Tag Archives: entrepreneurship

TechCrunch 7:54 pm on November 23, 2020
Tags: doug leone, entrepreneurship, , luciana lixandru, , , , ,   

7 things we just learned about Sequoia’s European expansion plans

Sequoia Capital, the renowned Silicon Valley venture capital firm that has backed companies like Apple, Google, Dropbox, Airbnb and Stripe, recently disclosed that it had opened its first office in Europe. To staff up, it hired partner Luciana Lixandru away from rival Accel Partners.

Even without an official European presence, Sequoia has quietly operated in the region for more than a decade, first investing in Klarna in 2010. Other Europe-founded companies in its portfolio include Baaima, CEGX, Charlotte Tilbury, Dashlane, Evervault, FON Wireless, Front, Graphcore, Mapillary, Metaswitch Networks, n8n, Remote, Skyscanner, Songkick, Tessian, Tourlane, UiPath, Unity and 6Winderkinder (Wunderlist).

Yet, it is only now that the VC firm is putting people on the ground here in Europe, starting with an office in London that has a remit to invest across the continent.

Working alongside Lixandru is junior investor George Robson, who joined from Revolut. Most recently, Sequoia recruited Zoe Jervier Hewitt from EQT as head of talent in Europe. And finally, Matt Miller, a Sequoia U.S. veteran, is also part of the European efforts and plans to relocate next year, while I also understand that Sequoia’s Doug Leone will be spending a lot of his time in Europe.

Last week at the virtual “Node by Slush” event, I interviewed Lixandru and Miller and teased out some important details about Sequoia’s plans.

1. Sequoia now believes Europe is producing market leaders ahead of Silicon Valley

“There has been this evolution and maturity of the tech ecosystem that has been really meaningful, that has attracted us to want to put down boots on the ground and be more invested in Europe than ever before,” said Sequoia partner Matt Miller.

“One change is in the attitudes of young people. Europe has always been this place where there’s been incredible talent coming out of the computer science programs, across the universities across the continent and the U.K., and these young people previously, were going into careers in investment banking and consulting are bigger conglomerates. And now that those young people are interested in startups and technology careers, that’s fueling a lot of great ideas and a lot of great talent.

“There was a long time this question of, when will there be a $10 billion plus startup, and now there’s multiple of them across the continent. And now the question has really changed: When will there be the next hundred billion dollar startup in Europe, and I think it’s just an evolution over time.

“We find ourselves getting pulled more and more. So when … we want to invest in the best AI semiconductor company in the world, we looked at them in China, Israel and Europe. And the one we wanted to invest in was Graphcore, in Bristol [in the U.K.]. And when we looked … [to] invest in the best process automation company in the world, we looked at automation anywhere in California … and we looked at companies all over the world, and the one we wanted to invest in was UiPath in Romania. And that is increasingly becoming the case.”

“To some extent, success breeds success, too,” said Lixandru. “I think role models are really powerful. And the fact that there have been these category-leading companies created out of Europe, but that are winning on a global scale, like Spotify, Adyen and UiPath … I think that’s really inspirational to the next generation of founders. And I think that has helped a lot.”

2. The firm will make investments out of the same fund as the U.S. and Canada

“We work as one partnership across two geographies, and we invest from the same pool of capital across both geographies,” explained Lixandru. “And the rationale behind that is exactly what Max talked about. We want to be able to partner with category leading companies, and if they start in Paris, or in Stockholm, or in San Francisco, for us, it does not make a difference. We want to partner with them early. And we want to be able to help them on the ground early … whether they start here in Europe or in the U.S.”

Related to this, Sequoia will share carry — the fund’s profits — with partners across the U.S. and Europe, regardless of where partners reside or where the deal was sourced.

“One of the things that I love the most about Sequoia having been here close to nine years now is the way that we operate is very, very team centric, and that everybody is compensated the same amount in a fund, whether or not it is the investment that they lead or the investment that their partner led,” said Miller. “So when we make an investment, we lock arms together as a team, and we work collectively to help that company be successful.”

Miller said portfolio companies in Europe also get to work with Sequoia’s operational supporting partners in the U.S., too. “And the economic model is one that supports that,” he said.

3. Sequoia will continue building out a team on the ground in Europe

#doug-leone, #entrepreneurship, #europe, #luciana-lixandru, #sequoia-capital, #startups, #stripe, #tc, #venture-capital

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TechCrunch 6:12 pm on November 23, 2020
Tags: , , entrepreneurship, , Gary Vaynerchuk, , , , , United Talent Agency,   

Founders seeking their first check need a fundraising sales funnel

Nathan Beckord Contributor
Nathan Beckord is CEO of Foundersuite.com, a software platform for raising capital and managing investors that has helped entrepreneurs raise over $2 billion since 2016. He is also the host of Foundersuite’s How I Raised It podcast.
More posts by this contributor

Milana Lewis, CEO and co-founder of music tech startup Stem, started the fundraising process long before she actually asked any investors for money (dig the well before you’re thirsty — it’s the best way). She recommends that other founders do the same.

Ten years ago, Milana started working at United Talent Agency (UTA), one of the world’s leading talent agencies. When tasked with finding the best tools and technologies that UTA’s clients could use to self-distribute their work, she discovered a glaring gap.

“There were all these tools built for the distribution of content, monetization of content and audience development,” she says. “The last piece missing was the financial aspect.” The entertainment industry desperately needed a platform that would help artists manage the financial side of their business — and that’s how the idea for Stem was born.

Because UTA had its own investment branch, called UTA Ventures, Milana’s job also introduced her to some brilliant investors. Years later, when it was time to fundraise for Stem, those connections played a pretty big role.

In an episode of How I Raised It, Milana shared how Stem has landed some superstar investors and raised a little under $22 million.

1. Bring investors along for the ride — from the very start

Milana’s involvement with UTA Ventures exposed her to the investor experience and put her in the same room as people like Gary Vaynerchuk, Jonathon Triest from Ludlow Ventures, Anthony Saleh from Wndrco and Scooter Braun.

After meeting them the first time, she made sure to nurture those relationships, and she was “honest and vulnerable” about the fact that she wanted to be an entrepreneur one day.

“It’s amazing how much people will help and support you along in that journey,” Milana says. Investors “get excited about making early-stage investments because they want to identify that person before anyone else does.”

As her idea for Stem came together, she shared that with them, too. Over the course of a year, she provided regular updates on her vision, like how she was building out her team, and she also called them for occasional advice.

By the time she approached some of them for funding, she didn’t even need to present a full pitch. By then, they already knew enough about Stem, and about Milana as a businesswoman. Her pitch meeting with Gary Vaynerchuk — the first person to invest — ended up being just 15 minutes long.

“I brought people on my entrepreneurial journey in the beginning,” Milana says. “The biggest piece of advice I could give is to start raising a year before you start raising. Start building relationships and data points.”

2. Become best friends with systems and deadlines

For each round, Milana put together a lead list — a list of potential investors who she either met socially or through business. Each time, she wanted to have at least 100 names on this list.

#column, #entertainment, #entrepreneurship, #funding, #gary-vaynerchuk, #growth-marketing, #scooter-braun, #startups, #tc, #united-talent-agency, #venture-capital

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TechCrunch 3:34 pm on November 23, 2020
Tags: 4, , , entrepreneurship, , , , ,   

6 reasons why reporters aren’t interested in your content marketing

Amanda Milligan Contributor
Amanda Milligan is the marketing director at Fractl, a prominent growth marketing agency that’s helped Fortune 500 companies and boutique businesses alike earn quality media coverage, backlinks, awareness and authority.
More posts by this contributor

Digital PR is an excellent strategy to pair with content marketing, especially if your goals include increasing your brand awareness and improving your backlink portfolio.

When you create excellent content and pitch it to writers, you not only get great media coverage, but you get the link back to your project and the authority that comes with being mentioned in a trusted publication.

This earned media tactic is very effective — but it isn’t easy.

If you get any part of it wrong, your chances of success decrease dramatically. If you’ve run into roadblocks, make sure you’re not making any of these mistakes with your content or your pitching.

1. It’s not newsworthy

Sure, it’s easy to say the news only wants to cover material that is, well, news worthy.

But what does that actually mean?

For content marketers, it usually refers to three criteria: timeliness, relevance and significance.

But there’s a catch: Most content marketing programs don’t have journalists devoted to breaking news like actual media outlets do. So how can you create content that is truly newsworthy without the resources of a newsroom?

By creating and analyzing your own data.

If your brand provides a fresh data set or a new analysis of existing data, then you’re the sole owner of information, and you can offer it exclusively to publications. This makes your pitch much more interesting.

This tactic is a combination of original content marketing and digital PR.

But the content can’t just be timely. It also has to be relevant to the writer you’re pitching and that writer’s audience. I’ll explain more on that in #4.

Finally, significance, which refers to the impact it has on the audience. When you think of local news, this is why they report on things like traffic jams and school closures: It directly affects the daily lives of the people watching and listening.

Alternatively, your data can be significant to writers covering specific beats. For example, for our client ZenBusiness, we surveyed Americans and asked what they thought about the government’s relief packages for COVID-19.

While ZenBusiness operates in the office/work niches, this new insight into American perspective was appealing to the political publication The Hill.

Significance is tough criteria from a brand perspective, but if you’re able to offer brand-new insights, it’s certainly not impossible.

2. The significance isn’t clear

Imagine a stranger handing you a book with a blank cover and saying, “Here, you’ll find this interesting.” Would you read the whole book?

#column, #content-marketing, #entrepreneurship, #growth-marketing, #media, #pr, #startups, #verified-experts

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TechCrunch 10:08 pm on November 20, 2020
Tags: , , , entrepreneurship, , , , , , ,   

Extra Crunch roundup: A fistful of IPOs, Affirm’s Peloton problem, Zoom Apps and more

DoorDash, Affirm, Roblox, Airbnb, C3.ai and Wish all filed to go public in recent days, which means some venture capitalists are having the best week of their lives.

Tech companies that go public capture our imagination because they are literal happy endings. An Initial Public Offering is the promised land for startup pilgrims who may wander the desert for years seeking product-market fit. After all, the “I” in “ISO” stands for “incentive.”

A flurry of new S-1s in a single week forced me to rearrange our editorial calendar, but I didn’t mind; our 360-degree coverage let some of the air out of various hype balloons and uncovered several unique angles.

For example: I was familiar with Affirm, the service that lets consumers finance purchases, but I had no idea Peloton accounted for 30% of its total revenue in the last quarter.

“What happens if Peloton puts on the brakes?” I asked Alex Wilhelm as I edited his breakdown of Affirm’s S-1. We decided to use that as the subhead for his analysis.

The stories that follow are an overview of Extra Crunch from the last five days. Full articles are only available to members, but you can use discount code ECFriday to save 20% off a one or two-year subscription. Details here.

Thank you very much for reading Extra Crunch this week; I hope you have a relaxing weekend.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

What is Roblox worth?

Gaming company Roblox filed to go public yesterday afternoon, so Alex Wilhelm brought out a scalpel and dissected its S-1. Using his patented mathmagic, he analyzed Roblox’s fundraising history and reported revenue to estimate where its valuation might land.

Noting that “the public markets appear to be even more risk-on than the private world in 2020,” Alex pegged the number at “just a hair under $10 billion.”

What is Roblox worth?

What China’s fintech can teach the world

Alibaba Employees Pay For Meals With Face Recognition System

HANGZHOU, CHINA – JULY 31: An employee uses face recognition system on a self-service check-out machine to pay for her meals in a canteen at the headquarters of Alibaba Group on July 31, 2018 in Hangzhou, Zhejiang Province of China. The self-service check-out machine can calculate the price of meals quickly to save employees’ queuing time. (Photo by Visual China Group via Getty Images)

For all the hype about new forms of payment, the way I transact hasn’t been radically transformed in recent years — even in tech-centric San Francisco.

Sure, I use NFC card readers to tap and pay and tipped a street musician using Venmo last weekend. But my landlord still demands paper checks and there’s a tattered “CASH ONLY” taped to the register at my closest coffee shop.

In China, it’s a different story: Alibaba’s employee cafeteria uses facial recognition and AI to determine which foods a worker has selected and who to charge. Many consumers there use the same app to pay for utility bills, movie tickets and hamburgers.

“Today, nobody except Chinese people outside of China uses Alipay or WeChat Pay to pay for anything,” says finance researcher Martin Chorzempa. “So that’s a big unexplored side that I think is going to come into a lot of geopolitical risks.”

What China’s fintech market can teach the world

Inside Affirm’s IPO filing: A look at its economics, profits and revenue concentration

Consumer lending service Affirm filed to go public on Wednesday evening, so Alex used Thursday’s column to unpack the company’s financials.

After reviewing Affirm’s profitability, revenue and the impact of COVID-19 on its bottom line, he asked (and answered) three questions:

  • What does Affirm’s loss rate on consumer loans look like?
  • Are its gross margins improving?
  • What does the unicorn have to say about contribution profit from its loans business?

Inside Affirm’s IPO filing: A look at its economics, profits and revenue concentration

If you didn’t make $1B this week, you are not doing VC right

Image Credits: XiXinXing (opens in a new window) / Getty Images

“The only thing more rare than a unicorn is an exited unicorn,” observes Managing Editor Danny Crichton, who looked back at Exitpalooza 2020 to answer “a simple question — who made the money?”

Covering each exit from the perspective of founders and investors, Danny makes it clear who’ll take home the largest slice of each pie. TL;DR? “Some really colossal winners among founders, and several venture firms walking home with billions of dollars in capital.

If you didn’t make $1B this week, you are not doing VC right

5 questions from Airbnb’s IPO filing

The S-1 Airbnb released at the start of the week provided insight into the home-rental platform’s core financials, but it also raised several questions about the company’s health and long-term viability, according to Alex Wilhelm:

  • How far did Airbnb’s bookings fall during Q1 and Q2?
  • How far have Airbnb’s bookings come back since?
  • Did local, long-term stays save Airbnb?
  • Has Airbnb ever really made money?
  • Is the company wealthy despite the pandemic?

5 questions from Airbnb’s IPO filing

Autodesk CEO Andrew Anagnost explains the strategy behind acquiring Spacemaker

Andrew Anagnost, President and CEO, Autodesk.

Andrew Anagnost, president and CEO, Autodesk.

Earlier this week, Autodesk announced its purchase of Spacemaker, a Norwegian firm that develops AI-supported software for urban development.

TechCrunch reporter Steve O’Hear interviewed Autodesk CEO Andrew Anagnost to learn more about the acquisition and asked why Autodesk paid $240 million for Spacemaker’s 115-person team and IP — especially when there were other startups closer to its Bay Area HQ.

“They’ve built a real, practical, usable application that helps a segment of our population use machine learning to really create better outcomes in a critical area, which is urban redevelopment and development,” said Anagnost.

“So it’s totally aligned with what we’re trying to do.”

Autodesk CEO Andrew Anagnost explains the strategy behind acquiring Spacemaker

Unpacking the C3.ai IPO filing

On Monday, Alex dove into the IPO filing for enterprise artificial intelligence company C3.ai.

After poring over its ownership structure, service offerings and its last two years of revenue, he asks and answers the question: “is the business itself any damn good?”

Unpacking the C3.ai IPO filing

Is the internet advertising economy about to implode?

Image Credits: jayk7 / Getty Images

In his new book, “Subprime Attention Crisis,” writer/researcher Tim Hwang attempts to answer a question I’ve wondered about for years: does advertising actually work?

Managing Editor Danny Crichton interviewed Hwang to learn more about his thesis that there are parallels between today’s ad industry and the subprime mortgage crisis that helped spur the Great Recession.

So, are online ads effective?

“I think the companies are very reticent to give up the data that would allow you to find a really definitive answer to that question,” says Hwang.

Is the internet advertising economy about to implode?

Will Zoom Apps be the next hot startup platform?

Logos of companies in the Zoom Apps marketplace

Image Credits: Zoom

Even after much of the population has been vaccinated against COVID-19, we will still be using Zoom’s video-conferencing platform in great numbers.

That’s because Zoom isn’t just an app: it’s also a platform play for startups that add functionality using APIs, an SDK or chatbots that behave like smart assistants.

Enterprise reporter Ron Miller spoke to entrepreneurs and investors who are leveraging Zoom’s platform to build new applications with an eye on the future.

“By offering a platform to build applications that take advantage of the meeting software, it’s possible it could be a valuable new ecosystem for startups,” says Ron.

Will Zoom Apps be the next hot startup platform?

Will edtech empower or erase the need for higher education?

Image Credits: Bryce Durbin

Without an on-campus experience, many students (and their parents) are wondering how much value there is in attending classes via a laptop in a dormitory.

Even worse: Declining enrollment is leading many institutions to eliminate majors and find other ways to cut costs, like furloughing staff and cutting athletic programs.

Edtech solutions could fill the gap, but there’s no real consensus in higher education over which tools work best. Many colleges and universities are using a number of “third-party solutions to keep operations afloat,” reports Natasha Mascarenhas.

“It’s a stress test that could lead to a reckoning among edtech startups.”

Will edtech empower or erase the need for higher education?

3 growth tactics that helped us surpass Noom and Weight Watchers

3D rendering of TNT dynamite sticks in carton box on blue background. Explosive supplies. Dangerous cargo. Plotting terrorist attack. Image Credits: Gearstd / Getty Images.

I look for guest-written Extra Crunch stories that will help other entrepreneurs be more successful, which is why I routinely turn down submissions that seem overly promotional.

However, Henrik Torstensson (CEO and co-founder of Lifesum) submitted a post about the techniques he’s used to scale his nutrition app over the last three years. “It’s a strategy any startup can use, regardless of size or budget,” he writes.

According to Sensor Tower, Lifesum is growing almost twice as fast as Noon and Weight Watchers, so putting his company at the center of the story made sense.

3 growth tactics that helped us surpass Noom and Weight Watchers

Send in reviews of your favorite books for TechCrunch!

Image via Getty Images / Alexander Spatari

Every year, we ask TechCrunch reporters, VCs and our Extra Crunch readers to recommend their favorite books.

Have you read a book this year that you want to recommend? Send an email with the title and a brief explanation of why you enjoyed it to bookclub@techcrunch.com.

We’ll compile the suggestions and publish the list as we get closer to the holidays. These books don’t have to be published this calendar year — any book you read this year qualifies.

Please share your submissions by November 30.

Dear Sophie: Can an H-1B co-founder own a Delaware C Corp?

Image Credits: Sophie Alcorn

Dear Sophie:

My VC partner and I are working with 50/50 co-founders on their startup — let’s call it “NewCo.” We’re exploring pre-seed terms.

One founder is on a green card and already works there. The other founder is from India and is working on an H-1B at a large tech company.

Can the H-1B co-founder lead this company? What’s the timing to get everything squared away? If we make the investment we want them to hit the ground running.

— Diligent in Daly City

Dear Sophie: Can an H-1B co-founder own a Delaware C Corp?

#affirm, #airbnb, #doordash, #entrepreneurship, #fundings-exits, #gaming, #roblox, #startups, #tc, #venture-capital, #wish

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TechCrunch 7:06 pm on November 20, 2020
Tags: , , , entrepreneurship, , , , , , , , , ,   

ORIX invests $60M in Israeli crowdfunding platform OurCrowd

Japan-based financial services group ORIX Corporation today announced that it has made a $60 million strategic investment into the Israeli crowdsourcing platform OurCrowd. In return, the crowdfunding platform will provide the firm with access to its startup network. OurCrowd also says that the two groups will collaborate to create financial products and investment opportunities for the Japanese and global market, including access to its venture funds and specific companies in the OurCrowd portfolio.

“ORIX is a global leader in diversified business and financial services who will strengthen OurCrowd in many ways,” OurCrowd CEO Jon Medved said in today’s announcement. “We are enthusiastic about the potential to further transform the venture capital asset class together and provide a strong bridge for our innovative companies to the important Asian markets.”

While ORIX already operates in 37 countries, including the U.S., this is the company’s first investment in Israel. It comes at a time where Japanese investments in Israel are already surging. And earlier this year, Israel’s flag carrier El Al was about to launch direct flights to Tokyo, for example, and while the pandemic canceled those plans, it’s a clear sign of the expanding business relations between the two countries.

“We are excited about investing in OurCrowd, Israel’s most active venture investor and one of the world’s most innovative venture capital platforms,” ORIX UK CEO Kiyoshi Habiro said. “We intend to be active partners with OurCrowd and help them accelerate their already impressive growth, while bringing the best of Israeli tech to Japan’s large industrial and financial sectors.”

So far, OurCrowd has made investments in 220 companies across its 22 funds. Some of its most successful exits include Beyond Meat and Lemonade, JUMP Bike, Briefcam and Argus. ORIX, too, has quite a diverse portfolio, with investments that range from real estate to banking and energy services.

#banking, #beyond-meat, #crowdfunding, #entrepreneurship, #finance, #financial-services, #investment, #israel, #japan, #jon-medved, #ourcrowd, #private-equity, #real-estate, #united-states

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TechCrunch 3:59 pm on November 20, 2020
Tags: , , , , , entrepreneurship, , , , ,   

If you didn’t make $1B this week, you are not doing VC right

The only thing more rare than a unicorn is an exited unicorn.

At TechCrunch, we cover a lot of startup financings, but we rarely get the opportunity to cover exits. This week was an exception though, as it was exitpalooza as Affirm, Roblox, Airbnb, and Wish all filed to go public. With DoorDash’s IPO filing last week, this is upwards of $100 billion in potential float heading to the public markets as we make our way to the end of a tumultuous 2020.

All those exits raise a simple question – who made the money? Which VCs got in early on some of the biggest startups of the decade? Who is going to be buying a new yacht for the family for the holidays (or, like, a fancy yurt for when Burning Man restarts)? The good news is that the wealth is being spread around at least a couple of VC firms, although there are definitely a handful of partners who are looking at a very, very nice check in the mail compared to others.

So let’s dive in.

I’ve covered DoorDash’s and Airbnb’s investor returns in-depth, so if you want to know more about those individual returns, feel free to check those analyses out. But let’s take a more panoramic perspective of the returns of these five companies as a whole.
First, let’s take a look at the founders. These are among the very best startups ever built, and therefore, unsurprisingly, the founders all did pretty well for themselves. But there are pretty wide variations that are interesting to note.

First, Airbnb — by far — has the best return profile for its founders. Brian Chesky, Nathan Blecharczyk, and Joe Gebbia together own nearly 42% of their company at IPO, and that’s after raising billions in venture capital. The reason for their success is simple: Airbnb may have had some tough early innings when it was just getting started, but once it did, its valuation just skyrocketed. That helped to limit dilution in its earlier growth rounds, and ultimately protected their ownership in the company.

David Baszucki of Roblox and Peter Szulczewski of Wish both did well: they own 12% and about 19% of their companies, respectively. Szulczewski’s co-founder Sheng “Danny” Zhang, who is Wish’s CTO, owns 4.9%. Eric Cassel, the co-founder of Roblox, did not disclose ownership in the company’s S-1 filing, indicating that he doesn’t own greater than 5% (the SEC’s reporting threshold).

DoorDash’s founders own a bit less of their company, mostly owing to the money-gobbling nature of that business and the sheer number of co-founders of the company. CEO Tony Xu owns 5.2% while his two co-founders Andy Fang and Stanley Tang each have 4.7%. A fourth co-founder Evan Moore didn’t disclose his share totals in the company’s filing.

Finally, we have Affirm . Affirm didn’t provide total share counts for the company, so it’s hard right now to get a full ownership picture. It’s also particularly hard because Max Levchin, who founded Affirm, was a well-known, multi-time entrepreneur who had a unique shareholder structure from the beginning (many of the venture firms on the cap table actually have equal proportions of common and preferred shares). Levchin has more shares all together than any of his individual VC investors — 27.5 million shares, compared to the second largest investor, Jasmine Ventures (a unit of Singapore’s GIC) at 22 million shares.

#affirm, #airbnb, #altos-ventures, #brian-chesky, #doordash, #entrepreneurship, #founders-fund, #roblox, #softbank-vision-fund, #startups, #venture-capital

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TechCrunch 3:39 pm on November 20, 2020
Tags: , , entrepreneurship, , , , , , ,   

Why is GoCardless COO Carlos Gonzalez-Cadenas pivoting to become a full-time VC?

Index Ventures, a London- and San Francisco-headquartered venture capital firm that primarily invests in Europe and the U.S., recently announced its latest partner. Carlos Gonzalez-Cadenas, currently COO of London-based fintech GoCardless and previously the chief product officer of Skyscanner, will join Index in January.

Gonzalez-Cadenas is a seasoned entrepreneur and operator, but has also become a prolific angel investor in the U.K. and Europe over the last three years, making more than 50 angel investments in total. Well-regarded by founders and co-investors, his transition to a full-time role in venture capital feels like quite a natural one.

Earlier this week, TechCrunch caught up with Gonzalez-Cadenas over Zoom to learn more about his new role at Index and how he intends to source deals and support founders. Index’s latest hire also shared his insights on Europe’s venture market, describing this era as the “best moment in entrepreneurship in Europe.”

TechCrunch: Let me start by asking, why do you want to become a VC? You’re obviously a well-established entrepreneur and operator, are you sure venture capital is the career for you?

Carlos Gonzalez-Cadenas: I’ve been an angel investor for the last three years and this is something that has basically grown for me quite organically. I started doing just a handful and seeing if this is something I like and over time it has grown quite a lot and so has the number of entrepreneurs I’m partnered with. And this is something I’ve been increasingly more excited to do. So it has grown organically and something that emotionally has been getting closer and closer as time has passed.

And the things I like more specifically are: One, I’m quite a curious person, and for me, investing gives you the possibility of learning a lot about different sectors, about different entrepreneurs, different ways of building businesses, and that is something that I enjoy a lot.

The second bit is that I care a lot about helping entrepreneurs, especially the next generation of entrepreneurs, build great businesses in Europe. I’ve been very lucky, in the past, to learn from great people, like Gareth [Williams, Skyscanner co-founder] and Hiroki [Takeuchi. CEO at GoCardless], in my journey. I feel a duty of helping the next generation of entrepreneurs and sharing all the things that I’ve learnt. I care a lot about setting up founders as much as possible for success and sharing all those experiences I’ve learned [from].

These are the key two motivations that have led me to decide that it would be a great time now to move to the investing side.

How have you managed your deal flow while having a full-time job and where is that deal flow coming from?

It is typically coming in three buckets. A part of it is coming from my entrepreneur and operator network. So there are entrepreneurs and operators I know that are referring other entrepreneurs to me. Another bucket is other investors that I typically co-invest with. Another bucket is venture capitalists. I basically tend to invest quite a lot with VCs and in some cases they are referring deals to me.

In terms of managing it alongside GoCardless, it takes quite a lot of effort. It requires a lot of dedication and time invested during evenings and weekends.

The good thing is that my network typically tends to send me quite highly curated deals so essentially the deal flow I have luckily tends to be quite high quality, which makes things a bit more manageable. But don’t get me wrong, it still takes quite a lot of effort even if the deal flow is relatively high quality.

Presumably you haven’t been able to be all that hands-on as an angel investor, so how are you going to make that transition and what is it that you think you bring with the operational side to venture?

The way I think about this is, the entrepreneurs I typically invest in and their companies tend to be quite capable in their day-to-day perspective. Where they tend to find more value in interactions with me is what I call the “moments of truth.” Those key decisions, those key points in the journey where essentially it can influence the trajectory of the business in a fundamental way. It could be things like, I am fundraising and I don’t know how to position the business. Or I’m thinking about my strategy for the next 18 months and I will basically welcome an experienced person giving me a qualified opinion.

Or I have a big people problem and I don’t know how to solve that problem and I need that third person who has been in my shoes before. Or it could be that I’m thinking about how to organize my team as I move from startup to scale-up and I need help from someone who has scaled teams before. Or could be that I’m hiring three executives and I don’t know what a great CMO looks like. It’s those high-impact, high-leverage questions that the entrepreneurs tend to find helpful engaging with me, as opposed to very detailed day-to-day things that most of the entrepreneurs I work with tend to be quite capable of doing. And so far that model is working. The other thing is that the model is quite scalable because you are engaging 2-3 times per year but those times are high quality and highly impactful for the entrepreneur.

I typically also tend to have pretty regular and frequent communication with entrepreneurs on Slack. It’s more like quick questions that can be solved, and I tend to get quite a lot of that. So I think it’s that bimodel approach of high-frequency questions that we can solve by asynchronous means or high-impact moments a few times per year where, essentially, we need to sit down and we need to think together deeply about the problem.

And I tend to do nothing in the middle, where essentially, it’s stuff that is not so impactful but takes a huge amount of time for everyone, that doesn’t tend to be the most effective way of helping entrepreneurs. Obviously, I’m guided by what entrepreneurs want from perspective, so I’m always training the models in response to what they need.

#artificial-intelligence, #carlos-gonzalez-cadenas, #entrepreneurship, #europe, #london, #machine-learning, #small-business, #startups, #tc, #venture-capital

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TechCrunch 4:45 pm on November 19, 2020
Tags: , , entrepreneurship, , , ,   

Against all odds: The sheer force of immigrant startup founders

Niko Bonatsos Contributor
Niko Bonatsos is a managing director at General Catalyst Partners.
More posts by this contributor

I’ve long said that I don’t care where you come from, if your name is hard to say, or you have a “funny” accent. There’s a reason for that. For centuries, some of America’s biggest companies have been founded by immigrants. Beyond household names like Levi Strauss (Germany) and Elon Musk (South Africa), more than half of unicorns in the U.S. today came from the minds of scrappy entrepreneurs who were born outside the United States. This country’s economy wouldn’t be the same without them.

It’s not easy to move to a new country to join an industry or found a company. Especially not when political moods can easily shift to create new headwinds. We’ve seen this happen periodically with U.S. immigration policy and visa programs. (I am hopeful that President-elect Biden’s more positive stance will lessen those headwinds in the very near future.)

Yet, despite the challenges of being an immigrant, so many have carved their own path to success. What makes them so special? What is it about immigrants, in particular, that so often leads to such impressive founder stories? Why are they twice as likely as native-born Americans to become entrepreneurs?

The short answer is: Everything that seems to work against them ends up being a huge advantage. From political roadblocks, to cultural barriers, to market differences, immigrants have a knack for transforming challenges into strengths.

Business as unusual: Visas and perseverance

On the surface, one might think a great idea is all it takes to secure a coveted visa and launch a startup in the U.S. Sadly, for immigrants, there are several steps they need to take first (and a lot of red tape to get past). While the U.K., Germany, Canada, Chile and other countries offer straightforward startup visa options, the same can’t be said for the U.S., where plans for a similar startup visa were quashed in 2017. Further airtight immigration restrictions under the Trump administration make it extremely difficult for entrepreneurs trying to start their company in America.

It’s no secret that perseverance is key to success for anybody in any field, but foreign-born entrepreneurs have no choice but to make it part of their journey. Just look at Eric Yuan. He might not be a household name, but the China-born entrepreneur was denied a visa eight times in the 1990s before finally landing a job at WebEx and ultimately founding the $35 billion company we all know and love (and need) today: Zoom.

Time and time again, immigrants have proven their scrappiness and found a way to work within the United States’ complicated visa system. Whether they’re getting creative with student visa options, or have the sheer willpower to try again six or seven or eight times, even before starting their companies, immigrant founders often prove they have the resilience needed to overcome any obstacle.

New, foreign kid on the block

Once the visa situation is sorted out, immigrants also face day-to-day hurdles. For starters, founders who graduated from an unknown college in another country have an uphill battle trying to establish their own reputation and attract VC attention over more “prestigious” competitors. On top of that, immigrants today tend to be on the younger side (nearly 50% are Gen Z or millennials), so they immediately have to deal with doubters who question their maturity. Another reason why being extra-tenacious from the get-go is nonnegotiable.

Language is perhaps the biggest hurdle for immigrant founders. Anyone with an accent knows what it’s like to get funny or confused looks during basic interactions: ordering food, getting directions, finding the bathroom. Oh yeah, and raising millions of dollars in venture funding.

On the bright side, nonnative speakers quickly develop empathy and a deep appreciation for how others live. Europeans, in particular, have traditionally emphasized foreign language education more than Americans, and their proximity to other countries instills a multinational attitude from an early age. Given their life experiences and global network of contemporaries and mentors, immigrant founders have a worldview that helps them think outside the box, challenge the status quo and stand out in a new country.

If you can make it here, you can make it anywhere (and vice versa)

Sure, a unique work ethic and diverse perspective are great differentiators. But what does that really have to do with growing a company? While many immigrant founders may have the “it factor” that grabs investors’ initial attention, the key to success is translating that worldview into business savvy.

Entrepreneurs from large economic players like China, Germany or India have the advantage of growing up in a fairly typical global market — the lessons learned there can loosely be applied to startup scenes in similar markets like the U.S. Luckily, coming from a small country also has its perks. Namely, a unique idea that starts in a smaller market will have plenty of room to grow in a new, bigger country.

Rappi has brought an untapped delivery app model from Bogotá to stores and customers throughout South America, and Amsterdam-based communications platform MessageBird recently joined Europe’s list of unicorns with a massive funding round to help expand its presence across continents. The Bay Area doesn’t always solve all the world’s tech problems. Quite often, there’s someone with a greater worldview (an immigrant founder) who’s noticed a market hole and is already building its solution on the other side of the world.

COVID-19 has made Silicon Valley totally borderless, as VC networking and meetings can now all be done anywhere in the world. While that has leveled the playing field in some ways, it gives immigrant “underdogs” an unexpected leg up. All of a sudden, that brilliant team from the Czech Republic can collaborate, expand and scale its business from across the world.

These days, no idea is too niche for a small- or large-market immigrant founder. As long as they continue turning challenges into opportunities, immigrants will always find a way to overcome the odds and get their startup off the ground. Now that we’re living in an ever more global world, there will need to be more advocacy for taking politics out of policy if the goal is for that will, that grit and that ingenuity to prosper into potential billion-dollar startups here in the U.S.

Dear Sophie: How will this election nail-biter affect immigration?

#column, #diversity, #entrepreneurship, #green-card, #immigration, #opinion, #policy

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TechCrunch 9:30 am on November 19, 2020
Tags: , , , , , entrepreneurship, , , , , , , , , , , , ,   

Portugal’s Faber reaches $24.3M for its second fund aimed at data-driven startups from Iberia

Portuguese VC Faber has hit the first close of its Faber Tech II fund at €20.5 million ($24.3 million). The fund will focus on early-stage data-driven startups starting from Southern Europe and the Iberian peninsula, with the aim of reaching a final close of €30 million in the coming months. The new fund targets pre-series A and early-stage startups in Artificial Intelligence, Machine Learning and Data Science.

The fund is backed by European Investment Fund (EIF) and the local Financial Development Institution (IFD), with a joint commitment of €15 million (backed by the Investment Plan for Europe – the Juncker Plan and through the Portugal Tech program), alongside other private institutional and individual investors.

Alexandre Barbosa, Faber’s Managing Partner, said “The success of the first close of our new fund allows us to foresee a growth in the demand for this type of investment, as we believe digital transformation through Intelligence Artificial, Machine Learning and data science are increasingly relevant for companies and their businesses, and we think Southern Europe will be the launchpad of a growing number.”

Faber has already ‘warehoused’ three initial investments. It co-financed a 15.6 million euros Series A for SWORD Health – portuguese startup that created the first digital physiotherapy system combining artificial intelligence and clinical teams. It led the pre-seed round of YData, a startup with a data-centric development platform that provides data science professionals tools to deal with accessing high-quality and meaningful data while protecting its privacy. It also co-financed the pre-seed round of Emotai, a neuroscience-powered analytics and performance-boosting platform for virtual sports.

Faber was a first local investor in the first wave of Portugal’s most promising startups, such as Seedrs (co-founded by Carlos Silva, one f Faber’s Partners) which recently announced its merger with CrowdCube); Unbabel; Codacy and Hole19, among others.

Faber’s main focus is deep-tech and data science startups and as such it’s assembled around 20 experts, researchers, Data Scientists, CTO’s, Founders, AI and Machine Learning professors, as part of its investment strategy.

In particular, it’s created the new role of Professor-in-residence, the first of whom is renowned professor Mário Figueiredo from Lisbon’s leading tech university Instituto Superior Técnico. His interests include signal processing, machine learning, AI and optimization, being a highly cited researcher in these fields.

Speaking to TechCrunch in an interview Barbosa added: “We’ve seen first-time, but also second and third-time entrepreneurs coming over to Lisbon, Porto, Barcelona, Valencia, Madrid and experimenting with their next startup and considering starting-up from Iberia in the first place. But also successful entrepreneurs considering extending their engineering teams to Portugal and building engineering hubs in Portugal or Spain.”

“We’ve been historically countercyclical, so we found that startups came to, and appears in Iberia back in 2012 / 2013. This time around mid-2020, we’re very bullish on what’s we can do for the entrepreneurial engine of the economy. We see a lot happening – especially around our thesis – which is basically the data stack, all things data AI-driven, machine learning, data science, and we see that as a very relevant core. A lot of the transformation and digitization is happening right now, so we see a lot of promising stuff going on and a lot of promising talent establishing and setting up companies in Portugal and Spain – so that’s why we think this story is relevant for Europe as a whole.”

#articles, #artificial-intelligence, #barcelona, #crowdcube, #cto, #entrepreneurship, #europe, #european-investment-fund, #machine-learning, #madrid, #managing-partner, #neuroscience, #portugal, #private-equity, #seedrs, #spain, #startup-company, #tc, #valencia

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TechCrunch 5:00 pm on November 18, 2020
Tags: , , , , , , , , entrepreneurship, , , , , , , , ,   

Abacus.AI raises another $22M and launches new AI modules

AI startup RealityEngines.AI changed its name to Abacus.AI in July. At the same time, it announced a $13 million Series A round. Today, only a few months later, it is not changing its name again, but it is announcing a $22 million Series B round, led by Coatue, with Decibel Ventures and Index Partners participating as well. With this, the company, which was co-founded by former AWS and Google exec Bindu Reddy, has now raised a total of $40.3 million.

Abacus co-founder Bindu Reddy, Arvind Sundararajan and Siddartha Naidu. Image Credits: Abacus.AI

In addition to the new funding, Abacus.AI is also launching a new product today, which it calls Abacus.AI Deconstructed. Originally, the idea behind RealityEngines/Abacus.AI was to provide its users with a platform that would simplify building AI models by using AI to automatically train and optimize them. That hasn’t changed, but as it turns out, a lot of (potential) customers had already invested into their own workflows for building and training deep learning models but were looking for help in putting them into production and managing them throughout their lifecycle.

“One of the big pain points [businesses] had was, ‘look, I have data scientists and I have my models that I’ve built in-house. My data scientists have built them on laptops, but I don’t know how to push them to production. I don’t know how to maintain and keep models in production.’ I think pretty much every startup now is thinking of that problem,” Reddy said.

Image Credits: Abacus.AI

Since Abacus.AI had already built those tools anyway, the company decided to now also break its service down into three parts that users can adapt without relying on the full platform. That means you can now bring your model to the service and have the company host and monitor the model for you, for example. The service will manage the model in production and, for example, monitor for model drift.

Another area Abacus.AI has long focused on is model explainability and de-biasing, so it’s making that available as a module as well, as well as its real-time machine learning feature store that helps organizations create, store and share their machine learning features and deploy them into production.

As for the funding, Reddy tells me the company didn’t really have to raise a new round at this point. After the company announced its first round earlier this year, there was quite a lot of interest from others to also invest. “So we decided that we may as well raise the next round because we were seeing adoption, we felt we were ready product-wise. But we didn’t have a large enough sales team. And raising a little early made sense to build up the sales team,” she said.

Reddy also stressed that unlike some of the company’s competitors, Abacus.AI is trying to build a full-stack self-service solution that can essentially compete with the offerings of the big cloud vendors. That — and the engineering talent to build it — doesn’t come cheap.

Image Credits: Abacus.AI

It’s no surprise then that Abacus.AI plans to use the new funding to increase its R&D team, but it will also increase its go-to-market team from two to ten in the coming months. While the company is betting on a self-service model — and is seeing good traction with small- and medium-sized companies — you still need a sales team to work with large enterprises.

Come January, the company also plans to launch support for more languages and more machine vision use cases.

“We are proud to be leading the Series B investment in Abacus.AI, because we think that Abacus.AI’s unique cloud service now makes state-of-the-art AI easily accessible for organizations of all sizes, including start-ups. Abacus.AI’s end-to-end autonomous AI service powered by their Neural Architecture Search invention helps organizations with no ML expertise easily deploy deep learning systems in production.”

 

RealityEngines.AI becomes Abacus.AI and raises $13M Series A

Deci raises $9.1M to optimize AI models with AI

#artificial-general-intelligence, #artificial-intelligence, #bindu-reddy, #cloud, #cloud-computing, #co-founder, #coatue, #enterprise, #entrepreneurship, #funding, #fundings-exits, #learning, #machine-learning, #ml, #recent-funding, #science-and-technology, #start-ups, #startups

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TechCrunch 9:00 am on November 18, 2020
Tags: , , Cars45, , , entrepreneurship, , , , , , , , , , , , , ,   

Nigeria’s Autochek raises $3.4M for car sales and service platform

Nigeria based startup Autochek looks to bring the sales and servicing of cars in Africa online. The newly founded venture has closed a $3.4 million seed-round co-led by TLcom Capital and 4DX ventures toward that aim.

The raise comes fresh off of Autochek’s September acquisition of digital car sales marketplace Cheki in Nigeria and Ghana. It also follows the recent departure of Autochek CEO Etop Ikpe from Cars45 — the startup he co-founded in 2016, now owned by Amsterdam based OLX Group.

That’s a lot of news in a short-time for Ikpe. His new company will likely be in direct competition with his previous venture (also located in Nigeria). Still, the Nigerian entrepreneur — who built his early tech credentials at e-commerce startups DealDey and Konga — says Autochek is a new model.

“It’s different in the type of technology we’re building and that it’s asset light. I don’t have any inventory. I don’t buy cars. I don’t transact any [physical] cars. I don’t own any inspection locations. I don’t own any dealerships,” Ikpe told TechCrunch on a call from Lagos.

Autochek’s model, according to its CEO, is aimed at creating the digital infrastructure for a new system to better coordinate sales, servicing, and vehicle records of the car market in Nigeria and broader Africa.

Autochek CEO Etop Ikpe, Image Credit: Autochek

Ikpe characterizes that market as still largely informal and fragmented. “We’re basically focused on technology solutions to build the rails of [Africa’s] automotive sector to run on. We’re focusing on three foundations of the market: transactions and trading, maintenance, and financing,” he said.

Autochek’s platform — managed by a developer team in Lagos and Nairobi — is a network for consumers and businesses to buy cars, sell cars, service cars, and finance cars sales.

On the financing side, the startup launched with 10 bank partnerships in Nigeria and two in Ghana, according to Ikpe. Creating more financing options is both a big opportunity for the startup and consumers, he explained. “The used car market in Africa is a $45 billion a year market that has only a 5% financing penetration rate…so there’s huge upside for growth.”

Image Credit: Autochek

Across its core product offerings, Autochek has created a network of partners and standards. The company generates revenues through fees charged on consumer transactions and commissions paid by dealers and service shops on the platform. Consumers can sign up and use the Autochek app for free.

On the sudden departure from his previous startup, Cars45, “I left because I wanted to build something else,” explained Ikpe. There’s been plenty of speculation in local tech press as to what happened, including reports of forced exits by investors. Ikpe declined to get into the details except to say, “I’ve resigned. I’ve moved on and I’m focused on doing what I’m doing right now.”

In addition to its operations in Nigeria — Africa’s most populous nation, largest economy and top VC destination — Autochek plans to use its seed-financing to expand services and geographic scope. The startup will add associated auto related services, such as insurance and blue book pricing products. Autochek is also eying possible entry in new countries such as Ivory Coast, Senegal, South Africa, Kenya, Egypt and Algeria. More M&A could also be in play. “Acquisitions are going to be a core part of our expansion strategy,” said Ikpe.

TLcom Capital Partner Andreata Muforo confirmed the fund’s co-lead on the $3.4 million seed round. Speaking to TechCrunch on a call from Nairobi, she named Autochek’s asset light model, Ikpe’s repeat founder status, and the fund’s view of auto sales and service as an underserved market in Africa as reasons for backing the venture. Golden Palm Investments, Lateral Capital, MSA Capital, and Kepple Africa Ventures also joined the investment round.

While fintech gains the majority of VC financing across Africa’s top tech hubs — such as Nigeria, Kenya and South Africa — mobility related startups operating on the continent have attracted notable support. Drone delivery venture Zipline and trucking logistics company Kobo360 have both received backing from Goldman Sachs. In 2019, FlexClub, a South African startup that matches investors and drivers to cars for ride-hailing services, used a $1.3 million round to expand to Mexico in partnership with Uber.

What we know (and don’t) about Goldman Sachs’ Africa VC investing

#africa, #berlin, #cars45, #ceo, #entrepreneur, #entrepreneurship, #ghana, #goldman-sachs, #kenya, #kobo360, #lagos, #mexico, #nairobi, #nigeria, #private-equity, #south-africa, #startup-company, #tc, #tlcom-capital, #uber

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TechCrunch 6:25 pm on November 17, 2020
Tags: , entrepreneurship, , , , , ,   

Why some VCs prefer to work with first-time founders

Repeat founders who have a proven track record, good references, and in the best cases, an exit to point to will have an easy time making inroads with venture capitalists. Earlier this week, for example, the former founders of Udemy and altMBA raised more than $4 million for a startup with no name or final product.

However, broad strokes in an environment as nuanced and dynamic as VC never make sense. As early stage evolves and more capital flows into the sector, some investors actually prefer first-time founders; it all depends on the type of venture capitalist you ask.

Last week, TMV co-founder Soraya Darabi joined the Extra Crunch Live stage to discuss her firm and investment theory.

“We look for founders who have not had a demonstrable exit before because we think that it can actually taint your perspective,” Darabi said during an Extra Crunch Live. “We look for, instead, founders [who] have had a front row seat of success, or had some product experience where you’re watching from third base but not necessarily the person that takes the whole show home.”

The preference comes directly because of TMV’s investment cadence. TMV invests between $500,000 to $1.5 million into startups that have valuations between $10 million to $15 million. Startups that have heavy market signals or hype will likely exceed that range, and thus become out of reach. For example, a Y Combinator company raised $16 million in a seed round at a $75 million valuation before Demo Day.

As a result, TMV sources founders who have not yet made the leap and want an institutional investor to help them start their first company.

Udemy and altMBA co-founders return to edtech with a new, stealthy business

#early-stage, #entrepreneurship, #extra-crunch-live, #first-check, #soraya-darabi, #startups, #tc, #venture-capital

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TechCrunch 7:37 pm on November 16, 2020
Tags: , , entrepreneurship, , , noom, , , weight loss   

3 growth tactics that helped us surpass Noom and Weight Watchers

Henrik Torstensson Contributor
Henrik Torstensson is CEO and co-founder of Lifesum. Previously, he was Head of Premium Sales at Spotify and SVP, Strategy at Stardoll.

Many consumers might think Noom or Weight Watchers are industry leaders with their nonstop commercials, but neither is the fastest-growing weight management program.

Over the past year, nutrition app Lifesum has acquired users at nearly twice the rate of both Noom and Weight Watchers, according to statistics from Sensor Tower, the independent market intelligence for the mobile app economy.

Over this past summer, we surpassed Noom on the global scale with 45 million users. More impressively, we accomplished this without any TV buys. That’s right — no multimillion dollar ad campaigns, allowing us to redistribute precious marketing dollars to other growth projects.

Here’s a closer look at the three growth marketing tactics I credit with helping us scale Lifesum over the last 36 months. It’s a strategy any startup can use, regardless of size or budget.

Understand the different generational lenses

Generations approach products differently. It’s important for startups to understand the different generational approaches of their customers. Startups that spend time thinking and strategizing about where generational trends are going will scale faster.

Here’s a closer look at the three growth marketing tactics I credit with helping us scale Lifesum over the last 36 months. It’s a strategy any startup can use, regardless of size or budget.

Millennials and Generation Z are now the largest consumer market in the world, so you can’t ignore them if you want to scale. With Lifesum these generations have helped our brand surpass the older and well-established competitors. We achieved this by intimately understanding how they view health and fitness.

Gen Z and millennials are all about empowerment. They grew up with Google and Facebook, having information at their fingertips. They are far less likely to be moved by a TV commercial since they desire to discover the world on their own.

In our industry, we’ve learned millennials and Gen Z don’t want a one-size-fits-all weight loss program or to count calories like their parents did 20 years ago. As millennials and Gen Z started embracing keto, intermittent fasting and pescatarian diets, our nutrition team had already created tailored programs to help them stick with it.

Bypass traditional marketing methods

As a brand, it’s important to look ahead and anticipate what is coming next. This also applies to marketing your product. If you get in early with emerging marketing platforms, you will save money and potentially reach more early adopters.

#apps, #column, #entrepreneurship, #growth-marketing, #health, #noom, #startups, #tc, #weight-loss

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TechCrunch 3:00 pm on November 16, 2020
Tags: , , entrepreneurship, , FINRA, , ,   

A report card for the SEC’s new equity crowdfunding rules

Slava Rubin Contributor
Slava Rubin is founder at Vincent, founder at Indiegogo and founder and general partner at humbition.

This month, the Securities Exchange Commission approved major updates to rules enacted via the 2012 JOBS Act. Their stated goal was to “harmonize” the guidelines that establish exemptions for equity crowdfunding, Reg D and Reg A+ offerings. These changes are a powerful step forward for both startups and investors alike.

This is a space I’ve watched closely since we launched Indiegogo in 2008 and Vincent earlier this year. I spent four years working with the Obama administration, the SEC and FINRA to help pass the JOBS Act in 2012. After that, it took another four years of rule refining with the SEC and FINRA before finally seeing equity crowdfunding go live in May 2016. At Indiegogo, we worked with several great partners, helping fund nearly 150 businesses via equity crowdfunding in just a couple of years.

For those who worked behind the scenes, we knew that the initial 2016 rules for equity crowdfunding were baby steps. We were balancing unknown risks with legacy rules, aiming toward broader democratization for both investors and entrepreneurs. Now, crowdfunding’s day has come, and I commend all involved including the regulators, politicians, startups and investors who all worked together to push the ecosystem forward to the next step.

That said, even today equity crowdfunding isn’t perfect. There are limits to how much you can raise, how you can communicate and how much documentation you need to provide. In reality, it’s not much different than raising from a pre-seed or seed investor, or far removed from a traditional product crowdfund. In short, it works.

The SEC made some important changes to the rules, and it’s valuable to explore them one by one. Rather than look at them on a macro scale, here are some of the bullet points that are important to entrepreneurs.

  • Regulation Crowdfunding (Reg CF) is the basic equity crowdfunding raise for companies. Now, companies can raise up to $5 million from investors, up from the current $1.07 million cap. Any investor can participate.
  • Regulation D, Rule 504 (Reg D) is another type of equity crowdfunding, but exclusively for accredited investors. With the new rules, its maximum funding cap raises to $10 million from $5 million.
  • Regulation A+, Tier II (Reg A+), which is for more established companies, can now raise $75 million via equity crowdfunding, up from the current $50 million. This is a huge move, enabling established companies to gain millions of dry powder. Any investor can participate.
  • Thanks to a “test the waters” provision, companies can build Indiegogo-like crowdfunding pages that allow companies to share information with investors prior to fundraising. This is new for Reg CF, but was previously allowed for Reg A+.
  • Demo day communications, in general, will no longer be considered general solicitation.
  • Reg CF and A+ offerings can use special purpose vehicles (SPVs) to consolidate their investor base into a single line item on a cap table.
  • Reg CF fundraisers can be done every 30 days, down from every 180 days.

Now for a report card. In hopes of clarifying these changes a bit, I looked at each specific point and gave it a letter grade depending on how important it will be to up-and-coming entrepreneurs. While many of the rules got an A or better, some are still lagging and, as we move into a new administration and new year, the difference between crowdfunding success and failure could be spelled out in these simple changes.

1. Regulation Crowdfunding (Reg CF) limit increase

Grade Previous rules (2016) Updated rules (2020)
A Maximum allowed fundraise of $1.07 million Increase in maximum fundraise to $5 million

This change is significant. One of the main complaints we heard from entrepreneurs exploring Reg CF were the actual costs associated with the raise. Between financial, legal and platform fees, companies could be looking at setup costs of $100,000 or more. Combined with time, effort and additional marketing expenses, it adds up to a lot of money just to be capped at $1 million. When compared to finding a few angel investors, the costs often don’t justify the effort. But at a $5 million cap, the cost-of-capital economics drastically improve. Also $5 million is real money, not something a few angels can match.

2. Regulation A+ Tier II limit increase

Grade Previous rules (2016) Updated rules (2020)
C Maximum allowed fundraise of $50 million Increase in maximum fundraise to $75 million

In this case, it’s nice that the cap has gone up, but this isn’t a game-changer. Rarely do Reg A+ offerings even hit the $50 million cap, and those considering Reg+ rarely cite the cap as a key deciding factor. It’s always nice to see the number go up, but this doesn’t change much.

#column, #crowdfunding, #entrepreneurship, #equity-crowdfunding, #finra, #indiegogo, #startups, #tc

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TechCrunch 8:32 pm on November 13, 2020
Tags: , , , , entrepreneurship, , , , , , , , ,   

Extra Crunch roundup: Inside DoorDash’s IPO, first-person founder stories, the latest in fintech VC and more

One of my favorite series of Monty Python sketches is built around the concept of surprise:

Chapman: I didn’t expect a kind of Spanish Inquisition.

[JARRING CHORD]

[Three cardinals burst in]

Cardinal Ximénez: NOBODY expects the Spanish Inquisition!

I was reminded of this today when I needed to reschedule a few stories so we could cover DoorDash’s S-1 filing from multiple angles. First, Managing Editor Danny Crichton looked at how well the company’s co-founders and many investors stand to make out. Alex Wilhelm covered the IPO announcement in depth on TechCrunch before writing an Extra Crunch column that studied the role the COVID-19 pandemic played in the home-delivery platform’s recent growth.

Our all-hands-on-deck coverage of DoorDash’s S-1 is a good illustration of Extra Crunch’s mission: timely analysis of current and future technology trends that serves founders and investors. We have a talented team, and as today’s coverage shows, they’re just as good as they are fast.

The stories that follow are an overview of Extra Crunch from the last five days. The full articles are only available to members, but you can use discount code ECFriday to save 20% off a one or two-year subscription. Details here.

Thanks very much for reading Extra Crunch this week. I hope you have a great weekend!

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

What I wish I’d known about venture capital when I was a founder

Why I left edtech and got into gaming

Young woman jumping on white sand through door frame at desert during sunny day. Image Credits: Klaus Vedfelt / Getty Images

We frequently run posts by guest contributors, but two stories we published this week were written in the first person, which is a bit of a departure.

In Why I left edtech and got into gaming, Darshan Somashekar brought us inside his decision to pivot away from a sector that’s been growing hotter in 2020.

His post is a unique take on two oft-discussed categories, but it also examines one founder/investor’s thought process when it comes to evaluating new opportunities.

Andy Areitio, a partner at early-stage fund TheVentureCity, wrote What I wish I’d known about venture capital when I was a founder, a reflection on the “classic mistakes” founders tend to make when it’s time to fundraise.

“Error number one (and two) is to raise the wrong amount of money and to do it at the wrong time,” he says. “They can also put all their eggs in one basket too early. I made that mistake.”

You can find business writing that explores best practices anywhere, which is why we hunt down stories that are firmly rooted in data or personal experience (which includes success and failure).

What I wish I’d known about venture capital when I was a founder

Why I left edtech and got into gaming

How COVID-19 accelerated DoorDash’s business

doordash dasher bicycle delivery person

Image Credits: DoorDash

The coronavirus pandemic looms large in DoorDash’s S-1 filing.

According to the food-delivery platform, “58% of all adults and 70% of millennials say that they are more likely to have restaurant food delivered than they were two years ago,” and “the COVID-19 pandemic has further accelerated these trends.”

As in other sectors, the pandemic didn’t wave a magic wand — instead, it hastened trends that were already in play: consumers love convenience, which means DoorDash’s gross order volume and revenue were tracking well before the virus started to shape our lives.

“It’s your call on how to balance the factors and decide whether or not to buy into the IPO, but this one is going to be big,” writes Alex Wilhelm in a supplemental edition of today’s The Exchange.

How COVID-19 accelerated DoorDash’s business

 

The VC and founder winners of DoorDash’s IPO

SAN FRANCISCO, CA – SEPTEMBER 05: DoorDash CEO Tony Xu speaks onstage during Day 1 of TechCrunch Disrupt SF 2018 at Moscone Center on September 5, 2018 in San Francisco, California. (Photo by Kimberly White/Getty Images for TechCrunch)

None of us knew DoorDash would release its S-1 filing today, but Danny Crichton jumped on the story “so we can see who is raking in the returns on the country’s delivery startup champion.”

After estimating the value of the respective ownership stakes held by DoorDash’s four co-founders, he turned to the investors who participated in rounds seed through Series H.

Some growth funds are about to look very good after this IPO, and each founder is looking at hundreds of millions, he found.

But even so, their diminished haul of about $1.3 billion is “a sign of just how much dilution the co-founders took given the sheer amount of capital the company fundraised over its life.”

The VC and founder winners of DoorDash’s IPO

 

Fintech VC keeps getting later, larger and more expensive

Investors sent stacks of cash to late-stage fintech companies in Q3 2020, but these sizable rounds may also point to shrinking opportunities for early-stage firms, reports Alex Wilhelm in this morning’s edition of The Exchange.

2020 could be a record year for fintech VC in Europe and North America, but are these “huge late-stage dollars” actually “a dampener for new fintech startups trying to get off the ground?”

Fintech VC keeps getting later, larger and more expensive

 

Accelerators embrace change forced by pandemic

Devin Coldewey interviewed the leaders of three startup accelerators to learn more about the adaptations they’ve made in recent months:

  • David Brown, founder and CEO, Techstars
  • Cyril Ebersweiler, founder HAX, venture partner at SOSV
  • Daniela Fernandez, founder, Ocean Solutions Accelerator

Due to travel bans, shelter-in-place orders and other unknowns, they’ve all shifted to virtual. But accelerators are intensive programs designed to indoctrinate founders and elicit brutally honest feedback in real time.

Despite the sudden shift, that boot-camp mindset is still in effect, Devin reports.

“Cutting out the commute time in a busy city leaves founders with more time for workshops, mentor matchmaking, pitch practice and other important sessions,” said Fernandez. “Everybody just has more flexibility and tranquility.”

Said Ebersweiler: “People are for some reason more participative and have more feedback than physically — it’s pretty strange.”

Accelerators embrace change forced by pandemic

Greylock’s Asheem Chandna on ‘shifting left’ in cybersecurity and the future of enterprise startups

Asheem Chandna

Image Credits: Greylock

In a recent interview with Greylock partner Asheem Chandna, Managing Editor Danny Crichton asked him about the buzz around no-code platforms and what’s happening in early-stage enterprise startups before segueing into a discussion about “shift left” security:

“Every organization today wants to bring software to market faster, but they also want to make software more secure,” said Chandna.

“There is a genuine interest today in making the software more secure, so there’s this concept of shift left — bake security into the software.”

Greylock’s Asheem Chandna on ‘shifting left’ in cybersecurity and the future of enterprise startups

 

Square and PayPal earnings bring good (and bad) news for fintech startups

If you missed Wednesday’s The Exchange, Alex scoured earnings reports from PayPal and Square to see what the near future might hold for several fintech startups currently waiting in the wings.

Using Square and PayPal’s recent numbers for stock purchases, card usage and consumer payment activity as a proxy, he attempts to “see what we can learn, and to which unicorns it might apply.”

Square and PayPal earnings bring good (and bad) news for fintech startups

 

Conflicts in California’s trade secret laws on customer lists create uncertainty

Concept of knowledge, data and protection. Paper human head with pad lock.

Concept of knowledge, data and protection. Paper human head with pad lock. Image Credits: jayk7 (opens in a new window)/ Getty Images

In California, non-competition agreements can’t be enforced and a court has ruled that customer contact lists aren’t trade secrets.

That doesn’t mean salespeople who switch jobs can start soliciting their former customers on their first day at the new gig, however.

Before you jump ship — or hire a salesperson who already has — read this overview of California’s trade secret laws.

“Even without litigation, a former employer can significantly hamper a departing salesperson’s career,” says Nick Saenz, a partner at Lewis & Llewellyn LLP, who focuses on employment and trade secret issues.

Conflicts in California’s trade secret laws on customer lists create uncertainty

As public investors reprice edtech bets, what’s ahead for the hot startup sector?

light bulb flickering on and off

Image: Bryce Durbin / TechCrunch

News of a highly effective COVID-19 vaccine appeared to drive down prices of the three best-known publicly traded edtech companies: 2U, Chegg and Kahoot saw declines of about 20%, 10% and 9%, respectively after the report.

Are COVID-19 tailwinds dissipating, or did the market make a correction because “edtech has been categorically overhyped in recent months?”

As public investors reprice edtech bets, what’s ahead for the hot startup sector?

 

Dear Sophie: What does a Biden win for tech immigration?

Image Credits: Sophie Alcorn

What does President-elect Biden’s victory mean for U.S. immigration and immigration reform?

I’m in tech in SF and have a lot of friends who are immigrant founders, along with many international teammates at my tech company. What can we look forward to?

— Anticipation in Albany

Dear Sophie: What does Biden’s win mean for tech immigration?

 

#asheem-chandna, #diversity, #doordash, #ecommerce, #entrepreneurship, #extra-crunch, #financial-technology, #food, #gaming, #payments, #paypal, #saas, #startups, #tc

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TechCrunch 6:02 pm on November 13, 2020
Tags: , , , entrepreneurship, , Mobile Technologies, , ,   

Which emerging technologies are enterprise companies getting serious about in 2020?

Scott Kirsner Contributor
Scott Kirsner is CEO and co-founder of Innovation Leader, a research and events firm that focuses on innovation in Global 1000 companies, and a longtime business columnist for The Boston Globe.

Startups need to live in the future. They create roadmaps, build products and continually upgrade them with an eye on next year — or even a few years out.

Big companies, often the target customers for startups, live in a much more near-term world. They buy technologies that can solve problems they know about today, rather than those they may face a couple bends down the road. In other words, they’re driving a Dodge, and most tech entrepreneurs are driving a DeLorean equipped with a flux-capacitor.

That situation can lead to a huge waste of time for startups that want to sell to enterprise customers: a business development black hole. Startups are talking about technology shifts and customer demands that the executives inside the large company — even if they have “innovation,” “IT,” or “emerging technology” in their titles — just don’t see as an urgent priority yet, or can’t sell to their colleagues.

How do you avoid the aforementioned black hole? Some recent research that my company, Innovation Leader, conducted in collaboration with KPMG LLP, suggests a constructive approach.

Rather than asking large companies about which technologies they were experimenting with, we created four buckets, based on what you might call “commitment level.” (Our survey had 211 respondents, 62% of them in North America and 59% at companies with greater than $1 billion in annual revenue.) We asked survey respondents to assess a list of 16 technologies, from advanced analytics to quantum computing, and put each one into one of these four buckets. We conducted the survey at the tail end of Q3 2020.

Respondents in the first group were “not exploring or investing” — in other words, “we don’t care about this right now.” The top technology there was quantum computing.

Bucket #2 was the second-lowest commitment level: “learning and exploring.” At this stage, a startup gets to educate its prospective corporate customer about an emerging technology — but nabbing a purchase commitment is still quite a few exits down the highway. It can be constructive to begin building relationships when a company is at this stage, but your sales staff shouldn’t start calculating their commissions just yet.

Here are the top five things that fell into the “learning and exploring” cohort, in ranked order:

  1. Blockchain.
  2. Augmented reality/mixed reality.
  3. Virtual reality.
  4. AI/machine learning.
  5. Wearable devices.

Technologies in the third group, “investing or piloting,” may represent the sweet spot for startups. At this stage, the corporate customer has already discovered some internal problem or use case that the technology might address. They may have shaken loose some early funding. They may have departments internally, or test sites externally, where they know they can conduct pilots. Often, they’re assessing what established tech vendors like Microsoft, Oracle and Cisco can provide — and they may find their solutions wanting.

Here’s what our survey respondents put into the “investing or piloting” bucket, in ranked order:

  1. Advanced analytics.
  2. AI/machine learning.
  3. Collaboration tools and software.
  4. Cloud infrastructure and services.
  5. Internet of things/new sensors.

By the time a technology is placed into the fourth category, which we dubbed “in-market or accelerating investment,” it may be too late for a startup to find a foothold. There’s already a clear understanding of at least some of the use cases or problems that need solving, and return-on-investment metrics have been established. But some providers have already been chosen, based on successful pilots and you may need to dislodge someone that the enterprise is already working with. It can happen, but the headwinds are strong.

Here’s what the survey respondents placed into the “in-market or accelerating investment” bucket, in ranked order:

#column, #corporate-venture-capital, #enterprise, #entrepreneurship, #internet-of-things, #mobile-technologies, #private-equity, #startups, #tc

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TechCrunch 3:22 pm on November 12, 2020
Tags: , , , entrepreneurship, , , , , , , , , , ,   

Calling Dublin VCs: Be featured in The Great TechCrunch Survey of European VC

TechCrunch is embarking on a major new project to survey the venture capital investors of Europe, and their cities.

Our <a href=”https://forms.gle/k4Ji2Ch7zdrn7o2p6”>survey of VCs in Dublin will capture how the city is faring, and what changes are being wrought amongst investors by the coronavirus pandemic. (Please note, if you have filled the survey out already, there is no need to do it again).

We’d like to know how Ireland’s startup scene is evolving, how the tech sector is being impacted by COVID-19, and, generally, how your thinking will evolve from here. Obviously, most VCs are in Dublin, but we don’t want to miss out on those based elsewhere.

Our survey will only be about investors, and only the contributions of VC investors will be included. More than one partner is welcome to fill out the survey.

The shortlist of questions will require only brief responses, but the more you can add, the better.

You can fill out the survey here.

Obviously, investors who contribute will be featured in the final surveys, with links to their companies and profiles.

What kinds of things do we want to know? Questions include: Which trends are you most excited by? What startup do you wish someone would create? Where are the overlooked opportunities? What are you looking for in your next investment, in general? How is your local ecosystem going? And how has COVID-19 impacted your investment strategy?

This survey is part of a broader series of surveys we’re doing to help founders find the right investors.

https://techcrunch.com/extra-crunch/investor-surveys/

For example, here is the recent survey of London.

You are not in Dublin, but would like to take part? That’s fine! Any European VC investor can STILL fill out the survey, as we probably will be putting a call out to your city next anyway! And we will use the data for future surveys on vertical topics.

The survey is covering almost every European country on the continent of Europe (not just EU members, btw), so just look for your country and city on the survey and please participate (if you’re a venture capital investor).

Thank you for participating. If you have questions you can email mike@techcrunch.com

#corporate-finance, #dublin, #economy, #entrepreneurship, #europe, #european-union, #finance, #ireland, #london, #money, #private-equity, #startup-company, #survey, #tc, #venture-capital

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TechCrunch 2:05 pm on November 12, 2020
Tags: , , , , , , entrepreneurship, , , launchpad, , , , , , , Rae, , ,   

Venture firm M13 names former Techstars LA managing director, Anna Barber, as its newest partner

The Los Angeles and New York-based venture firm M13 has managed to nab former Techstars LA managing director, Anna Barber, as its newest partner and the head of its internal venture studio, Launchpad.

Designed to be a collaborative startup company incubator alongside corporate partners, Launchpad focuses on developing new consumer tech businesses focused on M13’s main investment areas: health, food, transportation, and housing.

For Barber, the new position is the latest step in a professional career spent working both inside and outside of the tech industry.

Barber got her first taste of the startup world when she was poached from McKinsey to join one of the several online pet supply stores that cropped up in 1999. From her position as the vice president of product at Petstore.com, Barber got her taste of the startup world… and left it to become a talent manager and the co-founder of the National Air Guitar championships (no word if she managed air guitar talent).

Prior to launching the Techstars LA incubator program, Barber founded ScribblePress, a retail and digital publishing app, which was sold to Fingerprint Digital.

Anna Barber, partner, M13. Image Credit: Raif Strathmann

At M13, Barber will be working to recruit entrepreneurs to work collaboratively on developing startup consumer businesses that align with the strategic interests of M13’s corporate partners, like Procter & Gamble.

“We will be bringing in founders in residence who will come in without an idea,” Barber said of the program. “We’re starting with a blank sheet of paper and building teams in partnership with entrepreneurs and in partnership with corporate partners who will bring their perspective and their IP. “

The EIRs will receive a small stipend and equity in the business, Barber said.

The starting gun for M13’s Launchpad  program was in 2019 and the program currently has managed to spin up three startups. There’s Rae, an developer of affordable women’s wellness products; and the beauty tech company OPTE; Kindra menopause products; and Bodewell for sensitive skin care, which were all developed alongside Procter & Gamble Ventures.

M13, for its part, is developing a strong team of women partners who are investing at the firm. Barber will join Lizzie Francis and Christine Choi on the investment team, something that Barber said was especially exciting.

“There is no better place for M13’s Launchpad than Los Angeles and no better person to lead it than Anna. M13 is home to a creative, diverse community of entrepreneurs and operators who want to make the world better by applying innovation in everything from media to biotech, prop tech to food,” said M13 co-founder Carter Reum. “We are excited for Anna to continue to lead LA’s center of entrepreneurs, mentors and investors with a rigorous Launchpad program and more exceptional partners and cohorts.”

#articles, #business, #business-incubators, #business-models, #co-founder, #economy, #entrepreneurship, #food, #head, #launchpad, #los-angeles, #m13, #mckinsey, #mentorships, #new-york, #procter-gamble, #rae, #startup-company, #tc, #techstars

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TechCrunch 3:00 pm on November 11, 2020
Tags: , , , entrepreneurship, , , ,   

Greylock’s Asheem Chandna on ‘shifting left’ in cybersecurity and the future of enterprise startups

Last week was a busy week, what with an election in Myanmar and all (well, and the United States, I guess). So perhaps you were glued to your TV or smartphone, and missed out on our conversation with Asheem Chandna, a long-time partner at Greylock who has invested in enterprise and cybersecurity startups for nearly two decades now, backing such notable companies as Palo Alto Networks, AppDynamics and Sumo Logic. We have more Extra Crunch Live shows coming up.

Enterprise software is changing faster this year than it has in a decade. Coronavirus, remote work, collaboration and new cybersecurity threats have combined to force companies to rethink their IT strategies, and that means more opportunities — and challenges — for enterprise founders than ever before. In some cases, we are seeing an acceleration of existing trends, and in others, we are seeing all new trends come to the forefront.

All that is to say that there was so much on the docket to talk about last week. Chandna and I discussed what’s happening in early-stage enterprise startups, whether vertical SaaS is the future of enterprise investing, data and no-code platforms, and then this rise of “shift left” security.

The following interview has been edited and condensed from our original Extra Crunch Live conversation.

What’s happening today in the early-stage startup world?

Chandna has been a long-time backer of startups at their earliest stages, with some of his investments being literally birthed in Greylock’s offices. So I was curious how he saw the landscape today given all that prior experience.

TechCrunch: What sort of companies are exciting for you today? Are there particular markets you’re particularly attuned to?

Asheem Chandna: One is digital transformation. Every company is trying to figure out how to become more digital, and this has been accelerated by COVID-19. Second is information technology today and its journey to the cloud. I would say we might be about 10% or 15% of the way there. Some of the trends are clear, but the journey is actually still relatively early, and so there’s just a ton of opportunity ahead.

The third one is leveraging data for better predictability along with analytics. Every CEO is looking to make better decisions. And you know, most leaders make decisions based on gut instinct and a combination of data. If the data can tell a story, if the data can help you better predict, there’s a lot of potential here.

I view these as three macro trends, and then if one was to add to that, I would say cybersecurity has never been more important than it is today. I’ve been around cyber for over two decades, and just the prominence and importance and priority has never been more important than today. So that’s kind of another key area.

I want to dive into your first category, digital transformation. This is a phrase that I feel like I’ve heard for a decade now, with “Data is the new oil” and all these sorts of buzzwords and marketing phrases. Where are we in that process? Are we at the beginning? Are we at the end? What’s next from a startup perspective?

Due to COVID-19 and because of the way people are working today, digital’s become the primary medium. I would still say we’re early, and you can literally look sector by sector to see how much more work there is to do here.

Take enterprise sales itself, which is early in what I consider digitalization. It’s even more important today than it was a year ago. I’m using video to basically communicate, and then the next piece would basically be trialing of software. Can I allow even complex software to be self trials and can I measure the customer journey through that trial? Then there’s the contracting of the software, and we go to the sale process, can all that be done digitally?

So even when you take something as very mundane as enterprise sales, it’s being transformed. Winning teams, winning software entrepreneurs, they understand this well, and they’d be wise to examine every step of this process, and instrument it and digitize it.

Vertical versus horizontal plays in enterprise

#asheem-chandna, #ecl, #enterprise, #entrepreneurship, #extra-crunch-live, #greylock, #security, #venture-capital

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TechCrunch 2:15 pm on November 11, 2020
Tags: , , entrepreneurship, , , , , , , ,   

Inside Silicon Valley’s SPAC psychology

Jim Cook Contributor
Jim Cook is the CFO Leadership Coach at Velocity Group, the current CFO at Orbital Insight and was on the founding teams and growth stages of Intuit, Mozilla (Firefox) and Netflix.

The SPAC (special purpose acquisition company) hype is the latest financial engineering offering to quickly hit both mainstream media and the backrooms of Silicon Valley.

Wall Street is now “printing” 15 new SPAC IPOs each week while mainstream media prints 15 articles a week on the subject. Perhaps it’s time to explore the psychological motivations driving SPAC-mania.

I’m not going to cover the architecture or the mechanics of SPACs. The concept is the more familiar “reverse merger” where a public company acquires a more valuable private company to increase the public company’s valuation. With SPACs, the public company is literally a blank-check IPO company and the sole goal is for the acquired private company to become the operating public company.

SPAC IPO investors of the blank-check company also intend to include a PIPE (a third legal/financial structuring of a private investment in a public entity) to ensure that the resulting public company is fully funded for at least the next five years.

SPAC psychology

The psychology of how such hype develops and the pattern-matching that determines how it is likely to play out can be discovered through private conversations inside Sand Hill Road VC offices, in Silicon Valley boardrooms and on Wall Street. Here are the three investment themes I’m predominantly hearing:

  • New market creation and market-timing psychological forces.
  • Fear versus greed and risk rationalization psychology.
  • The FOMO flywheel effect.

Theme 1:  Wall Street and Silicon Valley created a new product for Main Street

Money, like water, finds the lowest ground and follows the path of least resistance.

Wall Street is currently awash in cash seeking a return. Effective 0% interest rates have stimulated new financial engineering ideas with relatively low risk, reviving a decades-old “financing vehicle”  known as the SPAC “blank check” IPO company. Wall Street has linked up with private markets to allow for a faster path to liquidity and higher value exits to create a tasty new investment product. Frost with a classic VC fund-like structure (2+2+20) to reduce risk for SPAC sponsors and initial investors, and the product sells like hotcakes!

Finally, put a for limited time only clock on the whole structure and the resulting rush to jump through a new IPO window before it closes creates a new investment race where there will be clear winners, laggards and losers.

As with most great new investment products, the idea is to sell this product to Main Street at a much higher valuation while creating a classic win-win-win mindset and a “buyer beware” undertone.

Notes:

  • (2+2+20) consists of a typical 2% management underwriting fee + $2 million of management operating expenses to fund the SPAC sponsors’ private company search, plus a 20% negotiated discount of the private company’s shares the SPAC is acquiring in return for taking them public at a higher valuation.
  • SPAC IPO companies are required by the SEC to find an acquisition target typically within 24 months or the structure is delisted and all remaining cash is returned to the original investors.

Theme 2:  Fear versus greed and risk rationalization psychology

#aerospace, #column, #entrepreneurship, #funding, #fundings-exits, #ma, #private-equity, #spac, #tc, #united-states, #venture-capital

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TechCrunch 6:15 pm on November 10, 2020
Tags: , , , entrepreneurship, , , , , ,   

What I wish I’d known about venture capital when I was a founder

Andy Areitio Contributor
Andy Areitio is a partner at the early-stage fund TheVentureCity, a new venture and acceleration model that helps diverse founders achieve global impact.

When you’re running your own venture — especially if it’s your first — it’s unlikely you will find the time to deep dive into how venture capital firms work. Fundraising is distracting for founders and can even hurt their company in the early days. But if you only start learning about VCs when you’re already down the fundraising path, you’ll already be too late.

Founders tend to make a series of classic mistakes when raising funding. Error number one (and two) is to raise the wrong amount of money and to do it at the wrong time. This double whammy results in founders being very diluted too early or not raising enough money to reach the next funding stage.

They can also put all their eggs in one basket too early. I made that mistake. I had signed a term-sheet (a nonbinding agreement) for a €2.5 million Series A round, passed the due diligence process, and the investment committee had approved the deal. But at the very last minute, a claim from one of the angels on my cap table made the prospect investor change his mind. In a Point Nine Capital survey, founders said that the two most stressful elements of raising venture capital are not knowing where in the fundraising process they are and not understanding why VCs have rejected their proposal.

On the other hand, if you know what VCs all about, you’ll be geared up for the ride, know the kind of investor personality you’re aiming for, and crucially — you’ll optimize the value of your equity in the long run. Founders who manage to raise more VC funds end up having a greater value stake in their company when the time comes to IPO, according to statistical research. The learning curve is steep; you’re not just studying VC as an industry, but the individual investors themselves. So, I’ve decided to share the main lessons about VC that I wish I’d known when I was a startup founder chasing venture capital.

1. It’s not about raising, it’s about raising the right amount at the right time

Startups are all about reaching two milestones: (a) product/market fit and (b) a profitable, repeatable and scalable growth model. Once those two corners are turned, the risk of a startup decreases enormously, which is normally reflected in the valuation. As an early-stage founder, if you want to protect your ownership, make sure you’re raising small amounts of money while your valuations are low.

Save your cash until you de-risk your early-stage startup. Then, raise aggressively when you finally have hard evidence that you have a strong product/market fit and a clear growth model. Be sure you understand when your company reaches that stage and becomes a scaleup. You don’t want to be a founder that has successfully raised a Series A round but has very little ownership and a very long road ahead.

Sometimes, the timing is out of your hands. The price of equity in startups is governed by the supply and demand of capital. Investors themselves have to raise money from another type of investor called Limited Partners (LPs), who may hold stakes in a variety of assets. If LPs have a strong interest in VC assets, there is more supply of capital and the price of startup equity will rise. But the opposite is also true. If you take a look at the last two recessions in the United States (2000 and 2008), you will see that the stock market crash coincided with corrections to valuations in the VC market.

So, be strategic and raise when “the market” has a strong appetite for your equity; otherwise, stretch your runway and wait for the right time. Right now, it’s common to see startups postponing their next raise to 2021, looking for stronger winds.

2. Location: Tell me where you are and I’ll tell you how much you’ll raise

I see two conditions for startups to raise a large round: (a) a large market that can justify a sizable exit, and (b) a large VC fund (small funds don’t need super sizable exits to be successful).

Assuming the first condition is met, where can we find those large VC funds? Typically, they’ll be in locations close to large markets, with a track record of sizable exits.

#column, #corporate-finance, #economy, #entrepreneurship, #europe, #private-equity, #startups, #tc, #venture-capital, #venture-debt

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TechCrunch 2:07 pm on November 10, 2020
Tags: , , , , entrepreneurship, , online tutoring, ,   

Why I left edtech and got into gaming

Darshan Somashekar Contributor
Darshan Somashekar co-founded drop.io (acquired by Facebook), Imagine Easy Solutions (acquired by Chegg) and is currently co-founder of gaming platform Solitaired and a venture partner at TMV.

Now that COVID-19 has accelerated the adoption of digital education tools, edtech has become one of the hottest areas of investment.

As someone who has been in edtech for nearly 20 years, this sounds like the precise moment to capitalize on all the newfound interest. Which is why what I’m about to say might be surprising: I’m leaving edtech for the world of gaming with my new company, Solitaired.

I first got into edtech in high school, when a friend and I founded EasyBib, a website that helped students cite sources for their papers. At the time, we were just students who felt there had to be a better way than formatting tedious citations for research papers by hand. But as we dove into the business further, we realized there was a lot to like about bibliographies and education technology in general.

For one, the education market is large. There are more than 56 million K-16 students in the U.S., and over 1.3 billion globally. Federal, state and local governments spend an aggregate of 5% of GDP on education, and that doesn’t even include what students and parents spend on content and technology.

Secondly, it’s structured. Students generally all go through the same curriculum together. That means most students have the same problem in the same way; if you solve a problem for one group of users, you’ve probably solved it for most users.

The citation problem was just like that. When we sold our company to Chegg, we were already reaching four out of five students that needed bibliographies, or over 30 million students in the U.S. Edtech companies that help students with math, chemistry, homework help, tutoring and other curricular needs can build massive audiences quickly.

Edtech that’s part of the curriculum also has high engagement. EasyBib users stayed on our site for nearly ten minutes per session, creating one citation after another for their bibliographies. For direct-to-consumer edtech companies that are ad and subscription driven, this behavior creates many monetization opportunities.

While we grew fast, our endemic market opportunity was limited. Why? The strengths of edtech can also be its downsides, especially for a startup. On the user growth front, we focused on school relationships, marketing and SEO. But once we reached four out of every five students in the U.S., there wasn’t much more room to grow.

To increase engagement even further, we tried a number of things: encouraging more citation creation, adding research and note-taking features and building a Chrome extension to be more ever-present in the user’s research journey. Those efforts fell short too. Ultimately, the school calendar dictated how often students needed to use us, and we were constrained by the number of research papers teachers assigned.

These challenges can certainly be overcome. But as a startup, we had to decide if we wanted to pursue adjacencies and expansions ourselves. Ultimately, this realization was one of the reasons we decided to sell our company to Chegg, which had a wider user base and product synergies that we couldn’t achieve on our own. As anyone who follows Chegg might know, they’ve been very successful in accelerating the edtech digital transformation.

When we began thinking about our second business, we had these lessons in the back of our mind. That’s when we discovered gaming.

#chegg, #column, #education, #education-technology, #entrepreneurship, #gaming, #online-tutoring, #startups, #tc

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TechCrunch 8:36 pm on November 9, 2020
Tags: , , , , , , entrepreneurship, female entrepreneurs, , , , , , , , , , , , The Next Women, , Venture capital investment, women in venture capital, Women Tech Founders   

Startup fundraising is the most tangible gender gap. How can we overcome it?

Ximena Aleman Contributor
Ximena Aleman is co-founder and chief business development officer at Prometeo, an open banking platform that serves Latin America.

Year-in, year-out, the gender gap in venture capital investment continues to be a problem women founders face. While the gender gap in other areas (such as the number of women entering tech in general) may be on the right path, this disparity in funding seems to be stagnant. There has been little movement in the amount of VC dollars going to women-founded companies since 2012.

In fintech, the problem is especially prominent: Women-founded fintechs have raised a meager 1% of total fintech investment in the last 10 years. This should come as no surprise, given that fintech combines two sectors traditionally dominated by men: finance and technology. Though by no means does this mean that women aren’t doing incredible work in the field and it’s only right that women founders receive their fair share of VC investment.

In the short term, women founders can take action to boost their chances at VC success in the current investment climate, including leveraging their community and support network and building the necessary self-belief to thrive. In the long term, there needs to be foundational change to level the playing field for women entrepreneurs. VC funds must look at ways they can bring in more women decision-makers, all the way up to the top.

Let’s dive into the state of gender bias in VC investing as it stands, and what founders, stakeholders and funds themselves can do to close the gap.

Venture capital is far from a level playing field

In 2019, less than 3% of all VC investment went to women-led companies, and only one-fifth of U.S. VC went to startups with at least one woman on the founder team. The average deal size for female-founded or female co-founded companies is less than half that of only male-founded startups. This is especially concerning when you consider that women make up a much bigger portion of the founder community than proportionately receive investment (around 28% of founders are women). Add in the intersection of race and ethnicity, and the figures become bleaker: Black women founders received 0.6% of the funding raised since 2009, while Latinx female founders saw only 0.4% of total investment dollars.

The statistics paint a stark picture, but it’s a disparity that I’ve faced on a personal level too. I have been faced with VC investors who ask my co-founder — in front of me — why I was doing the talking instead of him. On another occasion, a potential investor asked my co-founder who he was getting into business with, because “he needed to know who he’d be going to the bar with when the day was up.”

This demonstrates a clear expectation on the part of VC investors to have a male counterpart within the founding team of their portfolio companies, and that they often — whether subconsciously or consciously — value men’s input over that of the women on the leadership team.

So, if you’re a female founder faced with the prospect of pitching to VCs — what steps can you take to set yourself up for success?

Latin America takes the global lead in VC directed to female co-founders

Get funded, as a woman

Women founders looking to receive VC investment can take a number of steps to increase their chances in this seemingly hostile environment. My first piece of advice is to leverage your own community and support network, especially any mentors and role models you may have, to introduce you to potential investors. Contacts that know and trust your business may be willing to help — any potential VC is much more likely to pay you attention if you come as a personal recommendation.

If you feel like you’re lacking in a strong support network, you can seek out female-founder and startup groups and start to build your community. For example, The Next Women is a global network of women leaders from progress-driven companies, while Women Tech Founders is a grassroots organization on a mission to connect and support women in technology.

Confidence is key when it comes to fundraising. It’s essential to make sure your sales, pitch and negotiation skills are on point. If you feel like you need some extra training in this area, seek out workshops or mentorship opportunities to make sure you have these skills down before you pitch for funding.

When talking with top male VCs and executives, there may be moments where you feel like they’re responding to you differently because of your gender. In these moments, channeling your self-belief and inner strength is vital: The only way that they’re going to see you as a promising, credible founder is if you believe you are one too.

At the end of the day, women founders must also realize that we are the first generation of our gender playing the VC game — and there’s something exciting about that, no matter how challenging it may be. Even when faced with unconscious bias, it’s vital to remember that the process is a learning curve, and those that come after us won’t succeed if we simply hand the task over to our male co-founder(s).

More women in VC means more funding for female founders

While there are actions that women can take on an individual level, barriers cannot be overcome without change within the VC firms themselves. One of the biggest reasons why women receive less VC investment than men is that so few of them make up decision-makers in VC funds.

A study by Harvard Business Review concluded that investors often make investment decisions based on gender and ask women founders different questions than their male counterparts. There are countless stories of women not being taken seriously by male investors, and subsequently not being seen as a worthwhile investment opportunity. As a result of this disparity in VC leadership teams, women-focused funds are emerging as a way to bridge the funding gender gap. It’s also worth noting that women VCs are not only more likely to invest in women-founded companies, but also those founded by Black entrepreneurs. In addition to embracing women and minority-focused investors, the VC community as a whole should ensure they’re bringing in more women leaders into top positions.

Gender equality in VC makes more business sense

From day one, the Prometeo team has made concerted efforts to have both men and women in decision-maker roles. Having women in the founding team and in leadership positions has been crucial in not only helping to fight the unconscious bias that might take place, but also in creating a more dynamic work environment, where diversity of thought powers better business decisions.

Striving for gender equality, both within the walls of VC funds and in the founder community, is also better for businesses’ bottom line. In fact, a study by Boston Consulting Group found that women-founded startups generate 78% for every dollar invested, compared to 31% from men-founded companies.

Here in Latin America, women founders receive a higher proportion of VC investment than anywhere else in the world, so it’s no surprise that women are leading the region’s fintech revolution. Having more women in leadership positions is ultimately a better bet for business.

Closing the gender gap in VC funding is no simple task, but it’s one that must be undertaken. With the help of internal VC reform and external initiatives like community building, training opportunities and women-focused support networks, we can work toward finally making the VC game more equitable for all.

Pandemic’s impact disproportionately reduced VC funding for female founders

#articles, #co-founder, #column, #corporate-finance, #diversity, #economy, #entrepreneurship, #female-entrepreneurs, #finance, #financial-technology, #funding, #gender-equality, #harvard, #latin-america, #private-equity, #sexism, #startup-company, #startups, #tc, #the-next-women, #venture-capital, #venture-capital-investment, #women-in-venture-capital, #women-tech-founders

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