Ashmeet Sidana, a longtime VC who struck out on his own in 2015 to form Engineering Capital, just closed his third and newest fund with $60 million in capital commitments from a university endowment, a fund of funds, and three foundations.
Sidana — who previously spent nearly nine years with Foundation Capital and received one of his first limited partner agreements afterward from Foundation’s legendary founder, Kathryn Gould — says the fund came together despite the pandemic without too much pain.
That’s thanks in part to Sidana’s track record, including the sale of the cloud monitoring startup SignalFx to Splunk for $1 billion after it raised $179 million from VCs, and the sale of the cloud application monitoring startup Netsil by Nutanix for up for $74 million in stock after it raised just $5.7 million. (Engineering Capital was the first investor in both.)
Sidana’s day-to-day work in Palo Alto, Calif. –which centers on working with teams “that you can feed with two pizzas,” yet whose narrow technical insights can have broad applicability — was also an apparent draw. To learn more, we talked earlier today with Sidana, a self-described engineering nerd who studied computer science at Stanford about what “technical insights” have caught his attention most recently.
TC: You talk about pursuing founders with technical insights. Is that not true of most venture capitalists?
AS: No. Silicon Valley is a tech investing ecosystem, but most of its participants aren’t solving hard technical problems. They have market insights or consumer insights. It’s the difference between Google and Facebook. Google figured out how to index better, how to better prioritize a sorting problem. Facebook was started with the consumer insight that people want to be connected with each other. I focus on companies based on technical insights. Most VCs don’t.
TC: What are you looking for exactly?
AS: A team that’s using software or tech to solve a known problem that exists but for which there does not exist a solution. Many such problems exist. For example, we now the future will be multi cloud. Amazon has succeeded wildly with AWS. Microsoft is doing well with its cloud business. Google is catching up to them. Then you have the seven dwarves, including Digital Ocean. It’s a difficult way for enterprises to engage with infrastructure. Another technical problem is rooted in all of us wanting to give our infrastructure over to the cloud but not our data. How do we solve this? Some are solving it legally, some with publicity. But really, it’s a technical problem.
TC: What’s a recent bet you’ve made that has solved a technical problem?
AS: I’m the first investor in Baffle, which is a really interesting company that enables the user of a traditional relational database to see the data but not an administrator. [Editor’s note: the company says it enables the field level protection of data without requiring any application code changes.] Or Robust Intelligence is an even newer investment that’s solving the problem of data contamination in artificial intelligence.
TC: How so?
AS: When you run models and do machine learning, you do cybersecurity and protect them, but what about the data that the AI is working on? They have a killer demo that shows that when you deposit a check with your iPhone, your bank is of course using AI to recognize check and ensure the right amount goes into the proper account. [But a nefarious actor could] procure a small number of pixels that are invisible to the human eye in the photo of check and change the numbers and the routing number. What Robust does is protecting [both the bank and its customers] from that kind of data contamination.
TC: I know you tend to invest very early — often writing the first check. Are you hovering around Stanford all day? How do you find these nascent teams?
AS: I have good relationships with many schools, including [the University of] Michigan, Stanford, I’m involved with the University of Toronto’s Creative Destruction Lab; I keep active relationships with [schools in India]… I spend a lot of time with engineers in academia or industry.
TC: What size checks are you writing to get them started, and how much of their companies do you expect in return?
AS: Most people think investing in technical insights is expensive, but it can be very capital efficient if you are working with software. I’m also looking at companies where you can get to revenue with $1 million and $3 million and funding. That typically takes a small team of five to eight people who you can feed with two people. Linux was ultimately written by one person. VMWare was started by a technical insight addressed by two people. Google had its earlier stuff working with just Larry and Sergey.
As for ownership, my job is to buy low and sell high. I’m as greedy as the next VC and would love to have as much ownership as I can, but there is no formula.
TC: What’s a mistake you tend to see with new teams?
AS: Gluttony. Most think they have to go after a big market and solve a big problem, but the magic of doing a startup is to focus on an incredibly narrow problem that has broad application. As Steve Jobs used to say it is difficult to throw away features, not to add them.
Electric vehicle startup Fisker Inc. said Wednesday it has raised $50 million, much needed capital that will go toward funding the next phase of engineering work on the company’s all-electric luxury SUV.
The startup is aiming to launch the Fisker Ocean SUV in 2022.
The Series C funding round was led by Moore Strategic Ventures LLC, the private investment vehicle of Louis M. Bacon, the billionaire hedge fund manager.
“Since we first showed the car at CES earlier this year, reaction from customers and investors has been extremely positive,” Fisker Inc. Chairman and CEO Henrik Fisker said in a statement. “We are radically challenging the conventional industry thinking around developing and selling cars and this capital will allow us to execute our planned timeline to start producing vehicles in 2022.”
The company is also beefing up its executive lineup to help push the project along. Fisker said it has hired Burkhard Huhnke as its CTO. Huhnke was the former vice president of e-mobility for Volkswagen America and vice president of automotive at chipmaker Synopses.
As CTO, Huhnke will spread his time between the company’s R&D work in Los Angeles and its new Fisker Innovation Lab in Silicon Valley.
Building a car company isn’t easy. Just ask Fisker. The well-known automotive designer, who was behind the Aston Martin V8 Vantage, Aston Martin DB9 and BMW Z8 among others, launched a startup called Fisker Automotive that aimed to produce a luxury plug-in hybrid electric vehicles. The flagship vehicle, the Fisker Karma, debuted at the 2008 North American International Auto Show, and first deliveries were in 2011. But the company ran into numerous challenges and production was suspended in November 2012 and ended in bankruptcy a year later.
China’s Wanxiang Group purchased what was left of Fisker in 2014 and launched a new company called Karma Automotive . On a side note: Karma, which has had its own financial struggles, also announced Wednesday it had raised $100 million.
This time around, Fisker is focused on an SUV. The Fisker Ocean, which was officially revealed in January at CES 2020, starts at $37,499 before applying any federal income tax credit or state incentives.
The Colombian trucking and logistics services startup Liftit has raised $22.5 million in a new round of funding to capitalize on its newfound traction in markets across Latin America as responses to the COVID-19 epidemic bring changes to the industry across the region.
“We’re focusing on the five countries that we’re already in,” says Liftit chief executive Brian York.
The company recently hired a head of operations for Mexico and a head of operations for Brazil as it looks to double down on its success in both regions.
Funding for the round was led by Cambridge Capital and included investments from the new Latin American focused firm H20 Capital along with AC Ventures, the venture arm of the 2nd largest coca-cola bottler in Latam; 10x Capital, Banyan Tree Ventures, Alpha4 Ventures, the lingerie brand Leonisa; and Mexico’s largest long haul trucking company, Grupo Transportes Monterrey. Individual investor, Jason Radisson the former chief operating officer of the on-demand ride hailing startup 99, also invested.
The new capital comes on top of Liftit’s $14.3 million Series A from some of the region’s top local investors. Firms like Monashees, Jaguar Ventures and NXTP Ventures all joined the International Finance Corp. in financing the company previously and all returned to back the company again with its new funding.
Investors likely responded to the company’s strong performance in its core markets. Already profitable in Chile and Colombia, Liftit expects to reach profitability across all of its operations before the end of the year. That’s despite the global pandemic.
Of the 220 contracts the company had with shippers half of them went to zero and the other half spiked significantly, York said. While Liftit’s major Colombian customer stumbled, new business, like Walmart, saw huge spikes in deliveries and usage.
“Managing truck drivers is incredibly difficult, and trucking, in our opinion, is not on demand,” said York. “At the end of the day the trucking market in all of Latin America is a majority of independent owners. They’re not looking for on-demand work… they’re looking for full time work.”
Less than one percent of the company’s deliveries come from on-demand orders, instead, it’s a service comprised of scheduled shipments with optimized routes and efficiencies that are bringing customers to Liftit’s virtual door.
“We do scheduled trucking delivery so we integrate with existing systems that shippers have and start planning how many trucks they’re going to need and the routes they’re going to take and … tee it up exactly what is going to happen regardless what the traffic conditions are so we have been able to reduce the delivery times for the trucks,” said York.
If necessity is the mother of invention, then new business owners are getting very inventive in the ways in which they access cash. Relying on some long-tested and some new avenues to raise money, entrepreneurs are finding more ways to get public market cash faster than they would have in the past.
Whether it’s from Reg A crowdfunding dollars, Special Purpose Acquisition Companies (SPACs) or direct listings, these somewhat arcane and specialized financing vehicles are making a comeback alongside a rise in new funding mechanisms to get to market quickly and avoid the dilution that comes from private market rounds (especially since those rounds are likely to come at a reduced valuation given market conditions).
Some of these tools have existed for a while and are newly popular in an era where retail investors are driving much of the daily fluctuations of the public markets. Wall Street institutions are largely maintaining their conservative postures with regard to new offerings, so secondary market retail volume growth is outpacing institutional. Retail investors want into these new issues and are pouring into the markets, contributing to huge pops to new public offerings for companies like Lemonade this Thursday and creating an environment where SPACs and crowdfunding campaigns can flourish.
The rise of zero-commission brokerages and the popularization of fractional trading led by the startup Robinhood and adopted by every one of the major online brokers including Charles Schwab, TD Ameritrade, E-Trade and Interactive Brokers has created a stock market boom that defies the underlying market conditions in the U.S. and globally. For instance, daily trades on Robinhood are up 300% year-over-year as of March 2020.
According to data from the BATS exchange, the total trade count in the U.S. was up 71% and May trading was up more than 43% over 2019. Meanwhile, E-Trade daily average revenue trades posted a 244% increase in May over last year’s numbers.
The appetite for new issues is growing and if many of the largest venture-backed companies are holding off on going public, smaller names are using SPACs to access public capital and reach these new investors.
In just over a decade, cloud-based platforms have completely reshaped the multi-hundred billion dollar enterprise IT market. Companies have thrown out their boxes and software-defined and microservice’d everything from the network stack to storage, compute, and application delivery and everything in-between.
It should be the most lucrative single slice of the startup world today, except for one (well, maybe three) major challenges whose their names are AWS, Google Cloud, and Azure.
The growth of these three platforms has been dizzying and they have driven much of the enterprise adoption of cloud technologies the past decade. But they also lock customers into their vertically-integrated offerings, leaving in some cases just table scraps for startups trying to find margin in an incredibly competitive world.
How can startups fend off the biggest cloud providers and still maintain growth? How can they offer differentiated offerings when AWS alone offers more services than are countable by the most advanced forms of artificial intelligence?
Thankfully, we have a long-time operator and veteran VC joining us at TC Early Stage online on July 21-22 to discuss this and more on how infrastructure startups can compete in platform-dominated world.
Sam Pullara is a managing director at Sutter Hill Ventures where he invests in enterprise infrastructure startups like application performance monitoring service Observe, DevOps platform Transposit, and anomaly detection startup Lacework.
He’s up-to-speed on the latest in the infra world, and informed from his previous experience at Twitter, where he was a senior technology advisor and a senior infrastructure engineer, and he was formerly Chief Technologist at Yahoo, which today is part of the
Borg corporate entity that is Verizon Media, TechCrunch’s magnanimous and enigmatic parent company.
If you’re interested in the future of the enterprise, this is where you want to be.
TC Early Stage is our brand-new virtual event series that focuses on getting new founders the information, insight and advice directly from the experts — the founders, investors and lawyers who’ve been down these roads many times before. Schippers and Evans are joining an already incredible list of speakers, with sessions and talks from folks like Reid Hoffman, Brooke Hammerling, Dalton Caldwell, Garry Tan, Charles Hudson and Cyan Banister.
One catch: Each of the 50+ breakout sessions at TC Early Stage will be capped at just 100 people and will be filled on a first-come, first-serve basis. Buy your ticket today and you’ll be able to sign up for any breakout sessions we announce, plus any we’ve already announced that still have room.
It all goes down on July 21-22. The best news? This two-day event is all virtual, so you can tune in from the comforts of your couch. Want to know more? Find all the details you could ever want right here.
Permutive is announcing that it has raised $18.5 million in Series B funding, as the London-based startup works to help online publishers make money in a changing privacy landscape.
CEO Joe Root, who co-founded the company with CTO Tim Spratt, noted that publishers are facing increasing regulation while web browsers are phasing out support for third-party cookies — all good news for privacy advocates, but with a real downside for publisher ad revenue (blocking cookies causes an average 52% decline in ad revenue, according to a Google study last year).
Permutive tries to address this issues by allowing publishers to utilize their own first-party data more effectively. Root estimated that without cookies, web visitors break down to 10% who are logged in and authenticated, while 90% are anonymous, and he said, “We use the insight and understanding from that 10% to make predictions about that 90%.”
So from a single anonymous pageview, Permutive can collect 20 or 30 data points about visitor behavior, which it then uses to try to project who that visitor might be and what they might be interested in. Root also noted that the company’s technology relies on edge computing, allowing it to process data more quickly, which is crucial for publishers who may only have a few seconds in which to show a visitor an ad.
Joe Root – Permutive
If you’re wondering whether this approach has any privacy or regulatory implications of its own, Root suggested Permutive spends “a lot of time making sure we are ideologically aligned with [European privacy regulation] GDPR and ideologically aligned with the browsers.”
For one thing, “We don’t believe data should be portable across applications,” which is why Permutive is focused on helping publishers use their own data. For another, Root said Permutive is committed to “the destruction of identity in the adtech ecosystem.”
“Using data isn’t a problem — it’s when you attach data to an identity,” he added. So without identity, “Instead of saying, ‘Here is an ad for Anthony, look up everything you know from Anthony,’ we say, ‘Here is an ad for a user interested in tech media.’ One model leaks data and the other doesn’t.”
Root also suggested that these shifts will allow ad dollars to move back to the premium publishers who have more engagement with and data from their readers — publishers who he argued have “up until now funded the long tail” with their cookie-based data.
This approach is reflected in the publishers Permutive already works with, including BuzzFeed, Penske, The Financial Times, The Guardian, Business Insider, The Daily Telegraph, The Economist, Bell Media, News UK and MailOnline.
Founded in 2014, Permutive previously raised $11.5 million, according to Crunchbase. The Series B was led by Octopus Ventures with participation from EQT Ventures and previous investors.
“Today, Permutive is the UK category leader in its field and is beating billion-dollar global businesses on a consistent basis in trial processes,” said Will Gibbs of Octopus Ventures in a statement. “The team has hired many incredible people and is now ready to replicate the success seen in the U.K. in the U.S. Given the evolving regulatory and customer priorities, Permutive’s technology could be genuinely pioneering in its field.”
The startup is also announcing that it has hired Aly Nurmohamed (former global managing director for publisher partners at Criteo) as its general manager for publishing and Steve Francolla (former head of global publisher strategy at LiveRamp) as head of partnerships.
The COVID-19 pandemic hasn’t been a friend to the media business. Its economic impacts slashed advertising budgets, diminishing a key revenue plank for many publications. The results of falling ad spend have been felt across the industry, with a wave of layoffs hitting publications large and small, niche and general.
The Exchange explores startups, markets, and money. You can read it every morning on Extra Crunch, and now you can receive it in your inbox. Sign up for The Exchange newsletter, which drops every Friday starting July 24.
Other forms of publisher income, like events, have also been reduced. But the pain of 2020’s media downturn hasn’t been felt equally in the industry. Publications that had built subscription revenue bases were in a better position to weather declines in other media incomes than peers who hadn’t; revenue diversification can provide real shelter when the economy rapidly shifts.
Subscription incomes are not enough for publications to avoid all pain; The Atlantic’s subscription base famously surged during the early months of COVID-19, but the company still saw layoffs. The Athletic’s subscription business was predicated on sports events taking place — it too underwent cuts despite a membership-first model.
In this era, the healthiest publications tend to have a subscription component. The paywalled New York Times and Wall Street Journal are hiring, as is Business Insider, which launched a membership service in 2017. But not all subscription publications that are succeeding are large. Indeed, thanks to a growing set of publisher-friendly subscription services, there are a number of options in the market for supporting publications as small as a single author.
Perhaps most famously, Substack has seen good growth in the last year. The venture-backed newsletter-and-blogging service provides authors with the ability to charge for their writing. But other startups are competing in the space, helping publications derive more income directly from readers.
Pico, which provides paid-subscription tooling for publishers, has seen strong growth in the COVID-19 era. TechCrunch caught up with its co-founder Jason Bade to chat about what his company has seen in recent months. And a few months ahead of COVID-19’s arrival, publishing platform Ghost launched its paid subscription product into beta. TechCrunch asked Ghost about the reception, and growth of the membership portion of its business to better understand today’s media market.
What emerges from data and conversations concerning the startup-supported media membership landscape is something hopeful. Some writers are going to build micro-pubs that can finance their existence. And larger publications have never had more available help to wean their businesses off of ads, pageviews, and Google’s favor.
SUSE, which describes itself as ‘the world’s largest independent open source company,’ today announced that it has acquired Rancher Labs, a company that has long focused on making it easier for enterprises to make their container clusters.
The two companies did not disclose the price of the acquisition, but Rancher was well funded, with a total of $95 million in investments. It’s also worth mentioning that it’s only been a few months since the company announced its $40 million Series D round led by Telstra Ventures. Other investors include the likes of Mayfield and Nexus Venture Partners, GRC SinoGreen and F&G Ventures.
Like similar companies, Rancher’s original focus was first on Docker infrastructure before it pivoted to putting its emphasis on Kubernetes once that became the de facto standard for container orchestration. Unsurprisingly, this is also why SUSE is now acquiring this company. After a number of ups and downs — and various ownership changes — SUSE has now found its footing again and today’s acquisition shows that its aiming to capitalize on its current strengths.
Just last month, the company reported that the annual contract value of its booking increased by 30% year over year and that it saw a 63% increase in customer deals worth more than $1 million in the last quarter, with its cloud revenue growing 70%. While it is still in the Linux distribution business that the company was founded on, today’s SUSE is a very different company, offering various enterprise platforms (including its Cloud Foundry-based Cloud Application Platform), solutions and services. And while it already offered a Kubernetes-based container platform, Rancher’s expertise will only help it to build out this business.
“This is an incredible moment for our industry, as two open source leaders are joining forces. The merger of a leader in Enterprise Linux, Edge Computing and AI with a leader in Enterprise Kubernetes Management will disrupt the market to help customers accelerate their digital transformation journeys,” said SUSE CEO Melissa Di Donato in today’s announcement. “Only the combination of SUSE and Rancher will have the depth of a globally supported and 100% true open source portfolio, including cloud native technologies, to help our customers seamlessly innovate across their business from the edge to the core to the cloud.”
The company describes today’s acquisition as the first step in its ‘inorganic growth strategy’ and Di Donato notes that this acquisition will allow the company to “play an even more strategic role with cloud service providers, independent hardware vendors, systems integrators and value-added resellers who are eager to provide greater customer experiences.”
Most sales teams earn a commission after a sale closes, but nothing prior to that. Yet there are a variety of signals along the way that indicate the sales process is progressing, and SetSail, a startup from some former Google engineers, is using machine learning to figure out what those signals are, and how to compensate salespeople as they move along the path to a sale, not just after they close the deal.
Today, the startup announced a $7 million investment led by Wing Venture Capital with help from Operator Collective and Team8. Under the terms of the deal, Leyla Seka from Operator will be joining the board. Today’s investment brings the total raised to $11 million, according to the company.
CEO and co-founder Haggai Levi says his company is based on the idea that commission alone is not a good way to measure sales success, and that it is in fact a lagging indicator. “We came up with a different approach. We use machine learning to create progress-based incentives,” Levi explained
To do that they rely on machine learning to discover the signals that are coming from the customer that indicate that the deal is moving forward, and using a points system, companies can begin compensating reps on hitting these milestones, even before the sale closes.
The seeds for the idea behind SetSail were planted years ago when the three founders were working at Google tinkering with ways to motivate sales reps beyond pure commission. From a behavioral perspective, Levi and his co-founders found that reps were taking fewer risks with a pure commission approach and they wanted to find a way to change that. The incremental compensation system achieves that.
“If I’m closing the deal, I’m getting my commission. If I’m not closing the deal, I’m getting nothing. That means from a behavioral point of view, I would take the shortest path to win a deal, and I would take the minimum risk possible. So if there’s a competitive situation I will try to avoid that,” he said.
They look at things like appointments, emails and call transcripts. The signals will vary by customer. One may find an appointment with CIO is a good signal a deal is on the right trajectory, but to avoid having reps gaming the system by filling the CRM with the kinds of positive signals the company is looking for, they only rely on objective data, rather than any kind of self-reporting information from reps themselves.
The team eventually built a system like this inside Google, and in 2018, left to build a solution for the rest of the world that does something similar.
As the company grows, Levi says he is building a diverse team, not only because it’s the right thing to do, but because it simply makes good business sense. “The reality is that we’re building a product for a diverse audience, and if we don’t have a diverse team we would never be able to build the right product,” he explained.
The company’s unique approach to sales compensation is resonating with customers like Dropbox, Lyft and Pendo, who are looking for new ways to motivate sales teams, especially during a pandemic when there may be a longer sales cycle. This kind of system provides a way to compensate sales teams more incrementally and reward positive approaches that have proven to result in sales.
Scott Salandy-Defour used to make frequent stops at a battery manufacturer in southern China for his energy startup based in Hong Kong. The appeal of Hong Kong, he said, is its adjacency to the plentiful electronics suppliers in the Pearl River Delta, as well as the city’s amenities for foreign entrepreneurs, be it its well-established financial and legal system or a culture blending the East and West.
“It’s got the best of both worlds,” Salandy-Defour told TechCrunch. “But it’s not going to be the same.”
On July 1, Hong Kong’s sweeping new national security law came into effect, spelling the most profound change to the city’s way of life since the former British colony returned to Chinese rule in 1997.
The legislation will see Beijing set up an official security apparatus in the city to suppress what the authority defines as subversion, terrorism, separatism and collusion with foreign forces. Non-permanent residents can be expelled and companies can face fines if suspected of contravening the law.
Though the law doesn’t target the technology sector per se, speculation is rife about how it may affect entrepreneurs and larger companies as they go about their day-to-day operations and long-term plans. We talked to a handful of individuals in an attempt to parse out the ramifications of the law on internet freedom, data control, entrepreneurship, venture capital and other aspects pertaining to the tech industry. Several of our sources requested to have their names withheld in order to speak freely, an example of the law’s effect in action.
Part of the concern arises from the vagueness of the legislation. “We do not know anything concrete,” a Shanghai-based lawyer specializing in cross-border corporate cases told TechCrunch. “The national security law passed in Macau 11 years ago, but I heard there have been no enforcement cases. Hong Kong might be different. Police already prepared and carried banners warning against speech or gathering in violation of the new law.”
The bottom line is that the law impacts everyone in Hong Kong. “[It] will have a chilling effect as people try to understand its implementation,” reckoned Jeremy Daum, a senior research fellow at the Yale Law School Paul Tsai China Center.
An outstanding concern is that the new rules could curtail internet freedom in the freewheeling city. Specifically, Article 9 stipulates that the Hong Kong government “shall employ necessary measures to strengthen publicity, guidance, oversight and management in schools, social organizations, media, networks and other matters related to national security,” with ‘networks’ here referring to the internet.
There are already signs of self-censorship. Some residents have started to delete their Twitter accounts and messages “out of fear of the national security law,” a Hong Kong-based media professor pointed out to TechCrunch.
While the law doesn’t give rise to “a Great Firewall situation overnight, it will be insidious nonetheless,” said a Hong Kong-based digital rights expert. “Platforms, publishers, and content hosts are likely to self-censor broadly given the vagueness of the law, and even then we’ll likely see more takedown requests and the like from the government.”
Shortly after the law took effect, an app called Eat With You, which labels local eateries supportive of the Hong Kong protesters, terminated its service. A source close to the app told us that the takedown was voluntary. Though the developer didn’t say whether it made the decision to preempt internet crackdown, it has “put other plans on hold.”
AppleCensorship.com told TechCrunch it’s monitoring potential removal of apps by Apple in Hong Kong, where the giant commands a 44% market share in the mobile handset market. The site is a project created by researchers at GreatFire.org, an organization that monitors internet censorship in China, to track what apps are unavailable in various App Stores.
“Apple has shown over and over again that they are willing to censor apps on their platform at the behest of government authorities,” said GreatFire.org’s Charlie Smith of Apple’s recent removal of TikTok in India.
A week after the law’s enactment, tech giants have come to reckon with the city’s new circumstances. Facebook and Twitter said they have suspended data requests from the Hong Kong authority. TikTok, on the other hand, announced it would exit Hong Kong. Reddit, which received an outsize investment from Tencent, provided a more evasive response: “All legal requests from Hong Kong are bound by careful review for validity and with a special attention to human rights implications.”
Residents in the city of seven million people have been bracing for censorship in recent weeks. Demand for virtual private networks (VPNs), which let users access otherwise banned apps, surged in Hong Kong after Beijing passed the national security law in late May.
“But a VPN is not a magic bullet,” the media professor argued. The tool has proven to be a short-lived solution. Back in 2017, Apple removed hundreds of VPNs from its Chinese App Store, stating it did so to comply with Chinese regulations.
Others who are more attuned to the Chinese internet are less wary. Hugo Cheuk, co-founder and chief operating officer of viAct.ai, a Hong Kong-based startup using computer vision to manage construction safety, said he already uses a wide range of apps, both Chinese and overseas ones, and can easily switch to alternatives.
“Let’s say if for whatever reasons WhatsApp cannot be used in Hong Kong one day, you still have other options like Messenger, Line, Dingtalk, WeChat,” he said. “Even apps like Slack or Snapchat weren’t popular just a few years ago, but we still communicate well back then.”
Some worry that the enforcement of the security law could lead to requests of user data by Beijing, making Hong Kong a less attractive place for tech companies resistant to China’s data review policies. As Daum noted, several provisions directly allow for the search of electronic devices and request service providers to delete information.
According to Article 43:
“When handling cases of crimes endangering national security, the Hong Kong Special Administrative Region government police department for the preservation of national security may employ the various measures that the extant laws of the Hong Kong Special Administrative Region allow the police and other law enforcement departments to take when investigating serious crimes, and may employ the following measures:
(1) search premises, vehicles, boats, aircraft and other relevant places and electronic devices that may contain evidence of an offence.
(4) Requiring persons who published information or the related service providers to remove information or provide assistance.”
“When setting up their APAC headquarters, foreign headquarters may no longer choose Hong Kong because the law overrides the original legal system,” partner of a Hong Kong venture capital firm told TechCrunch.
While Hong Kong is primarily known as a free trade and financial center, many international tech firms have set up offices there as a conduit into the APAC market.
Facebook and Twitter, whose main services are unavailable to mainland users, employ marketing staff in Hong Kong to court Chinese exporters with overseas advertising needs. Unicorns like delivery service Lalamove, logistics firm Gogovan and travel platform Klook, put their headquarters in Hong Kong for its strategic geographical location to attract customers across Asia.
“As a historic trading center, with ease of currency exchange, data and logistic flows, Hong Kong has played a key role in cross-border e-commerce. Many start-up tech companies service clients across Southeast Asia from a base in Hong Kong,” said Napoleon Biggs, a digital marketing consultant with over two decade’s experience in the region.
Though the new regulation may hit these sectors in terms of requests for government access to data, it will not affect their businesses otherwise, he reasoned.
Being in a key geographic location, as an internet hub for submarine cables and satellite dishes, Hong Kong also acts a top data center destination for multinationals, Biggs observed. The question now, he said, is how multinationals will perceive this new law and how it will affect their daily operations, if at all.
Many entrepreneurs see Hong Kong as a springboard to its nearby resources rather than their main market. “Hong Kong investors are super risk-averse. The risk of being an entrepreneur doesn’t have the same level of respect here as in the U.S.,” reckoned Salandy-Defour, whose company Liquidstar deploys smart batteries primarily in Africa.
“But there are opportunities to network quickly,” he added. “We are also so close to Shenzhen and can speak to people [in tech] there who know what they are doing.”
Some Hong Kong entrepreneurs are hopeful that the law could accelerate the Greater Bay Area (GBA) initiative, which aims to stitch together Hong Kong, Macau and other cities around the Pearl River Delta, including economic powerhouses like Shenzhen and Guangzhou.
With its own set of laws and economic system in line with Western practices, Hong Kong has long been a top destination for multinational financial services. The special status was, however, not beneficial for technology companies targeting the Chinese market.
“If we want to do business in China, the first concern is the adaptation of different laws of China. Now, with the newly established national security law plus the GBA initiatives, more resources will be allocated to the 9+2 cities in the market and business perspectives, so we can more easily access the China market,” suggested Cheuk.
The integration can extend the potential reach of Hong Kong companies from seven million customers to 70 million in the GBA region, the entrepreneur said. “It’s good for startups trying to attract investment.”
His optimism is echoed by a Hong Kong-based investor for a Chinese venture capital firm. “After the law came into effect, there may be fewer technological exchanges between Hong Kong and the U.S. or Europe, but the GBA is more important to Hong Kong’s future development.”
For Hong Kong-based entrepreneurs who uphold freedom of information, the law may not bode well. Salandy-Defour, an American citizen, said he’s mulling a move to Singapore or Australia. In the long term, he plans to diversify his supply chain in other countries like Japan or Germany for sustainable batteries.
Relocation is less realistic for entrepreneurs who generate most of their revenues from the mainland. Several of them voiced concerns about the law’s adverse effect on freedom of speech, but have declined our interview requests due to concerns that their comment may violate the new law.
The divide between Washington and Beijing is spilling into Hong Kong as the security law is seen as undermining the territory’s autonomy. In response, the U.S. declared Hong Kong is no longer autonomous from China and suspended the export of sensitive technologies to the city.
The impact of the split was evident. Shortly after China passed the national security for Hong Kong in late May, Hong Kong-based staff of China Mobile lost access to a piece of IBM data software, an employee at the Chinese telecom giant told TechCrunch. The staff has since switched to a Huawei substitute called TaiShan, which the source said comes with a user interface “very similar” to the IBM product.
China Mobile and IBM have not responded to our request for comment.
When it comes to picking promising local startups, the Hong Kong venture partner said he will avoid industries deemed ‘sensitive’ or susceptible to sanctions by the U.S. He’s also advised portfolio companies with an international plan to diversify their supply chain from China to nearby regions like Southeast Asia. Limited partners from the U.S. may start to shy away from Hong Kong VC funds, he speculated, as the city gets caught in the crossfire of trade tensions.
It’s notable that one of the most prominent VCs in Hong Kong, Horizons Ventures, which backs a lot of startups globally and is led by one of Asia’s richest men Li Ka-shing, has long kept a low profile. It continues to do now, perhaps very wisely. Some of the big names in its expansive portfolio include Spotify, Slack, Zoom, Impossible Foods and Skype. The firm did not respond to requests for comment for this article.
An unintended implication of Hong Kong’s loss of its special status is the potential inconvenience to mainland companies. It’s a common practice for Chinese companies to maintain a Hong Kong entity as a gateway to purchase U.S. technologies, tapping the region’s favorable trading terms, the venture partner said. Many Chinese exporters also take advantage of Hong Kong’s well-developed financial system and currency stability to handle international fund transfers.
“If that expediency is gone, Hong Kong is just another Chinese city,” said the investor.
Black Lives Matter may be the largest movement in U.S. history, according to four different polls cited recently by the New York Times that suggest anywhere from 15 million to 26 million people in the U.S. have participated in demonstrations over the death of George Floyd and others since Floyd’s death in late May.
Blavity, a six-year-old, L.A.-based media company that’s focused on Black culture, could hardly be better positioned to help outraged Americans better understand what’s really been going on. Blavity founder Morgan DeBaun says the outfit receives at least a handful of videos each week that feature egregious acts against Black Americans, and the same has been true since DeBaun, working at the time at Intuit, founded the company in 2014 after unarmed, 18-year-old Michael Brown was gunned down by a police office in her native Missouri.
Blavity tells the stories that the mainstream media has largely been missing, but that’s only part of the story. The company is also become a go-to destination for a growing number of Black millennials interested in fresh takes on culture and politics; in Black Hollywood and travel (via two other properties it runs); and in its sizable networking events, one of which attracted 10,000 people last year.
Last week, we talked with DeBaun about Blavity — which has raised a comparatively conservative $11 million to date, including from GV, Comcast Ventures, and Plexo Capital — to learn more about how the company seizes this moment, and whether investors see the opportunity. Our chat has been edited for length and clarity (you can hear the full discussion here).
TC: You started Blavity in part to address a need you were feeling to connect with others after Michael Brown’s death. What were you reading at the time?
MD: The unfortunate answer is I wasn’t reading anything. I hadn’t really felt the need to stay connected to local or regional or Black issues until I moved out of my community and found myself wondering [from California], what is going on.
Historically in the Black community, we’ve had our own networks and platforms and brands: the African American newspapers in various cities, Essence, Jet, Ebony, and more recently, The Root. [But] a significant amount of media publications are still focused on entertainment and Hollywood and not necessarily on news. And so there was a huge gap of information that I felt wanting to understand.
This was before Twitter really became a source of information and truth for so many people, so there was a gap of information from what I saw happening on the ground in St. Louis and in text messages and as part of an email list with friends who were on the ground, and what I saw in the mainstream media. And to me, that was a huge miss, because we needed to be connected at that point more than ever so we could help impact change.
TC: There’s a lot of social injustice covered by Blavity. Two of the most popular stories on the site as we speak are about Sacramento police officer who placed a plastic bag on a 12-year-old’s head, and a cop who was arrested and charged after tasing a pregnant woman on her stomach. Are these stories central to making Blavity a resource to its readers?
MD: We tend to be a reflection of the pulse of the reality and the Black experience, and we do share stories and news that people might not find other places. I get the question more recently about: Does this time feel different? Are we covering different things? And unfortunately, the answer is that we’ve been covering these stories weekly since Michael Brown happened. It’s been a critical part of our publication and ethos to ensure that we’re sharing the stories of our community and bringing light to the injustices that are happening.
We also share joy and happiness and celebrations and moments of great accomplishments and local stories of heroes. But certainly right now, we’re making sure that we’re doing our diligence and covering the stories that are very important for this moment in time.
TC: You recently told Forbes that advertisers and marketers do not want to spend money next to Black death and violence. You have to cover these stories because it’s core to what you do, but it’s a double-edged sword for you, it sounds like.
MD: Blavity as an organization has five different brands. So we have a diversified revenue stream where we don’t just rely on display advertising against our news business, because if we did, we would wind up very much similar to what we’ve seen happen [to other struggling media companies]. There was a time when our Facebook page was even blocked because [stories] have gotten flagged as being too violent. And it’s like, well yeah, violence against Black bodies is real. It’s the truth; it’s real news.
So we do have this weird kind of balance that we strike in terms of really making sure that we’re telling the truth and that we are pushing back against our clients, our advertisers, and even Facebook to ensure that Blavity can continue to distribute content. But overall, the news business isn’t our highest revenue-generating business. It’s our conference business and our display ads business across all of our brands, some of which are lifestyle brands.
We also have an ad network that we don’t advertise publicly much, but essentially, we run ads and sales operations for other publishers of color who maybe don’t have the scale to necessarily have their own sales team and ad tech and engineers and things of that nature. We’re fighting for deals against a Vice or a Refinery 29 that also have ad networks, so we wanted to make sure that we could also win those deals and we needed that huge inventory and [that business has] allowed us the flexibility to reinvest [in the rest of the business].
TC: I understand that you’re also starting a paid-for membership-only professional network.
MD: We have an exciting announcement that’ll come out in a few weeks about a new platform that will specifically be a place for young Black professionals to come together to have discussions to learn; to get jobs, because that’s one of our core competencies through [our conference business]; but most importantly, to have discussions around the issues and topics that are trending and that matter. We already do daily conversations through Facebook Live and YouTube and Instagram Live. So we’re trying to build a place where we can have a more private space for those conversations that feels safe and also is a place where people can connect on a deeper level.
TC: Have you noticed a real change in Silicon Valley in the last month or so among investors? Are you seeing interest from firms that previously hadn’t reached out to you?
MD: There are a lot of VCs that perhaps are paying attention, but the bias is so deep that I don’t even think they know how to get out. It.
Have I seen more requests for conversations? Yes. Do I think that that’s going to result in more investments and wires and checks? No. I’m very skeptical of this kind of like performative ‘we care’ flag. The most important metric of success for VCs are returns on their investments. [Venture money] is not a donation; it’s not charity. [VCs look for companies that] meet the metrics of success. And my metrics may be different because I’ve been chronically underfunded despite how much we’ve done.
TC: Can you elaborate?
I think the argument that [later-stage] investors make is, ‘Well, there are just not that many Series A Series B companies to invest in. [But] there are enough companies to invest in, that have your revenue criteria and your goal criteria in terms of a potential exit, but that may not call themselves startups. They may look different. And so you need to do more work to go get them.
There are certainly a lot more people raising funds and having really success in terms of raising their first fund, or that are now on their second fund as a result of this [focus on diversity] and that’s very encouraging and that’s really going to help the seed- and early-stage founders.
I wish I was a founder right now who was raising a seed [round], because I could raise $10 million, there’s so much money going around.
TC: It’s incredible that you could be at a disadvantage because you’re now running a real business with multiple properties, particularly given that you seem to have a huge opportunity ahead of you. As you’ve mentioned in the past, there will be a majority minority population in this country in 10 years or so. Are you developing products for other communities, including the Afro-Latino community?
MD: We’ve thought a lot about the sub communities that have huge audiences, are growing quickly, but perhaps don’t have a space or a place to connect. And originally, one of our ideas was to build out our tech platform, then change the UI to accommodate all these [ideas] and become a true house with brands that serve people and communities on a niche level — so Gen Z, Black, LGBT, Afro Latina, for the many Caribbean folks who are in the U.S. and Nigerian Americans; there are so many sub communities within the diaspora.
What we realized is that the overhead and operations of doing that over and over would not be a good idea and that we should figure out how to a build the operations side instead. That’s why we invested in our own ad network, because we can say, ‘Hey, creator in Brooklyn who’s amazing, you have a million monthly unique visitors, which is better than half the publications out there. You don’t have ad sales team. Let’s partner with each other.’ That was the first solution.
The second is this social networking platform that we’ve built. Part of the frustration and tension I felt when I started the company was feeling like there was no one like me. I couldn’t find other Black women who wanted to build a huge company and change the world and do it through tech. There was no one walking around Mountain View who looked like that, and I didn’t know where to go. We want to solve that through technology and through a platform that makes it easy for people to find each other. Hopefully then, once people are more connected, they can build their own companies and come up with their own organizations.
When Manatee founder Damayanti Dipayana’s brother was diagnosed with autism spectrum disorder, the family took all the steps to ensure that he was properly cared for. All of the things that could have been an obstacle to getting treatment weren’t for Dipayana’s family.
A comfortably middle class background, a supportive family and ready access to care were all available, but still the therapy didn’t take. For Dipayana, it was witnessing the breakdown between the care provided at sessions and the differences in treatment at home, that led her to create Manatee.
“Therapy just sucks for kids,” Dipayana said. “My brother hated it.. It can’t be the best thing for children to put them in a room with an adult and have them talk about their problems for an hour.”
Now the graduate from Techstars Los Angeles has $1.5 million in funding from investors including the Michigan-based investment firm, Grand Ventures; Telosity, a fund launched by Vinaj Ventures & Innovation, that invests in companies improving children’s and young adult’s mental health; and the American Family Insurance Institute for Corporate and Social Impact, will pursue clinical validation for its suite of apps and services to provide a continuum of care for children with cognitive and behavioral disorders.
Beginning with Children’s Hospital Los Angeles, Manatee has started a trial with ten clinicians and fifty families to evaluate the commercial use case for Dipayana’s service.
The first targets for care are anxiety and oppositional disorder, Dapayana said.
Image credit: Manatee
“I really want to focus on children. From a social [return on investment] perspective it seems insane to me that we don’t invest more in the early wellbeing of children,” said Dipayana. “If we did then we probably wouldn’t have to deal with a ballooning juvenile detention system.”
From the company’s earliest days the stars seemed to align for Dipayana. She found her technical co-founder, Shawn Kuenzler, thanks to a post on AngelList. A veteran in the health tech startup world, Kuenzler ran engineering at Health Language and Zen Planner and has two exits under his belt. If that wasn’t serendipitous enough, Kuenzler’s wife is a clinical psychologist.
The two Denver-based entrepreneurs then took their startup on the road to the Techstars Los Angeles accelerator. It was there that they were introduced to contacts at companies including Headspace and LA Children’s Hospital that are paving the way for clinical validation of digitally delivered cognitive behavioral healthcare.
“We’re going to spend money and resources on launching our research with Children’s LA to understand the impact for a health system,” Dipayana said. “We position it as everyday therapy for kids. We provide the platform for providers to make it the day-to-day therapy for kids.”
Manatee sells its services directly to healthcare systems to ensure that it can reach the broadest population of users rather than just ones who could afford to access the company’s app-based offerings. Doctors use Manatee as a clinical dashboard and way to communicate to both a child and their family around care plans and treatment.
“I thought about this really long and hard… Looking from my personal experience. Parents and families that have kids with autism… there’s so much snake oil that gets pushed down their throat that they’ll try anything,” Dipayana said. “It was very important to me that one i understand the clinical workflow and understood how the workforce manages behavioral healthcare and whether the work we were doing was valuable.”
Kerry Washington’s fingerprints are all over Hollywood. The Emmy, SAG and Golden Globe nominated actor, director and producer has touched myriad projects, from her role as Olivia Pope on “Scandal” (where she was the first African-American woman since 1974 to headline a network drama) to her production of Hulu’s “Little Fires Everywhere” and Netflix’s AMERICAN SON (she starred in both, as well). And let’s not forget her many director credits, including on “SMILF”, “Scandal”, and “Insecure”.
But Washington is much, much more than a Hollywood superstar.
She’s gotten deeper into the tech realm over the past few years, and not only by writing a check.
Washington participated in the $75 million investment in The Wing, a members’ only coworking space for women. She also invested in Community, the platform that gives stars and celebrities a more direct connection with their fans (you can ‘text’ her using the number in her Twitter bio) and she invested in Byte, a D2C teeth-straightening platform (where she serves as Creative Ambassador).
Washington told TechCrunch in May that her portfolio is all about companies that she can be proud to be associated with.
“That pride comes from the quality of the product and how it improves the quality of people’s lives,” said Washington. “The idea of having a voice is really important.”
Whether it’s through creating space to come together, straightening a smile, or giving people a more direct connection to their icons, her portfolio is exclusive when it comes to empowering people to use their voices.
Washington is also an activist.
She was honored with the NAACP’s President’s Award in 2013, and received the GLAAD Media Vanguard Award in 2015, as well as the ACLU Bill of Rights Award in 2016. In 2018, when the world went through a huge change in the form of #MeToo, Washington joined Natalie Portman, America Ferrera, Reese Witherspoon and others as a leader of the Time’s Up movement within Hollywood.
She’s also the co-chair of Michelle Obama’s “When We All Vote” campaign and the founder of Influence Change 2020, an initiative that partners with non-profit organizations with the goal of increasing voter turnout.
It should go without saying, we’re absolutely thrilled to sit down for a conversation with Washington at Disrupt 2020.
We’ll ask her about her recent move towards tech investment and operations, and which sectors are most exciting to her as we head into the next couple years. We’ll also talk about the rapidly changing media landscape as platforms like Netflix, Hulu, Quibi, Disney+ and HBO take up more space in the ecosystem and networks look to evolve alongside the shift in user behavior.
As we head into a presidential election, in a year where the Black Lives Matter movement has risen to the forefront, we’ll also talk about her activism work and get her insights on where the tech world is falling short with regards to diversity, equity and inclusion, and how it can do better.
There will be no shortage of topics to cover with Washington and we’re very excited about this conversation.
Disrupt 2020 runs from September 14 – September 18 and will be virtual this year. Get your front row seat to see Kerry Washington speak with a Disrupt Digital Pro Pass or a Digital Startup Alley Exhibitor Package before prices increase in a few short weeks. Can’t wait to see you there!
Connect Ventures, the London-based seed-stage VC that was an early investor in Citymapper and Typeform announced a new $80 million fund last month to continue investing in “product-led” founders.
Launched back in 2012, when there was a shortage of institutional capital at seed stage in Europe and micro VC was a novelty in the region, Connect Ventures invests in B2B and consumer software across Europe, including SaaS, fintech, digital health and “future of work.”
Running throughout the firm’s investment thesis is a product focus, with the belief that product-led — or “product-first” — software entrepreneurs are the kinds of founders most likely to transform the way we live and work at scale.
Connect Ventures does fewer deals per year than many seed-stage firms, promising to place bets in a smaller number of early-stage companies. It recently backed scaling startups such as Curve and TrueLayer. Keeping a compact portfolio lets the shop throw more support behind its investments to help tip the scales toward success.
To learn more about Connect’s strategy going forward, I put questions to partners Sitar Teli, Pietro Bezza and Rory Stirling. We covered what makes a product-first founder, the upsides and downside of “conviction investing,” and the next digital product opportunities in fintech, health and the future of work.
TechCrunch: Connect Ventures positions itself as a pan-European VC investing in “product-led” founders at seed stage. Can you be more specific with regards to check size, geography and the types of startups you look for?
Sitar Teli: Of course, I know it can be hard to differentiate seed funds at first glance, so it’s worth digging in one layer down. Connect is a thesis-led, seed stage, product-centric fund that invests across Europe. I know we’re going to dive into some of those parts later, so I’ll focus on our investment strategy and what we look for. We lead seed rounds of £1-£2 million (sometimes less, sometimes more) and make 8-10 investments a year. Low volume, high conviction, high support is the investment strategy we’ve executed since we started eight years ago.
Business is the foundation, of, well, business. For startups, finding a working business model and honing it through decision-making, smart hires and relentless focus on the right metrics can be the difference between building a scalable company and collapsing into the next Luckin Coffee.
Given how important business performance and finance is, it’s not uncommon in the early days of a startup to hire an “outsourced CFO” — a part-time financial professional who helps with budgeting, basic forecasting and preparing reports for investors. Those reports, though, are static, and don’t lead to great conversations around how a business is performing, how it can change and what should happen next for all parties involved.
Quaestor wants to upend the static spreadsheets and PDFs sent to dozens if not hundreds of people on cap tables today with a software-first solution that allows executives and their investors to hold better, more intelligent conversations about business performance.
The idea for the company congealed in the offices of 8VC, where the firm’s partners like Joe Lonsdale and Alex Moore repeatedly watched companies struggling to present all of their business information to their investors in a time-efficient way. 8VC has a history of incubating projects just like Quaestor, such as CRM tool Affinity.
For Quaestor, the firm eventually brought together a trio of co-founders, with Lonsdale also officially co-founding the company. John Melas-Kyriazi is CEO, and formerly was with Spark Capital for five years as a VC. He left earlier this year, and is maintaining his board seats there. Kevin Hsu is head of product and was a product manager at cap table management startup Carta before joining 8VC as an EIR. Finally, Deny Khoung is head of operations and was formerly the director of design at 8VC.
The group has been riffing for months on the idea of improving collaboration around the fundamentals of startup metrics, but officially spun out of 8VC in March and raised $5.8 million, led by 8VC with participation from Melas-Kyriazi’s former firm Spark as well as Abstract Ventures, Riot Ventures, Fathom Ventures and GFC.
Let’s head back to the product though. Quaestor connects founders, company executives and investors all together to discuss a business and make sure everyone is on the same page regarding targets and metrics. “How do VCs and their companies interact around financial data, whether it’s documents like P&L / balance sheet / cash flow statement [or] individual financial KPIs like revenue, gross margin, net income, ARR, etc.?,” Melas-Kyriazi explained. “How do companies share that information with their investors to keep them updated? How do investors support their companies in understanding what goals they should be setting?”
The goal with the platform is two-fold. One is to ingest financial data and automatically prepare it so that all those annoying Excel mistakes disappear and everyone can read from one consistent set of metrics. The other is to help guide everyone to focus on the metrics that matter. “Most entrepreneurs come from a product background or engineering or sales and they might not necessarily have worked in finance before,” Melas-Kyriazi said. The goal with Quaestor is to help push them to think carefully about their finances.
Over time as cap tables get more complicated and more investors add their capital, the goal is that Quaestor can offer a single source of truth for all financial data, without requiring the CEO or an outsourced CFO to prepare individual reports for each firm.
Right now, the company is focusing its product on early-stage startups, but hopes to grow up with those companies as they scale, expanding its services to other types of companies over time. The company’s product has been in beta as it tests out its MVP.
Quaestor is now a team of eight, with several offer letters in motion (so that number is actively growing as I write this article). Melas-Kyriazi said that product development and early scaling are the key goals for the startup over the next year or two.
Since the killing of George Floyd at the hands of four police officers heightened awareness about racial justice, the experiences of Black people in tech — and the industry’s lack of racial diversity — are getting new attention.
In the tech ecosystem at large, the industry is still predominantly white and male, and venture capital is no different. Just 3% of investment partners are Black, according to a 2018 survey from by the National Venture Capital Association and Deloitte. Meanwhile, more than 80% of VC firms don’t have a single Black investor and just 1% of venture-backed startups have a Black founder, according to BLCK VC.
“Venture capital certainly plays a role,” GV Principal Terri Burns told TechCrunch about the overall lack of diversity in tech. “VC is a tool that can enable businesses to scale greatly and quickly, and historically, this tool hasn’t been equally distributed. For example, VC has traditionally focused on founders from a small number of institutions and pedigrees that are not particularly diverse (in 2016 we learned from Richard Kerby, general partner at Equal Ventures, that 40% of VCs went to either Harvard or Stanford). With more equal distribution of funds across backgrounds, underrepresented people will have a greater chance at success.”
Burns shared the above and more as part of our survey of a handful of Black VCs in tech. Burns, and others, described what they’re looking for in their next investment, identified overlooked opportunities that are ripe for innovation and offered advice for founders navigating COVID-19 amid this racial justice uprising.
“Both COVID-19 and the racial justice uprising have had really profound impacts on our society and the tech ecosystem,” Precursor Ventures Managing Partner Charles Hudson told TechCrunch. “For me, the main takeaway from COVID-19 is that planning in an uncertain environment is extremely stressful for founders. Advice that made sense in March and April might not apply in May and June. We went from a world where it felt like we might shelter-in-place through the fall to an attempted reopening of the economy. I think the racial justice uprising is a different thing. It’s bigger than technology, it’s about our society coming to grips with some really important, structural issues.
“While I think everyone is really struggling with the impacts of COVID-19, I think employees and founders of color are being particularly impacted by the racial justice issue and it is weighing heavily on the minds and hearts of many who are trying to process what’s happening while also trying to be productive and engaged at work. I think it’s important to be aware of that and do what you can to support folks who are struggling under the weight of this.”
Below, we’ve gathered insights from:
Image Credits: Photo by Kimberly White/Getty Images for TechCrunch)
What are the industries you’re most interested in right now?
I am into things that promote sustainability, that are clever. I like the senior care industry, but also pushing that a little further into senior activity and thriving entrepreneurship, et cetera. And media. I think media has a really interesting, exciting opportunity right now because of the way representation is so important, has always been, but it’s even more now. I’m seeing more and more interesting and unique media options rather than the status quo.
What are you looking for in your next investment?
I’m looking for people who can break down barriers within their industries, who can offer something exciting, and new, and innovative to their end user, and someone who is daring, and risk-taking, and not afraid to go against the grain. That’s really the main thing I’m looking for.
What are some overlooked opportunities that are ripe for innovation?
Again, I think senior care is something a lot of people are thinking about, thankfully. At the same time, we don’t spend a lot of time thinking about what value seniors can bring to the ecosystem, to even tech. I think you have millions and millions of people who have a gained experience that no one else has, that’s their junior, and you have all this technology at their fingertips. I’ve noticed that a lot of seniors I know have some sort of… it’s intuitive, some of this tech, like voice. They’re used to having to track down their children, and so they’re used to yelling out in the middle of an empty room, to be honest. I think that’s part of where it comes from.
They don’t have the same vanities that a lot of younger people have, and so they’re willing to take more risk when it comes to trying something new. It’s not necessarily something they want to be dangerous about because they are, by and large, taking care of themselves and caring about damage to their bodies, but they’re not afraid to look silly or to sound silly when they’re trying out a new device. I think that’s something that we can really tap into, because a lot of these people who are 70, 75, 80 years old, there’s still 20 years purchasing power there, at the least, and it’s just important that we don’t discard them and forget about them.
Replenysh has been kicking since 2016, but up til now, the Orange County, California startup hasn’t done much press. That changes today, as the company announces that it has raised a $2 million seed round with the fairly lofty goal of transforming recycling in the U.S.
A press release outlining Replenysh’s plans offers up plenty of information about what’s wrong with recycling here in the States. Among some of the key figures are the fact that it can be up to 3x more expensive to recycle a ton of material rather than simply dropping it off in a landfill. Outside of the positive press around sustainability and the rare instance of corporate altruism, that’s a rather large fiscal penalty for doing the right thing.
For its part, the Replenysh team says it’s “building this new digital supply chain.” What that means in less buzzwordy terms is that the company is working to provide software solutions designed to benefit both those selling recycled goods and companies looking to acquire the materials. That latter bit is hotter market than you’re likely aware, as big corporations have set commitments to adopt recycled materials as part of larger pledges for sustainability.
Image Credits: Replenysh
The company’s primary value comes by way of its interfacing with the owners and employees at the thousands of recycling centers based in the U.S. Replenysh has developed a software dashboard that allows the centers to find the best price for materials and schedule shipments. On the buyer side, the company also offers means by which brands can find sufficient materials and foster relationships with the aforementioned recycling centers. The company says it already has relationships with hundreds of recycling centers it has helped connect with buyers from large retailers and big brands (though it’s not yet disclosing the names of either).
“The response to our technology and services has been exciting,” founder Mark Armen told TechCrunch. “Recycling centers benefit from our rate discovery, price transparency, and workflow automation tools – and we are just getting started. We envision a world where all materials circulate through an intelligent system of continual reuse, which brands, recycling centers, and collectors can tap into and propel. The result will be a regenerative economy that restores ecosystems, relationships, and value.”
Replenysh is still a lean team, with an eight-person headcount (plus one intern). While it was founded and began working on pilots way back in 2016, the company says it really began work in earnest when it incorporated last year. The $2 million seed round is led by Kindred Ventures and Floodgate Fund, with plans to further build out the technologies and Replenysh’s network.
Cavalry Ventures, the Berlin-based early-stage venture fund which was the lead inceptor into BRYTER, has closed its second fund of €80M, more than 3.5x the size of its maiden fund.
Geared somewhat like a large Angel syndicate, Cavalry’s LPs tend to be active founders and other LPs in early-stage funds in the DACH region, and the fund is best known for its focus on key SaaS and B2B infrastructure startups such as those in HR, sales, PR, fundraising, legal and internationalization.
In a statement Stefan Walter, managing partner at Cavalry, said: “Our mantra has always been ‘what’s best for the startup?’. If that is staying on the sidelines and letting you as a founder do your job, that’s what we’re going to do. But if you request our support, you can count on us to be there – any time of the day.”
Typically, Cavalry invests alongside angels, both external and from within its network.
Among these angels are Martin Henk (Pipedrive), Nico Rosberg (former F1 World Champion), Viktoriya Tigipko (TA Ventures), Myke Naef (Doodle), Emmanuel Thomassin (Delivery Hero), Gero Decker (Signavio), Joshua Cornelius & Mehmet Yilmaz (Freeletics), Tobias Balling (Blinkist) and Felix Jahn (Rocket Internet, McMakler).
The Cavalry II fund is the partnership’s first vintage with institutional funds including the European Investment Fund .
Cavalry was launched by Rouven Dresselhaus, Claude Ritter and Stefan Walter in 2016 and has since invested in McMakler, Rekki and PlanRadar among others.
OwnBackup has made a name for itself primarily as a backup and disaster recovery system for the Salesforce ecosystem, and today the company announced a $50 million investment.
Insight Partners led the round with participation from Salesforce Ventures and Vertex Ventures. This chunk of money comes on top of a $23 million round from a year ago, and brings the total raised to over $100 million, according to the company.
It shouldn’t come as a surprise that Salesforce Ventures chipped in when the majority of the company’s backup and recovery business involves the Salesforce ecosystem, although the company will be looking to expand beyond that with the new money.
“We’ve seen such growth over the last two and a half years around the Salesforce ecosystem. and the other ISV partners like Veeva and nCino that we’ve remained focused within the Salesforce space. But with this funding, we will expand over the next 12 months into a few new ecosystems,” company CEO Sam Gutmann told TechCrunch.
In spite of the pandemic, the company continues to grow, adding 250 new customers last quarter, bringing it to over 2000 customers and 250 employees, according to Gutmann.
He says that raising the round, which closed at the beginning of May had some hairy moments as the pandemic began to take hold across the world and worsen in the U.S. For a time, he began talking to new investors in case his existing ones got cold feet. As it turned out, when the quarterly numbers came in strong, the existing ones came back and the round was oversubscribed, Gutmann said.
“Q2 frankly was a record quarter for us, adding over 250 new accounts, and we’re seeing companies start to really understand how critical this is,” he said.
The company plans to continue hiring through the pandemic, although he says it might not be quite as aggressively as they once thought. Like many companies, even though they plan to hire, they are continually assessing the market. At this point, he foresees growing the workforce by about another 50 people this year, but that’s about as far as he can look ahead right now.
Gutmann says he is working with his management team to make sure he has a diverse workforce right up to the executive level, but he says it’s challenging. “I think our lower ranks are actually quite diverse, but as you get up into the leadership team, you can see on the website unfortunately we’re not there yet,” he said.
They are instructing their recruiting teams to look for diverse candidates whether by gender or ethnicity, and employees have formed a diversity and inclusion task force with internal training, particularly for managers around interviewing techniques.
He says going remote has been difficult, and he misses seeing his employees in the office. He hopes to have at least some come back, before the end of the summer and slowly add more as we get into the fall, but that will depend on how things go.
Women start 40 percent of the businesses in the U.S., but they receive just 3% of venture funding. It doesn’t take a math whiz to recognize that such an extreme funding gap could spell opportunity, but it might help if you are math minded, a longtime investor, and happen to be woman and so conceivably understand certain products and pitches better than some men.
That was certainly the thinking of both Lori Cashman and Suzanne Norris, who came together in 2016 to form Boston-based Victress Capital, a consumer-focused, seed- and early-stage firm that just closed its second fund with nearly $22 million in funding to back gender diverse teams, meaning there is at least one woman on the founding team.
Cashman is a Duke grad who has spent her career as an investor, including previously cofounding a private equity firm, Linear Capital, to invest exclusively in owner-managed businesses. Norris, meanwhile, with two degrees Harvard, has been an investment banking analyst, a management consultant, and spent nearly four years as a VP focused on e-commerce with the company Kate Spade.
The two friendly acquaintances originally joined forces to enhance their “cognitive diversity,” says Cashman, scraping together a total of $2 million from friends and family so they could establish a track record.
Ultimately, they used that money to fund 14 startups by writing checks ranging from $100,000 to $150,000. A couple of them have already been acquired. Moxxly, which sold silent, wearable breast pumps, was acquired by Medela, a leading breast pump maker, in 2017. Last summer, it was shut down, but Cashman and Norris suggest that investors (another of whom was Randi Zuckerberg) got their money back and that they were happy to see it acquired by what seemed at the time like a strong strategic partner. A second portfolio company, Werk, more recently sold to a Chicago-based startup called The Mom Project for undisclosed terms.
Others of their bets include Daily Harvest, a direct-to-consumer organic food delivery business that has so far raised $43 million from investors, according to Crunchbase; Mented Cosmetics, a cosmetics company catering to women with darker skin tones that has raised $4 million to date; and Copper Cow Coffee, a young L.A.-based startup that makes organic Vietnamese coffee and has raised $3 million, per Crunchbase.
The idea all along was to raise a larger fund so that as Victress’s young portfolio matures, it can invest more into its breakout winners, as well as to fund other innovative young startups.
In fact, toward that end, Victress — whose newest fund came largely came from family offices — has added to its team in recent years. In February, it brought in Kate Castle, a longtime marketing partner at Flybridge Capital Partners who later cofounded XFactor Ventures as a partner. In 2018, it also hired HBS alum Madeline Keulen, who previously interned with Victress and is now a vice president. (Because of Norris’s background and network, Victress receives some of its deal flow from Harvard and HBS and typically brings in HBS students as interns.)
It wasn’t easy assembling its team — or its new fund. Norris half-kiddingly calls $20 million “no man’s land” in the eyes of institutional investors. Though they are just now closing the vehicle, they began assembling checks for it in late 2018 and have already funded seven startups that represent 25% of their new investing capital.
Still, they’re playing the long game and think the relationship-building they’ve done will pay off — both with institutional investors that will be tracking this second fund with an eye toward its third, and with venture firms around the country with whom they’ve syndicated deals and that now keep Victress in mind when meeting nascent startups with diverse founding teams.
A big win would help grow the outfit from here, too, of course. Only time will tell if they’ll have one, but Norris and Cashman talks enthusiastically about numerous portfolio companies, including Minneapolis-based Rae, which makes what it markets as libido-enhancing vegan vitamins. Rae sells its products directly to consumers but they’re also available at Target, a retail giant that, notably, has remained open throughout the pandemic.
Rae was able to secure such valuable real estate partly because its cofounder and CEO, Angie Tebbe, spent the previous 12 years as a senior director in merchandising at Target, where she oversaw the private label products in the chain’s beauty and wellness aisles. But Rae’s products are also priced affordably, with a 30-day supply of vitamins costing $14, compared with many alternatives that cost twice as much and more.
That’s partly what drew Victress to the company. Victress is focused on tech-enabled consumer services, marketplaces and digitally native brands. But if a startup in the last camp wants its attention, its products can’t be priced for the most affluent consumers with money to burn. Victress is far more interested in startups that aim to sell at an “authentic, accessible price point for the majority of America,” says Cashman.