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Silicon Valley could be Biden’s funding lifeline post South Carolina

By Jake Bright

Presidential candidate Joe Biden is likely to throw a fundraising lifeline to Silicon Valley donors after his commanding South Carolina victory and into the next wave of primaries.

A pro-Biden super Pac, Unite the Country — whose past backers include senior tech figures — is picking up efforts to tap wealthy donors, Treasurer Larry Rasky told CNBC. The group made several ad-buys in Super-Tuesday states (per a February 28 Federal Election Committee filing).

Past Unite the Country’s benefactors include LinkedIn founder and Greylock Partners VC Reid Hoffman (who contributed $500,000) and Angel Investor Ronald Conway ($250,000), according to FEC data.

Source: FEC filing

Biden revived his presidential-bid from life-support with a resounding 29 point win over Bernie Sanders in Saturday’s South Carolina primary.

But after flailing in the first three contests — Iowa, New Hampshire and Nevada — the former Vice-President’s campaign has reportedly been running on financial fumes.

The last Federal Election Campaign disclosures before South Carolina’s democratic primary showed Biden with $7.1 million cash on hand, compared to Sanders’ nearly $17 million.

The race to become the Democratic-nominee for president is consolidating, post South Carolina, to a Sanders-Biden match-up — after Mayor Pete Buttigieg and billionaire Tom Steyer dropped out. Mayor Mike Bloomberg, who entered the race late, will be on the ballot for the first-time on Super Tuesday, though its not clear if he’ll shift dynamics between the front-runners.

To capture Sanders, who now leads Biden in the delegate count, Biden will need to close the fundraising gap between himself and the Vermont Senator, who doesn’t accept super Pac funds and has raised a large portion of his total $126 million presidential fundraising haul from small contributions.

Source: NBC News

For Democrats, fundraising is a big focus of campaign efforts in uncontested states (like New York and California) where they are nearly certain to win in the general-election. Areas with affluent residents, such as the Bay Area and Manhattan, have served as piggy-banks for tapping wealthy donors.

But a fundraising push by Biden and surrogates in Silicon Valley could further expose a political rift within big tech: that of founders and senior executives favoring a moderate candidate, while rank-and file workers “feel the Bern” on campaign donations.

FEC data and analysis by the LA Times and the Center for Responsive Politics indicate Bernie Sanders has substantially outperformed all candidates in garnering small-donations from workers in tech companies. By Times reporting, Sanders has raised $1 million, or nearly four-times as much as Biden, in small donations from employees at Google, Amazon, Apple, Microsoft, and Facebook.

This preference divide within big-tech could align with the differences in each candidate’s policy platforms. Biden’s positions are generally milder on initiatives to police and potentially split up big-tech companies, such as Facebook.

Sanders has been vocal about driving policies that address the pay gap across major tech companies and has called for breaking up Facebook and Amazon.

Founders and tech-workers in California will have a non-monetary opportunity to express their preferences in voting booths tomorrow — as the Golden State is one of 13 in the super Tuesday primary contest. Those results will roll into more primaries, more fundraising and a decision on the 2020 presidential nominee at the Democratic National Convention in Milwaukee this July.

Silicon Valley Community Foundation challenges donors to address local problems

By Walter Thompson
Scott Bade Contributor
Scott Bade is a former speechwriter for Mike Bloomberg and co-author of "More Human: Designing a World Where People Come First."

Over the last decade, Silicon Valley Community Foundation has become one of the favorite destinations for tech philanthropy.

Counting Mark Zuckerberg, Jack Dorsey and Reed Hastings among its donors, SVCF has quietly become a philanthropic powerhouse. As a community foundation, it made $126 million in grants in 2018 in San Mateo and Santa Clara counties (the latest year for which numbers were available), but its true power comes from the nearly $9 billion in donor-advised funds (also known as DAFs) it oversees.

DAFs have become popular among wealthy donors in recent years because they carry the tax benefits of a donation without requiring that an immediate donation be made. They also courted controversy, with critics accusing them of being a vehicle for tax sheltering.

Not so, says Nicole Taylor, SVCF’s CEO and president. Appointed a year ago after her predecessor was ousted in scandal, Taylor is working to change the image of DAFs while challenging her donors to take on the Bay Area’s unique challenges, like housing, inequality and transportation. I spoke to Taylor about how the tech sector can do better with its giving.

TechCrunch: Let’s start by explaining how a community foundation works?

Nicole Taylor: Community foundations are a vehicle for people who want to give that come with a far better tax advantage and advising advantage than setting up private foundations [whose] overhead is costly. Most people don’t want to go there; they want a place that helps them with their giving and they want to have that connection back to their local community.

Community foundations were started in the Midwest and are over 100 years old. There are over 800 of us. We serve particular geographic areas. Our core focus [at SVCF] is the Silicon Valley region, the two counties here – Santa Clara and San Mateo.

Is this what an early-stage slowdown looks like?

By Alex Wilhelm

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

Today we’re exploring some fascinating data from Silicon Valley Bank markets report for Q1 2020. We’re digging into two charts that deal with the early-stage funding market, and after we unpack what the local Iron Bank of Braavos has to share, we’ll bring in some other data and see if we can back up our conclusions.

To avoid keeping you waiting, it appears that global early-stage deal counts could be slipping. But is this is a real early-stage slowdown?

For founders hoping to get their company out of their minds and into the world, it’s a key question. Without ample early-stage funding, the startup and venture pipeline begins to constrict, eventually limiting late-stage activity after crimping its early-stage sibling.

So let’s dig in and parse out what we can. To the charts!

A global slowdown

Utah tech magnates create new Silicon Slopes Venture Fund to boost startups in the state

By Sarah Buhr

Those looking outside of Silicon Valley as a potential hub for their startup might want to take a gander at Utah — at least that’s the kind of trend the new Silicon Slopes Venture Fund hopes to create.

The newly formed fund, put together by Qualtrics co-founder Ryan Smith, Omniture and Domo founder Josh James and Stance co-founder turned Pelion Venture Partners’ Jeff Kearl, pledges to invest solely in Utah-based startups. The goal? To become every bit as notable as a16z or Sequoia Capital.

Qualtrics co-founder Ryan Smith and Domo and Omniture founder Josh James onstage at the Silicon Slopes Tech Summit.

“I grew up in the Bay Area,” Kearl told TechCrunch of the energy he feels in the state. “This feels like the 1990s in the Bay Area. You can find hundreds of open jobs up and down the Wasatch Front.”

Utah has a reputation as a mostly religious, conservative and sleepy mountain region for outdoors enthusiasts but tech has fast become the leading job sector in the state, with some salaries from companies like Adobe and Qualtrics rivaling those in Silicon Valley. The state recently pledged a push to include at least one computer science course in every high school in the state by 2022 and also just hosted a massive, 25,000 person startup festival called the Silicon Slopes Tech Summit, where it held a Utah state governor’s debate and both Steve Case and Mark Zuckerberg spoke on stage.

It’s unclear how much the fund has set aside for its mission to help Utah become a full-fledged tech ecosystem rivaling Silicon Valley but one would imagine it would have a sizable sum to invest, if, as Smith tells TechCrunch, it is to help Utah’s up-and-coming startups go all the way from seed stage to IPO.

“I want to see companies get even bigger than Qualtrics…and do it in this state,” Smith said. Qualtrics sold to SAP in 2019 for $8 billion, notably the largest private enterprise software deal in tech history.

Silicon Slopes Tech Summit 2020 Gubernatorial Debate

One of the many issues tech hubs around the world face is both the networking capabilities and the ability to invest after the seed stage or Series A. Most startups throughout the globe still find the need to travel and make connections in Silicon Valley to get them through the next step of growth. This has been true for every billion-dollar startup idea in Utah as well so far. Both Smith and James took in Silicon Valley venture for their companies, as did unicorn turned public ed tech startup Pluralsight and the recently rebranded sales platform Xant (formerly InsideSales), before making it big.

However, this new fund represents the kind of push needed to create a strong innovation ecosystem in the future, as Steve Case mentioned on stage at the summit event this last week. “Venture capitalists must look at ‘what’s happening in the Silicon Slopes’ and make sure it ‘is happening other places’,” Utah newspaper Deseret News paraphrased the AOL founder as saying.

Pelion Venture Partners, which operates in both Utah and Southern California, will act as a support to Silicon Slopes Venture Fund, providing organizational overhead. Each partner will still keep their day job and donate most fees to support the ongoing operation of the non-profit tech organization, Silicon Slopes, which runs the annual tech summit of the same moniker. However, the Silicon Slopes Venture Fund will be an independent fund from Pelion, with the sole purpose of investing in deal flow the three partners find through their respective networks within the state.

“I used to hate the term ‘a rising tide lifts all boats’ because I want to be the only boat,” James told TechCrunch. “But I really think it applies here for what we are trying to do [in Utah].”

Court rules Mike Rothenberg must fork over more than $31 million to settle SEC allegations

By Sarah Buhr

Mike Rothenberg, the once high-flying VC bent on bringing the party to Silicon Valley, must now pay a whopping $31.4 million to settle a California federal court ruling in favor of Security and Exchange Commission allegations.

TechCrunch deemed Rothenberg a “virtual Gatsby” back in 2016, when we first broke the news about the downfall of his venture capital firm, Rothenberg Ventures. It seemed he took it as a compliment, changing his Instagram handle to @virtualgatsby. Indeed, the name seemed appropriate for a man who seemingly lived a party-boy lifestyle and spent lavishly to woo startup founders — including going on Napa Valley wine tours, holding an annual “founder field day” where he rented the whole San Francisco Giants’ baseball stadium and spending unsparingly to executive produce a video for Coldplay.

But the party life came to a halt when top leadership jumped ship and the SEC started looking into the books. The SEC formally charged Rothenberg in August of 2018 for misappropriating millions of dollars of his investors’ capital and funneling that money into his own bank account. Rothenberg settled with the SEC at the time and, as part of the settlement, was barred from the brokerage and investment advisory business for five years.

Rothenberg was later caught up in several lawsuits, including one from Transcend VR for fraud and breach of contract, which ended in a settlement. Another suit between Rothenberg and his former CFO, David Haase, ended with Rothenberg being ordered to pay $166,000 in damages.

But there was more to come from the SEC, following a forensic audit in partnership with the firm Deloitte showing the misuse or misappropriation of $18.8 million in investor funding. Under that examination, Deloitte showed Rothenberg had used the money either personally, to float his flashy lifestyle, or for other extravagances, such as building a race car team and a virtual reality studio. Rothenberg has now been ordered to pay back the $18.8 million he took from investors, another $9 million in civil penalties, plus $3.7 million in interest.

Neither the SEC nor Rothenberg have responded for comment. It’s also important to note none of the charges so far have been criminal, but were handled in civil court, as the SEC does not handle criminal cases.

Through all of it, Rothenberg never admitted any guilt for his actions and it is important to note that, because of this he will be able to practice again after the bar is lifted in five years. He’s also made some decent early investments in startups like Robinhood, and many investor sources TechCrunch spoke to over the years seemed quite loyal to him as an investor, despite the charges, employee mass exodus and fund implosion that followed.

And it seems this saga is not over yet. Rothenberg told MarketWatch in a recent interview that he thought the ruling was, “historically excessive and vindictively punitive,” that he planned to appeal it and would be suing Silicon Valley Bank, which Rothenberg used to funnel several investments, over the matter.

Rothenberg Ventures already filed suit against Silicon Valley Bank in August of 2018, the same day the SEC filed formal charges against Rothenberg himself. In that suit, Rothenberg alleged negligence, fraud and deceit on the part of the bank and sought a trial before jury. Silicon Valley Bank said it would defend against the case at the time.

We’ve reached out to Silicon Valley Bank and are waiting to hear back. The real question is, if Rothenberg were to come back to investing in Silicon Valley, would anyone still trust him?

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