”
With the scooter market’s unit economics unlike that of car-based on-demand transportation (the vehicles are owned, and there are not drivers to pay out, for starters), he said that Tier is already profitable in some of its markets.
One of the other big sticking points that has hindered the growth of more scooter services has been regulation, and specifically safety concerns, with reports of faulty software and human error / reckless driving both contributing to a number of accidents.
Leuschner noted that Tier has had around 250 accidents to date across its 10 million rides, with “the vast majority minor accidents.”
“We continue to educate users, but I can’t see a significant safety issue compared to other vehicles,” he added. “I think Tier has taken a leadership role in safety with the safest scooter on the market, permanent education of our users and insurance for every driver in every city.”
In this regard, having an insurance company — Axa — now on board as a strategic investor will potentially see both more safety initiatives rolled out by Tier, but also potentially the emergence of insurance policies provided to customers as part of the service.
All told, the strong growth on the back of conservative capital, combined with the experience of the founders (Laug had also been the co-founder of Lieferando, one of the first big food delivery startups in Europe), and that interesting backing from big industry players, has all contributed to an optimistic outlook from investors.
“Tier Mobility is not only the fastest-growing mobility company in the world, but one of the fastest-growing companies in consumer tech history,” noted Chi-Hua Chien, the star investor and Goodwater Capital co-founder who had previously been at Kleiner Perkins and before that Accel.
“With phenomenal execution they have emerged as the leading micromobility provider in Europe on only a fraction of the invested capital of their competitors. This is a true testament to the uniquely capital efficient and profitable model the team chose to deploy from the outset. Tier’s unique approach to operations and partnerships yields superior unit economics and defensibility.”
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.
When Elizabeth Warren took on Mark Zuckerberg and Facebook earlier this week, it was a low moment for what New Yorker writer Andrew Marantz calls “techno-utopianism.”
That the progressive, populist Massachusetts Senator and leading Democratic Presidential candidate wants to #BreakUpBigTech is not surprising. But Warren’s choice to spotlight regulating and trust-busting Facebook was nonetheless noteworthy, because of what it represents on a philosophical level. Warren, along with like-minded political leaders, social activists, and tech critics, has begun to offer the first massively popular alternative to the massively popular wave of aggressive optimism and “genius” ambition that characterized tech culture for the past decade or two.
“No,” Warren and others seem to say, “your vision is not necessarily making the world a better place.” This is a major buzzkill for tech leaders who have made (positive) world-changing their number one calling card — more than profits, popularity, skyscrapers like San Francisco’s striking Salesforce Tower, or any other measure.
Enter Marantz, a longtime New Yorker staff writer and Brooklyn, N.Y. resident who has recently trained his attention on tech culture, following around iconic figures on both sides of what he sees as the divide of our time — not between tech greats whose successes make us all better and those who would stop them, but between the alternative figures on the “new right” and the self-understood liberals of Silicon Valley who, according to Marantz, have both contributed to “hijacking the American conversation.”
Marantz’s first book, “Antisocial: Online Extremists, Techno-Utopians, and the Hijacking of the American Conversation,” will be released next week, and I recently had a chance to talk with him for this series the ethics of technology.
Greg Epstein: Congratulations on your absolutely fascinating new book Antisocial, and on everything you’ve been up to.
PayPal is the first company to walk away from Facebook’s Libra cryptocurrency.
“PayPal has made the decision to forgo further participation in the Libra Association at this time and to continue to focus on advancing our existing mission and business priorities as we strive to democratize access to financial services for underserved populations,” PayPal said in an emailed statement. “We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future. Facebook has been a longstanding and valued strategic partner to PayPal, and we will continue to partner with and support Facebook in various capacities.”
It could be that PayPal isn’t the only firm to walk away from the ambitious effort to transform the entire global financial system.
Mastercard, Visa and other companies may join PayPal in backing away from the Libra project, which has been the subject of mounting criticism since its launch.
As we reported when Libra first launched, Facebook doesn’t control the Libra organization or currency, but gets a single vote alongside the remaining partners which include Uber, Andreessen Horowitz, the venture capital firm with roughly $10 billion in assets under management, Mastercard and Visa. Each partner has invested at least $10 million in the project and the association will promote the open-sourced Libra Blockchain.
The partners will not only pitch the Libra Blockchain and developer platform with its own Move programming language, plus sign up businesses to accept Libra for payment and even give customers discounts or rewards.
Facebook has a lot more riding on the success of the Association that just it’s Libra stake. The company has also launched a subsidiary company called Calibra that handles crypto transactions on its platform that would use the Libra blockchain.
Governments around the world have been up in arms about what they see as Facebook and its partners making an end run around the existing financial services.
And earlier this month, Facebook chief executive Mark Zuckerberg indicated that the company would be willing to push back the launch of the cryptocurrency past its planned 2020 launch date, in an interview with the Japanese Nikkei news service.
At age 27, Jordan Fudge is quietly making a splash in the VC world.
Fudge is the managing partner of Sinai Ventures, a multi-stage VC fund that manages $100 million and has more than 80 portfolio companies including Ro, Drivetime, Kapwing, and Luminary. His 2017 investment in Pinterest — a secondary shares deal from his prior firm that was rolled into Sinai when he spun out — will have returned the value of Sinai’s Fund I by itself once the lockup on shares expires next week.
Fudge and co-founder Eric Reiner, a Northwestern University classmate, hired staff in New York and San Francisco when Sinai launched in early 2018. Today, they’re centralizing the team in Los Angeles for its next fund, a bet on the rising momentum of the local startup ecosystem and their vision to be the city’s leading Series A and B firm.
Fudge and Reiner have intentionally stayed off the radar thus far, wanting to prove themselves first through a track record of investments.
A part-time film financier who also serves on the board of LGBT advocacy non-profit GLAAD, Fudge describes himself as an atypical VC firm founder, an edge he’s using to carve out his niche in a crowded VC landscape.
I spoke with Fudge to learn more about his strategy at Sinai and what led to him founding the firm. Here’s the transcript (edited for length and clarity):
Eric Peckham: Tell me the origin story here. How did Sinai Ventures get seeded?
Jordan Fudge: I was working for Eagle Advisors, a multi-billion dollar family office for one of the founders of SAP, focused on the tech sector across public markets, crypto, and eventually VC deals. Two years in, I pitched them on spinning out to focus on VC and they seeded Sinai with the private investments like Compass and Pinterest I had done already, plus a fresh fund to invest out of on my own. It was $100 million combined.
Becoming a venture capitalist is notoriously difficult. One part timing, one part experience, another part network. Rarely can someone provide succinct instructions on how to break into the field of private market investing or how to create your own VC fund.
On stage at TechCrunch Disrupt San Francisco, established VCs Theresia Gouw, the founder of a new firm called aCrew Capital, and Floodgate co-founder Ann Miura-Ko explained what they see as two distinct paths to the top of VC.
On path is long, calculated and requires endurance. The first step is to become an associate at a venture capital fund (this typically requires a college degree and a few years working in investment banking or in the greater finance industry). Next, you spend several years learning the ins and outs of the trade. And finally, once you’ve developed a portfolio and reputation in startups investing, you can rise to the partner ranks or raise your own VC fund.
“When I was starting in 2008 everyone said ‘no one starts a venture capital firm,'” Miura-Ko, who launched Floodgate nearly a decade ago after a stint as an analyst at CRV and seven years obtaining a Ph.D. in cybersecurity, told TechCrunch’s Connie Loizos. “Today, there are so many different paths into the market and that’s both an opportunity and a huge challenge … The question is how do you stand out? … You have to figure out what’s your schtick?”
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Gouw, for her part, was a managing partner at the renowned firm Accel from 1999 to 2014 after consulting for Bain & Company. In 2014, she co-founded one of the first female-run venture capital firms, Aspect Ventures, alongside Jennifer Fonstad. Last month, however, the pair announced the firm would be splitting up, with Gouw launching aCrew and Fonstad starting Owl Capital.
Gouw, said to be one of the wealthiest women in venture thanks to several high-profile bets, says raising your own fund is all about relationships: “I think there are many great entry paths into [venture] now,” she said. “Remember what makes you stand out as an investor is investing in great companies… These people are going to be the references for you when you want to raise your first fund. It’s about investing in great people who are trying to do great things.”
The other route to venture is newer and simpler. Just start making investments, the two explained. This only works if you have money to invest, i.e. if you’ve sold your startup for a decent sum or you’re being paid an exorbitant sum by one of the tech giants.
“There’s some great investors who went out and started building their own individual track records as either advisors or angels,” Gouw said. “And, you know, there’s obviously a lot of great entrepreneurs who then go and start venture funds.”