Surging homegrown talent and VC spark Italy’s tech renaissance

As Italy reinstates many COVID-19 restrictions, the country’s tech ecosystem is watching and waiting to see what the wider effects of the emergency will be. Italy’s ecosystem for tech venture capital and startups has been in development for years and has made decent strides in the last decade. Will the coronavirus stymie their efforts?

Put off by high taxes and paperwork in their home country, many Italian entrepreneurs moved to places like London in years past to startup. Indeed, the Italian Ministry of Economic Development and the Italian Trade & Investment Agency in London have even been known to fund Italian entrepreneurs abroad to help them gain more experience. There are an estimated 100,000 Italians already living in London, attracting the likes of Riccardo Zacconi, co-founder of King.com (maker of Candy Crush) and Simon Beckerman of social shopping app Depop.

Rome has more than 20 incubators/accelerators and many established VCs; because of its lower costs compared to other European cities, it’s become a major base for startups. However, while many startups exist in cities like Turin, Bologna, Naples and Rome, Milan is generally seen as a bigger ecosystem because of its mercantile culture and a significant share of VC funds.

The good news: VC funding in Italy has grown. In 2019, Italian startups attracted $850 million, compared to just €140 million in 2017, as the VC ecosystem became less insular and more international investors arrived. Milan tends to attract the lion’s share of VC funding — in 2019, startups located there received €311 million, according to NGP Capital. In 2019, about 300 deals were venture-backed.

Even so, Italy is still very much behind its European counterparts, which means founders tend to move their HQ to fundraise elsewhere, while keeping their comparatively cheaper workforce at home. Italy continues to have structural problems for startups: Credit is based on a company’s financial history, so loans are off-limits.

However, in June 2020, the Italian government sponsored a €1 billion investment program aimed at the native startup ecosystem, creating a new venture arm: CDP Venture Capital.

This has seven different funds under management, including a VC fund-of-funds, “Series A/B matching” funds and acceleration funds. It has also launched two different acceleration projects aimed at supporting SMEs and startups with mentoring, networking and support services.

Additionally, the Ministry of Economic Development launched an initiative called The Italian Startup Act that bundled previously passed legislation to incentivize the Italian ecosystem with tools like tax breaks on early-stage investments and R&D credits, plus a startup visa to attract talent.

Entrepreneurs still face plenty of red tape, however, which is tough enough for Italians, let alone outsiders who might consider relocating. And skeptical observers are concerned that some of the government-backed initiatives look like the government is trying to pick winners, which rarely ends well. Plus, there is controversy about how a €209 billion recovery fund from the European Union, earmarked for the country’s 11,000 startups, will be spent.

But the talent pool is increasing, with Italian universities attracting more overseas students with English-language-based courses and big corporates investing. Microsoft has announced a $1.5 billion investment plan, which includes its first cloud data center in the country. NTT data is investing in Calabria. Amazon has invested in new infrastructure. And Apple has sponsored a Naples-based developer academy.

With a population of 60 million (for comparison, U.K.: 66 million, Germany: 83 million, Spain: 46 million), Italy is not lacking in people, but GDP per capita is a low $34,000. It has an estimated 67 VC funds, with 18 of them started since 2015.

Notable startups from Italy include MoneyFarm (which has raised $127 million from United Ventures, Allianz), Prima.it (€100 million, Blackstone, Goldman Sachs), Soldo (€83 million, Accel, Battery Ventures), Casavo (€59 million, Greenoaks, Picus, Project A, 360 Capital), Milkman (€32 million, p101, 360 Capital Partners) and Mosaicoon (€12 million).

Approximately half of seed to Series A funds have raised $100 million+ funds in the last year. However, seed rounds for startups remain low, even for Europe, ranging from anywhere from €300,000 to €1 million.

ScaleIT is a notable tech business event for the country (which clearly took over from the fabulous TechCrunch Italy events of a million years ago).

And finally, WeWork is opening two more buildings in Milan, taking it to five locations in the city, by mid-2021. Milan-born Talent Garden, which has raised €56 million, is still bullish about co-working despite the pandemic. While this was announced before news of a vaccine emerged, it’s clear that major players are still betting on Italy’s emerging tech ecosystem.

These are the investors we interviewed:

Giulia Giovannini, partner, United Ventures

What trends are you most excited about investing in, generally?

We are sector-agnostic in our approach, and we invest both in B2B and B2C tech/digital companies from various industries. We mainly invest in SaaS companies with some proven traction in the market – but overall, we seek the best technology entrepreneurs that want to make an impact. Our focus is on entrepreneurial and technological initiatives aimed at digitalizing and increasing the productivity of traditionally undigitized sectors. Lately, we have been looking into insurtech and medtech.

What’s your latest, most exciting investment?

In October 2020, we led a $7M Series A round in Boom Image Studio, a Milan-based company on a mission to reshuffle the world of commercial photography by transforming the way digital photo content is generated. We believe that Boom will significantly accelerate the photography industry’s digital transformation, dramatically improving the photo production experience for customers and photographers.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?

The strategy of venture capital is not to capitalize on the continuity of trends already existing on the market or to focus on the hype of the moment, but rather the exercise of imagining the demands of tomorrow, intercepting products and services capable of reinventing entire sectors with a view to a future industrial policy. Startups using tech to foster remote work, education, healthcare are undoubtedly in the spotlight at the moment: the key question is which technologies and platforms can meet current priorities and remain relevant in the post-pandemic future.

What are you looking for in your next investment, in general?

There is no such thing as a “typical United Ventures company,” but there is a paradigm that all our best investments have in common: ambitious founders with strong values and who know how to inspire their team, with an entrepreneurial project focused on a large growing market and the ability to scale internationally.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?

I have seen too many startups in payment services. I think the wave has passed.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?

We are a European VC with a strong focus – approximately 50% – on the Italian ecosystem, where we are best placed to support teams in terms of value-add. We are committed to making the most of the Italian market’s peculiarities, connecting Italian entrepreneurs and talents to the global market. On a national level, we are active all around Italy, with startups headquartered in Milan, Rome, Bologna, Pisa.

Which industries in your city and region seem well-positioned to thrive, or not long-term? What are companies you are excited about (your portfolio or not), which founders?

Milan is well positioned on fintech matters, while Italy is home to many exciting initiatives very much oriented towards deep technologies thanks to research centers of excellence such as Milan and Turin Polytechnics and the IIT (Italian Institute of Technology). Concerning our portfolio, I am very excited by Credimi, a digital lending platform offering digital factoring solutions to enterprises experiencing significant growth rates, and I’m looking forward to working with Boom, our latest investment.

How should investors in other cities think about the overall investment climate and opportunities in your city?

The Italian ecosystem is still small compared to other European hubs, but it has been developing rapidly in recent years. Milan has earned a national hub’s status and reached that critical mass — of large companies, multinationals, universities with cosmopolitan vocation, new companies — capable of generating an ecosystem able to attract the best talents and connect them with other continental and global hubs.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?

I think startups will continue to gravitate around big cities’ hubs because they bring value in terms of network and contamination. However, the pandemic has allowed an acceleration in the adoption of remote work organization, enabling the search and recruitment of talents from abroad. Many of our portfolio companies opened up fully-remote roles.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?

B2C startups are certainly favored due to the increased penetration of e-commerce. On the other side, the adoption of new B2B business models may be slowed down by the modus operandi of large companies that are not at their ease signing remote commercial agreements, causing delays.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?

Our role, as Venture Capital investors, is to support our portfolio companies at our best capacity. Getting fundraising done and signing customer deals has been challenging in these months, so our advice is, first of all, to control and manage the cash carefully. We highlighted the need to communicate effectively and realistically with their employees, clients, and stakeholders. Concerning our investment strategy, we refocused on the Italian market.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?

Tech startups are facing challenges and opportunities. Our portfolio is navigating the pandemic with determination and creativity. For example, Credimi has put in place several initiatives to aid Italian SMEs to face the COVID-19 emergency. More generally, B2C startups have seen significant growth in revenues, while B2B startups have, in some cases, seen a lengthening in the average time taken to underwrite commercial contracts.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.

Having managed to close the investment in BOOM working remotely with the startup from the first meetings to the closing, I had the confirmation that our job can be easily managed through remote work.

Any other thoughts you want to share with TechCrunch readers?

Technology is driving radical change across all aspects of our life, and the uncertain times we are going through has accelerated the digital transformation in multiple ways. Our job requires a long-term outlook: now more than ever, we are confident in technological innovation’s potential to lay the groundwork for a brighter future.

Anna Tampieri, partner, ENEA Tech

What trends are you most excited about investing in, generally?

Material science and biotech.

What’s your latest, most exciting investment?

Green Bone Ortho.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?

Startups dealing with new materials.

What are you looking for in your next investment, in general?

Innovative materials and solutions coming from recycling and the circular economy.

What are companies you are excited about (your portfolio or not), which founders?

Food and beverage, biotech, automation and tourism.

How should investors in other cities think about the overall investment climate and opportunities in your city?

Before the pandemic the business climate was positive, even if it was challenging.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
No, I don’t expect that: I think that the pandemic will create a move towards “localism.”

What are the opportunities startups may be able to tap into during these unprecedented times?

Mainly biotech and company involved in developing various anti-COVID solutions.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?

Startups dealing with new solutions for personal mobility.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?

Many.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.

The moment that I contacted a newco developing an innovative cure for COVID-19 using monoclonal antibodies.

Any other thoughts you want to share with TechCrunch readers?

I would share an unpopular thought: To focus more on true innovations versus the short-term economic return.

Giuseppe Donvito, partner, P101 Ventures

#europe, #investor-surveys, #italy, #startups, #tc, #vc-surveys, #venture-capital

0

10 Zurich-area investors on Switzerland’s 2020 startup outlook

European entrepreneurs who want to launch startups could do worse than Switzerland.

In a report analyzing Europe’s general economic health, cost of doing business, business environment and labor force quality, analysts looked for highly educated populations, strong economies, healthy business environments and relatively low costs for conducting business. Switzerland ended up ranking third out of 31 European nations, according to Nimblefins. (Germany and the UK came out first and second, respectively).

According to official estimates, the number of new Swiss startups has skyrocketed by 700% since 1996. Zurich tends to take the lion’s share, as the city’s embrace of startups has jump-started development, although Geneva and Lausanne are also hotspots.

As well as traditional software engineering startups, Switzerland’s largest city boasts a startup culture that emphasizes life sciences, mechanical engineering and robotics. Compared to other European countries, Switzerland has a low regulatory burden and a well-educated, highly qualified workforce. Google’s largest R&D center outside of the United States is in Zurich.

But it’s also one of the more expensive places to start a business, due to its high cost of living, salary expectations and relatively small labor market. Native startups will need 25,000 Swiss Francs to open an LLC and 50,000 more to incorporate. While they can withdraw those funds from the business the next day, local founders must still secure decent backing to even begin the work.

This means Switzerland has gained a reputation as a place to startup — and a place to relocate, which is something quite different. It’s one reason why the region is home to many fintech businesses born elsewhere that need proximity to a large banking ecosystem, as well as the blockchain/crypto crowd, which have found a highly amenable regulatory environment in Zug, right next door to Zurich. Zurich/Zug’s “Crypto Valley” is a global blockchain hotspot and is home to, among others, the Ethereum Foundation.

Lawyers and accountants tend to err on the conservative side, leading to a low failure rate of businesses but less “moonshot innovation,” shall we say.

But in recent years, corporate docs are being drawn up in English to facilitate communication both inside Switzerland’s various language regions and foreign capital, and investment documentation is modeled after the U.S.

Ten years ago startups were unusual. Today, pitch competitions, incubators, accelerators, VCs and angel groups proliferate.

The country’s Federal Commission for Technology and Innovation (KTI) supports CTI-Startup and CTI-Invest, providing startups with investment and support. Venture Kick was launched in 2007 with the vision to double the number of spin-offs from Swiss universities and draws from a jury of more than 150 leading startup experts in Switzerland. It grants up to CHF 130,000 per company. Fundraising platforms such as Investiere have boosted the angel community support of early funding rounds.

Swiss companies, like almost all European companies, tend to raise lower early-stage rounds than U.S. ones. A CHF 1-2 million Series A or a CHF 5 million Series B investment is common. This has meant smaller exits, and thus less development for the ecosystem.

These are the investors we interviewed:

 

Jasmin Heimann, partner, Ringier Digital Ventures

What trends are you most excited about investing in, generally?
Consumer-facing startups with first revenues.

What’s your latest, most exciting investment?
AirConsole — a cloud-gaming platform where you don’t need a console and can play with all your friends and family.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
I really wish that the business case for social and ecological startups will finally be proven (kind of like Oatly showed with the Blackstone investment). I also think that femtech is a hyped category but funding as well as renown exits are still missing.

What are you looking for in your next investment, in general?
I am looking for easy, scalable solutions with a great team.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
I think the whole scooter/mobility space is super hyped but also super capital intensive so I think to compete in this market at this stage is hard. I also think that the whole edtech space is an important area of investment, but there are already quite a lot of players and it oftentimes requires cooperation with governments and schools, which makes it much more difficult to operate in. Lastly, I don’t get why people still start fitness startups as I feel like the market has reached its limits.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Switzerland makes — maximum — half of our investments. We are also interested in Germany and Austria as well as the Nordics.

Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Zurich and Lausanne are for sure the most exciting cities, just because they host great engineering universities. Berne is still lagging behind but I am hoping to see some more startups emerging from there, especially in the medtech industry.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Overall, Switzerland is a great market for a startup to be in — although small, buying power is huge! So investors should always keep this in mind when thinking about coming to Switzerland. The startup scene is pretty small and well connected, so it helps to get access through somebody already familiar with the space. Unfortunately for us, typical B2C cases are rather scarce.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
I think it is hard to make any kind of predictions. But on the one hand, I could see this happening. On the other hand, I also think that the magic of cities is that there are serendipity moments where you can find your co-founder at a random networking dinner or come across an idea for a new venture while talking to a stranger. These moments will most likely be much harder to encounter now and in the next couple of months.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
I think travel is a big question mark still. The same goes for luxury goods, as people are more worried about the economic situation they are in. On the other hand, remote work has seen a surge in investments. Also sustainability will hopefully be put back on the agenda.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Not much. I think we allocated a bit more for the existing portfolio but otherwise we continue to look at and discuss the best cases. The biggest worries are the uncertainties about [what] the future might look like and the related planning. We tell them to first and foremost secure cash flow.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Totally! Some portfolio companies have really profited from the crisis, especially our subscription-based models that offer a variety of different options to spend time at home. The challenge now is to keep up the momentum after the lockdown.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
What gives me hope is to see that people find ways to still work together — the amount of online events, office hours, etc. is incredible. I see the pandemic also as a big opportunity to make changes in the way we worked and the way things were without ever questioning them.

 

Katrin Siebenbuerger Hacki, founder, Medows

#blockchain, #coronavirus, #covid-19, #europe, #fintech, #investor-surveys, #startups, #switzerland, #tc, #vc-surveys, #venture-capital, #zurich

0

7 investors discuss augmented reality and VR startup opportunities in 2020

For all of the investors preaching that augmented reality technology will likely be the successor to the modern smartphone, today, most venture capitalists are still quite wary to back AR plays.

The reasons are plentiful, but all tend to circle around the idea that it’s too early for software and too expensive to try to take on Apple or Facebook on the hardware front.

Meanwhile, few spaces were frothier in 2016 than virtual reality, but most VCs who gambled on VR following Facebook’s Oculus acquisition failed to strike it rich. In 2020, VR did not get the shelter-in-place usage bump many had hoped for largely due to supply chain issues at Facebook, but VCs hope their new cheaper device will spell good things for the startup ecosystem.

To get a better sense of how VCs are looking at augmented reality and virtual reality in 2020, I reached out to a handful of investors who are keeping a close watch on the industry:

Some investors who are bullish on AR have opted to focus on virtual reality for now, believing that there’s a good amount of crossover between AR and VR software, and that they can make safer bets on VR startups today that will be able to take advantage of AR hardware when it’s introduced.

“Besides Pokémon Go I don’t think we have seen the engagement numbers needed for AR,” Boost VC investor Brayton Williams tells TechCrunch. “We believe VR is still the largest long-term opportunity of the two. AR complements the real world, VR creates endless new worlds.”

Most of the investors I got in contact with were still fairly active in the AR/VR world, but many still disagreed whether the time was right for VR startups. For Jacob Mullins of Shasta Ventures, “It’s still early, but it’s no longer too early.” While Gigi Levy-Weiss of NFX says that the market is “sadly not happening yet,” Facebook’s Quest headsets have shown promise.

On the hardware side, the ghost of Magic Leap’s formerly hyped glory still looms large. Few investors are interested in making a hardware play in the AR/VR world, noting that startups don’t have the resources to compete with Facebook or Microsoft on a large-scale rollout. “Hardware is so capital intensive and this entire industry is dependent on the big players continuing to invest in hardware innovation,” General Catalyst’s Niko Bonatsos tells us.

Even those that are still bullish on startups making hardware plays for more niche audiences acknowledge that life had gotten harder for ambitious founders in these spaces, “the spectacular flare-outs do make it harder for companies to raise large amounts with long product release horizons,” investor Tipatat Chennavasin notes.

Responses have been edited for length and clarity.


Niko Bonatsos, General Catalyst

What are your general impressions on the health of the AR/VR market today?

We’re seeing some progress in VR and some of that is happening because of the Oculus ecosystem. They continue to improve the hardware and have a growing catalog of content. I think their onboarding and consumption experience is very consumer-friendly and that’s going to continue to help with adoption. On the consumer side, we’re seeing some companies across gaming, fitness and productivity that are earning and retaining their audiences at a respectable rate. That wasn’t happening even a year ago so it may be partially a COVID lift but habits are forming. 

The VR bets of several years ago have largely struggled to pan out, if you were to make a startup investment in this space today what would you need to see? 

Companies to watch are the ones that are creating cool experiences with mobile as the first entry point. Wave VR, Rec Room, VRChat are making it really easy for consumers to get a taste of VR with devices they already own. They’re not treating VR as just another gaming peripheral but as a way to create very cool, often celebrity-driven, content. These are the kinds of innovations that makes me optimistic about the VR category in general.

Most investors I chat with seem to be long-term bullish on AR, but are reticent to invest in an explicitly AR-focused startup today. What do you want to see before you make a play here?

In both AR/VR, a founder needs to be both super ambitious but patient. They’ll need to be flexible in thinking and open to pivoting a few times along the way. Product-market fit is always important but I want to see that they have a plan for customer retention. Fun to try is great, habit-forming is much better. Gaming continues to do pretty well as a category for VC dollars but it’d be interesting to see more founders look at making IRL sports experiences more immersive or figuring out how to enhance remote meeting experiences with VR to fix Zoom fatigue.

There have been a few spectacular flare-outs when it comes to AR/VR hardware investments, is there still a startup opportunity in AR/VR hardware?

Hardware is so capital intensive and this entire industry is dependent on the big players continuing to invest in hardware innovation. Facebook and Microsoft seem to be the main companies willing to spend here while others have backed away. If we expand our thinking for a minute, maybe the first real mainstream breakthrough AR/VR consumer experience isn’t visual. For VR, it might be the mobile experiences. For AR maybe AirPods or AirPod-like devices are the right entry point for consumers. They’re in millions of people’s ears already and who doesn’t want their own special-agent-like earpiece? That’s where founders might find some opportunity.

Tipatat Chennavasin, The Venture Reality Fund

#apple, #ar, #augmented-reality, #brianne-kimmel, #digital-media, #instagram, #investor-surveys, #jacob-mullins, #magic-leap, #niko-bonatsos, #oculus-rift, #quest, #snap, #startups, #tc, #venture-capital, #virtual-reality, #vr

0

As investors and founders mature, Vienna emerges as a European startup hub

According to Austrian Startup Monitor, entrepreneurs have founded more than 2,200 startups in Austria since 2008, with the number of tech companies growing 12% per year since then, significantly faster than the 3% growth rate for traditional companies.

Home to roughly 50% of Austria’s startups, Vienna has a plethora of VC, corporate and university investors. Top VCs include 3TS Capital Partners, AC & Friends, Cudos Capital, FSP Ventures, Hansmen Group, i4g Investment, i5invest, LilO Ventures, next.march, primeCROWD, Speedinvest and Venionaire Capital, among others.

The local ecosystem benefits from several initiatives, including the Social Impact Awards, Vienna Startup Awards, Design Week, Climate KIC Stage, Innovation Incubation Center and INiTS Accelerator. The well-run Pioneers Festival contributed massively to the ecosystem for several years after a certain TechCrunch editor-at-large gave the organizers an excuse to expand on a simple TechCrunch meetup. But the festival was shuttered last year after its sale to a local accelerator meant that the event itself ran out of steam. Perhaps it was just as well, given this year’s pandemic.

State support for startups is also there. The Austrian government created a comprehensive startup program in 2016 to make the country more attractive to startups setting up there.

Standout exits include fitness app maker Runtastic, acquired by Adidas for $240 million in 2015, as well as listings marketplace Shpock, which was acquired by Norwegian publishing conglomerate Schibsted in 2015. Other notable startups originally from Vienna include mySugr, wikifolio, kompany and Codeship.

There have been jitters on the way, however. The Austrian Private Equity and Venture Capital Organization’s 2019 report found that Austria’s startups saw €237.6 million invested in 2018, but, this number fell 8.2% to €218 million in 2019; the number of deals exceeding €500,000 also dipped by 8.7%. Foreign funding also slowed in 2019 after a few years of a bull run — between 40% and 63% of deals sized €0.25-€1.99 million were significantly funded by foreign investors in 2018.

Despite the decline, local investors have started to pick up the slack, boosting the number of funding rounds over €5 million to 12 deals in 2019 from 11 in 2018. In both years, all but one of those deals drew a substantial part of the funding round from foreign investors.

We expect more to emerge from Vienna’s tech scene in the future. The Pioneers Festival (RIP) proved that Vienna is a fascinating bridge between Western European capital and entrepreneurial culture, and East European entrepreneurs and talent, which it will no doubt continue to benefit from in years to come. But — just as will happen with Lisbon this year and the loss of Web Summit — the loss of a major conference in Vienna to shine a light on the city and ecosystem, combined with the pandemic, may have cooling effects for the next couple of years.


Notable Vienna startups:

  • Newsadoo: Uses artificial intelligence to personalize news.
  • Cashpresso: Links customers, merchants and banks to offer consumer financing options.
  • Jobrocker: An online job search portal that connects applicants’ CVs with job openings.
  • Storyblok: A headless content management system.
  • Byrd: First-mile shipping service that allows customers to ship items hassle-free.
  • Music Traveler: A marketplace that centralizes spaces with musical instruments and equipment.
  • PAYUCA: Provides flexible access to parking spaces in private office and residential buildings.
  • Refurbed: Fast-growing marketplace for refurbished electronics, across the German-speaking world.
  • Presono: A web platform for creating, managing and showing presentations in companies.
  • Blockpit: Develops software for portfolio tracking, tax calculation and compliance reporting of transactions for cryptocurrencies and crypto assets.
  • Robo Wunderkind: A robot for kids to build and program.
  • Medicus: Converts health data with their cryptic numbers and medical language into an easy-to-understand visual experience.
  • Cybershoes: VR accessory that allows you to walk through your favorite VR games.

Here’s who we interviewed:

Eva Arh, principal, Capital 300

What trends are you most excited about investing in, generally?
B2B software, robotics, no/low-code automation, AI-enabled vertical solutions, e-health, companies enabling others to hire and engage talent remotely.

What’s your latest, most exciting investment?
Lokalise.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Companies that enable others to manage and automate billing even further (e.g., per API call), next-gen video conferencing, solutions guiding women through menopause, providing solutions that help companies to offer mental health services to distributed teams, bringing cloud kitchens to the next level (not running central kitchens).

What are you looking for in your next investment, in general?
As always, ambitious, smart, hard-working teams eager to build a category leader in a huge market.

What other types of products/services are you wary or concerned about?
Concerned about solutions that leverage behavioral data to influence people for the sake of optimizing profit, overload of sales and marketing tech, overload of chatbot providers. [It is] hard to compete with players that have benefited from huge network effects such as food delivery.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
We focus on German-speaking areas and Central Eastern Europe. Opportunistically we would also invest outside of the region, still in Europe.

Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Austria — no specific industry focus within software. However, well-positioned in the biotech space, CEE — given the strong presence of IT outsourcing companies, the region is well-positioned to build solutions in the business-process automation, dev tool space. Storyblok (our portfolio). Others to watch: Anyline, Adverity, Bitpanda, PlanRadar, Refurbed.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Regarding Vienna — we are seeing the first generation of entrepreneurs building global companies. Their and their team experience will be at utmost value creating a new wave of tech companies that compete on a global level.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
Yes, we already see this — exciting companies coming out of small cities in Poland, Germany, etc. and companies going remote.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
Telemedicine, online education has been accelerated. We see a shift that otherwise would have taken years, especially in the relatively conservative German-speaking area. As mentioned previously, mental health solutions, hiring and employing remotely are some of the opportunities highlighted by COVID-19. Companies that are heavily exposed are those that have been serving the long tail of companies, small merchants, and local businesses that were closed down or experienced much less traffic in past months and hence are extremely sensitive around their cost base, discontinuing services that are not 110% essential.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
We have always been very selective and focused, partnering up three to four times a year. We continue at the same pace. The companies that perform well despite COVID-19 are still in a strong position for attracting external capital. Of course, we help our portfolio to secure a runway and have a discussion how/whether the situation has impacted their offering/GTM. Some companies have to rethink their value proposition, some rethink their target groups either to make up for slower sales cycles or on the other hand to leverage and benefit from the current situation.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Yes, we see that Lokalise is growing heavily with the current customer base as their customers expand to new markets, likely to make up for slower revenue growth in their existing markets. We see that Nethone (fraud prevention) is able to double down on e-commerce. Online fraud and online transactions are skyrocketing as people spend much more time online. (On the other hand, their airline customers of course show a different trajectory.)

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
It is inspiring to see how founders go through the current situation, act instead of reacting, especially in those countries where there is less government support incentives in place. Personally, I am also happy to see that people use the work from home time to rethink and introduce healthier habits.

Any other thoughts you want to share with TechCrunch readers?
As the world has gone online and the location matters much less, there is an opportunity to distribute the created value and wealth more evenly — be it a company founded in a “non-tech-hub” location or be it talent hired remotely.

#austria, #europe, #germany, #investor-surveys, #oliver-holle, #speedinvest, #tc, #uniqa-ventures, #vc-survey, #vc-surveys, #venture-capital

0

Extra Crunch Friday roundup: Edtech funding surges, Poland VC survey, inside Shift’s SPAC plan, more

I live in San Francisco, but I work an East Coast schedule to get a jump on the news day. So I’d already been at my desk for a couple of hours on Wednesday morning when I looked up and saw this:

As unsettling as it was to see the natural environment so transformed, I still got my work done. This is not to boast: I have a desk job and a working air filter. (People who make deliveries in the toxic air or are homeschooling their children while working from home during a global pandemic, however, impress the hell out of me.)

Not coincidentally, two of the Extra Crunch stories that ran since our Tuesday newsletter tie directly into what’s going on outside my window:

As this guest post predicted, a suboptimal attempt I made to track a delayed package using interactive voice response (IVR) indeed poisoned my customer experience, and;

Sheltering in place to avoid the novel coronavirus — and wildfire smoke — is fueling growth in the video-game industry, perhaps one factor in Unity Software Inc.’s plan to go public ahead of competitor Epic Games. In a two-part series, we looked at how the company has expanded beyond games and shared a detailed financial breakdown.

We covered a lot of ground this week, so scroll down or visit the recently redesigned Extra Crunch home page. If you’d like to receive this roundup via email each Tuesday and Friday, please click here.

Thanks very much for reading Extra Crunch; I hope you have a relaxing and safe weekend.

Walter Thompson
Senior Editor
@yourprotagonist


Bear and bull cases for Unity’s IPO

In a two-part series that ran on TechCrunch and Extra Crunch, former media columnist Eric Peckham returned to share his analysis of Unity Software Inc.’s S-1 filing.

Part one is a deep dive that explains how the company has grown beyond gaming to develop multiple revenue streams and where it’s headed.

For part two on Extra Crunch, he studied the company’s numbers to offer some context for its approximately $11 billion valuation.


10 Poland-based investors discuss trends, opportunities and the road ahead

The Palace of Culture and Science is standing reminder of communism in Warsaw, Masovian Voivodeship, Poland.

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

As we’ve covered previously, the COVID-19 pandemic is making the world a lot smaller.

Investors who focus on their own backyards still have an advantage, but the ability to set up a quick coffee meeting with a promising investor is no longer one of them.

Even though some VCs are cutting first checks after Zoom calls, regional investors’ personal networks are still a trump card. Tourists will always rely on guide books, however, which is why we continue to survey investors around the world.

A Dealroom report issued this summer determined that 97 VC funds backed more than 1,600 funding rounds in Poland last year. With over 2,400 early- and late-stage startups and 400,000 engineers in the country, it’s easy to see why foreign investors are taking notice.

Editor-at-large Mike Butcher reached out to several investors who focus on Warsaw and Poland in general to learn more about the startups fueling their interest across fintech, gaming, security and other sectors:

  • Bryony Cooper, managing partner, Arkley Brinc VC
  • Anna Wnuk-Błażejczyk, investor relations manager, Experior.vc
  • Rafał Roszak, investment director, YouNick Mint
  • Michal Mroczkowski, partner, Market One Capital
  • Marcus Erken, partner, Sunfish Partners
  • Borys Musielak, partner, SMOK Ventures
  • Mathias Åsberg, partner, Nextgrid
  • Kuba Dudek, SpeedUp Venture Capital Group
  • Marcin Laczynski, partner, Next Road Ventures
  • Michał Rokosz, partner, Inovo Venture Partners

We’ll run the conclusion of his survey next Tuesday.


Brands that hyper-personalize will win the next decade

Customer Relationship Management and Leader Concepts on Whiteboard

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

Even for fledgling startups, creating a robust customer service channel — or at least one that doesn’t annoy people — is a reliable way to keep users in the sales funnel.

Using AI and automation is fine, but now that consumers have grown used to asking phones and smart speakers to predict the weather and read recipe instructions, their expectations are higher than ever.

If you’re trying to figure out what people want from hyper-personalized customer experiences and how you can operationalize AI to give them what they’re after, start here.


VCs pour funding into edtech startups as COVID-19 shakes up the market

For today’s edition of The Exchange, Natasha Mascarenhas joined Alex Wilhelm to examine how the pandemic-fueled surge of interest in edtech is manifesting on the funding front.

The numbers suggest that funding will far surpass the sector’s high-water mark set in 2018, so the duo studied the numbers through August 31, which included a number of mega-rounds that exceeded $100 million.

“Now the challenge for the sector will be keeping its growth alive in 2021, showing investors that their 2020 bets were not merely wagers made during a single, overheated year,” they conclude.


How to respond to a data breach

Digital Binary Code on Red Background. Cybercrime Concept

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

The odds are low that someone’s going to enter my home and steal my belongings. I still lock my door when I leave the house, however, and my valuables are insured. I’m an optimist, not a fool.

Similarly: Is your startup’s cybersecurity strategy based on optimism, or do you have an actual response plan in case of a data breach?

Security reporter Zack Whittaker has seen some shambolic reactions to security lapses, which is why he turned in a post-mortem about a corporation that got it right.

“Once in a while, a company’s response almost makes up for the daily deluge of hypocrisy, obfuscation and downright lies,” says Zack.


Shift’s George Arison shares 6 tips for taking your company public via a SPAC

Number 6 By Railroad Tracks During Sunset

Image Credits: Eric Burger/EyeEm (opens in a new window) / Getty Images

There’s a lot of buzz about special purpose acquisition companies these days.

Used-car marketplace Shift announced its SPAC in June 2020, and is on track to complete the process in the next few months, so co-founder/co-CEO George Arison wrote an Extra Crunch guest post to share what he has learned.

Step one: “If you go the SPAC route, you’ll need to become an expert at financial engineering.”


Dear Sophie: What is a J-1 visa and how can we use it?

Image Credits: Sophie Alcorn

Dear Sophie:

I am a software engineer and have been looking at job postings in the U.S. I’ve heard from my friends about J-1 Visa Training or J-1 Research.

What is a J-1 status? What are the requirements to qualify? Do I need to find a U.S. employer willing to sponsor me before I apply for one? Can I get a visa? How long could I stay?

— Determined in Delhi


As direct listing looms, Palantir insiders are accelerating stock sales

While we count down to the September 23 premiere of NYSE: PLTR, Danny Crichton looked at the “robust secondary market” that has allowed some investors to acquire shares early.

“Given the number of people involved and the number of shares bought and sold over the past 18 months, we can get some insight regarding how insiders perceive Palantir’s value,” he writes.


Use ‘productive paranoia’ to build cybersecurity culture at your startup

Vector illustration of padlocks and keys in a repeating pattern against a blue background.

Image Credits: JakeOlimb / Getty Images

Zack Whittaker interviewed Bugcrowd CTO, founder and chairman Casey Ellis about the best practices he recommends for creating a startup culture that takes security seriously.

“It’s an everyone problem,” said Ellis, who encouraged founders to promote the notion of “productive paranoia.”

Now that the threat envelope includes everyone from marketing to engineering, employees need to “internalize the fact that bad stuff can and does happen if you do it wrong,” Ellis said.

#education, #europe, #extra-crunch, #immigration-law, #investor-surveys, #palantir, #policy, #saas, #security, #spacs, #startups, #tc, #unity, #venture-capital

0

Despite COVID-19, 5 Chicago VCs say region is poised for success

Chicago has a long history of creating industry-leading companies and it doesn’t seem COVID-19 is slowing down the city. TechCrunch surveyed Chicago venture capitalists who remain optimistic despite the current crisis. COVID-19 could be good for Chicago, they told TechCrunch throughout their survey responses.

It’s clear from the responses below investors in Chicago are interested in startups in and out of the city. As explained in the responses, the partners and associates are happy to invest in worthwhile companies no matter where the company is located. That said, they see Chicago as a fantastic place to experience big city life with a much lower cost of living than what’s available in NYC, San Francisco or Seattle.

Here’s who we surveyed:

  • Guy Turner, partner, Hyde Park Venture Partners
  • Constance Freedman, founder and managing partner, Moderne Ventures
  • Katie McClain, partner, Energize Ventures
  • Bess Goodfellow, principal, Hyde Park Angels
  • Rachel Stillman, associate, 7WireVentures

VCs are optimistic that COVID-19 will result in a win for Chicago

Guy Turner sees a possible outcome where Chicago and other cities in the region benefit from the COVID-19 fallout. He said, “In this sense, COVID could reaccelerate Chicago and other midcontinent cities’ startup communities with more availability of talent and cheaper operating costs. Might COVID result in tech flight to ex-urban or suburban communities around the midcontinent, or otherwise in third- and fourth-tier cities around the country?” He later notes this warning: “Related to the 2020 COVID recession, I would expect the availability of local capital for seed and post-seed stage financing to reduce somewhat.”

Constance Freedman of Moderne Ventures notes on COVID-19: “I think Chicago is poised to come out well. The city is affordable to begin with … like 50% more affordable than the West or East Coast hubs … Chicago has long been known for banking, real estate, health care and insurance. I think these sectors and others are poised to do well. The largest opportunity for us (and any major city) is how to close the education gap, which leads to closing the income gap and from there — the sky is the limit!”

Rachel Stillman of 7WireVentures is optimistic, too, in part saying, “We believe that Chicago will remain a technology hub and may actually stand to benefit from the shift to more remote work. As talent recruitment becomes democratized through location-agnostic roles, many of the functions that have been characterized by scarce talent pools (e.g., engineering, data science, product) will benefit from national recruitment capabilities. Additionally, strong candidates that prefer to remain in the Midwest were historically pushed to move to the coasts for career advancement.

Chicago VCs to continue regional and national focus

Nearly all the investors surveyed stressed their firms focus is not on just Chicago, but startups nationwide. None expect COVID-19 to change that mission.

Katie McClain of Energize Ventures said, “We expect to maintain a balance of investing in companies across geographies that are not limited to Silicon Valley. With many more firms going remote and relocating to areas outside of the West Coast since the start of the pandemic, we see a big opportunity for non-Bay Area companies to emerge. We’re excited about what that could mean for cities like Chicago and the Midwest in general.”

Guy Turner sees a similar outcome, noting, “We expect to maintain the same geographic focus after COVID, however, we are likely to be more open to teams and companies with a remote or partially remote working structure. In the past, we mostly avoided ‘virtual’ teams, but the last six months have proven at scale that companies can be innovative and productive with a largely remote culture.”


Guy Turner, partner at Hyde Park Venture Partners

How much is local investing a focus for you now? If you are investing remotely in general now, are you filtering for local founders?

We are geographically focused on the “midcontinent” — in which we include the Midwest, Toronto and Atlanta. We are indeed investing remotely right now, but are maintaining our geographic lens so that we sustain a focused sourcing, talent and co-investing network post-COVID. Early-stage investing is a very personal and network-driven business, so we want to be near and accessible to find and work with the best founders. Focusing on specific geographies has allowed us to do this and will again after COVID. Chicago represents about 40% of our activity historically and will likely continue to.

Long term, do you expect to be more or less locally focused?

We expect to maintain the same geographic focus after COVID, however, we are likely to be more open to teams and companies with a remote or partially remote working structure. In the past, we mostly avoided “virtual” teams, but the last six months have proven at scale that companies can be innovative and productive with a largely remote culture. Most “virtual” companies still have an HQ with several key leaders, and we seek companies that call a city in our geography HQ. The best way we’ve found to filter for the center of mass of a remote or virtually run company is to ask the question, “Where do you hold your holiday party or off-sites?” This usually coincides with the city where one or more founders live.

What do you expect to happen to the startup climate in Chicago longer term, with the shift to more remote work, possibly from more remote areas. Will it stay a tech hub? (Will there be tech hubs? What is a tech hub now?)

We remain optimistic that the decade of progress in Chicago’s march toward “tech hub” status will not be interrupted by COVID. Indeed, it was the higher unemployment and dropping rents of the financial crisis that helped spark the growth of the Chicago startup community, in what is otherwise a fairly traditional and conservative business community. One of the first companies we invested in paid $12/square foot/month in the Chicago Merchandise Mart in 2012. Depending how you count, that space reached $40 to $60/square foot in the 2019 peak.

In this sense, COVID could reaccelerate Chicago and other midcontinent cities’ startup communities with more availability of talent and cheaper operating costs. Might COVID result in tech flight to ex-urban or suburban communities around the midcontinent, or otherwise in third- and fourth-tier cities around the country? The new virtual work trend may enable more of that at the margin, but it’s hard to see it taking off at scale. In the long run, startups will still have to fly to sell their products or have employees fly in for HQ events post-COVID. That means most startups will want to have some center near a top 10 or top 20 airport. Young people (founders, tech talent, etc.) still want to date, experience nightlife and have fun with lots of other young people — i.e., city life.

Are there particular industry sectors that you expect to do uniquely well or poorly, locally?

Chicago has always been a logistics hub and is now becoming a logistics tech hub with companies like FourKites, Shipbob and Forager. COVID highlighted the fragility and importance of our food supply chains, making the role and potential of these companies increasingly visible. This will be good for Chicago and the broader Midwest.

In the short term, what challenges are facing Chicago’s startup scene?

Related to the 2020 COVID recession, I would expect the availability of local capital for seed and post-seed stage financing to reduce somewhat. While we were fortunate to raise our third fund late last year, some of our peer funds were still raising or planning to raise their next fund. A few are likely to come out smaller or to be significantly delayed in their next raise given the effects of COVID on most venture portfolios’ valuations and exit horizons. This means seed and post-seed rounds will probably be harder for local startups to raise for a few years. On the other hand, angel activity remains very strong given the rebound of public markets, and coastal funds continue to show strong interest and deployment in Series A and later in Chicago.

Likewise — as in every other geography — COVID has significantly slowed down the growth of most startups while aiding a small few. Chicago is no exception, though there are some restaurant tech startups (Tock, Chowly, etc.) and logistics startups (FourKites, Shipbob, Forager) that have come out on top. This is my mental model for what the startup opportunity set looks like during COVID versus normal times — but just as true anywhere else as here:

Image Credits: Guy Turner

Less related to COVID, Chicago has always been strong in sales talent but weaker on product and product-led growth talent. This is improving with each successive generation of successful startup outcomes like Grubhub, Cleversafe, Braintree, GoHealth, etc. But it’s a long journey.

Who are some founders (who you’ve invested in or otherwise) that are leaders in the community?

  • Garry Cooper at Rheaply: Series A stage and has been very involved in social justice efforts locally.
  • Amanda Lannert at Jellyvision: late stage and very active angel.
  • Mike Evans at Fixer: co-founder of Grubhub and now runs a startup B-corp.

A lot of Bay Area founders and developers are looking to relocate. Why Chicago or even the Midwest?

The answer is pretty simple. The cost of living in Chicago — in particular housing — is about half or less that of the Bay Area/SF and NYC. If you go to a Minneapolis, Indianapolis or Cincinnati, you’re talking a quarter or a third. If you are starting a startup or a career in tech, that is a massively different paradigm under which to build a nest egg. You just can’t in most major coastal cities. Chicago is also a beautiful place with all the benefits of a top three U.S. city — culture, arts, career opportunities, education, accepting culture, etc.

Constance Freedman, founder and managing partner at Moderne Ventures

I think as a society we do not quite know how COVID is going to impact us all long term but what is becoming clear is that we are going to need to all figure out how to live with COVID for the foreseeable future, which could be many more months or, more likely, years.

What does that mean for the startup scene in Chicago? First, what does it mean for cities broadly? There will be a repositioning of sorts as workplaces everywhere evaluate what “work from home means” and where, when and how we go back to the office.

We are social people and we need social interaction so there will be a return of some kind — how and when is unclear.

Where do people want to live? Data is showing us that migration to the suburbs and second home markets are up — all those millennials who would never buy a home and move to the suburbs are buying homes and moving to the suburbs (or moving back in with their parents as the case may be); moves into the expensive first-tier cities are down. People who say, “Why am I living in a 300 square foot apartment with four roommates in NYC [or SF or insert equally crazy expensive city here] when I can’t even enjoy the city I am in?” are asking the right question. COVID has provided an opportunity for those who are still employed to reassess their quality of life and make changes.

I think this has big impact on the most expensive cities in the world and less impact on the secondary and tertiary markets. Short term, there is not much change but long term, as the Silicon Valley startups expand work-from-home, headquarters may also move.

World-class startups still need world-class feeders, so I don’t expect expansion to reach all that far, but perhaps density or proximity to work becomes less important for those who work there. This may give more cities a change to rise, including Chicago.

So what does this mean for Chicago startup ecosystem? I think Chicago is poised to come out well. The city is affordable to begin with … like 50% more affordable than the West or East Coast hubs. If I live in Chicago I can afford space, I can enjoy my city and I have good transportation if I want to bail out of the city and move to the suburbs. Chicago has a strong ecosystem of universities and capital that can sustain it and may become more appealing to those (tech people and investors) who moved out to go to the coasts in the first place and now realize they don’t need to be there. As people migrate to live where they really want to live, with the lifestyle they want to have, near family they want to be with, they begin to look for more local opportunities and that may bring some great talent back to Chicago and other markets outside of the coasts.

Chicago has long been known for banking, real estate, health care and insurance. I think these sectors and others are poised to do well. The largest opportunity for us (and any major city) is how to close the education gap, which leads to closing the income gap and from there — the sky is the limit!

Katie McClain, partner at Energize Ventures

How much is local investing a focus for you now? If you are investing remotely in general now, are you filtering for local founders?

When we look at investments, we focus on diversifying our portfolio — and that includes diversity across geographies. While we don’t necessarily have a filter for local founders, we are intentional about making sure about half of our investments are in companies outside of the Bay Area. Our portfolio includes startups based in Chicago, Austin, Boston, New Jersey and Switzerland, just to name a few. For us, it’s important to be closer to the customer – and we love it when we can find them close to our hometown. We’ve actually just recently invested in a Chicago-based company that we’re very excited to announce soon, so stay tuned!

Long term, do you expect to be more or less locally focused?

We expect to maintain a balance of investing in companies across geographies that are not limited to Silicon Valley. With many more firms going remote and relocating to areas outside of the West Coast since the start of the pandemic, we see a big opportunity for non-Bay Area companies to emerge. We’re excited about what that could mean for cities like Chicago and the Midwest in general.

From that, what do you expect to happen to the startup climate in Chicago longer term, with the shift to more remote work, possibly from more remote areas. Will it stay a tech hub? (Will there be tech hubs? What is a tech hub now?)

We believe the shift away from traditional tech hubs like New York, Boston and San Francisco presents a great opportunity for Chicago as people are discovering they can be efficient, innovative and collaborative in other pockets of the world. This could play out positively for our city in a number of ways, from creating jobs to enabling new opportunities for investors to back Chicago-based companies. It’s important to note that we believe certain sectors with centers of gravity in Chicago — like energy, industrials and manufacturing – are here to stay. However, how far that reach might extend beyond the Loop and into the broader ecosystem is still a work in progress.

Are there particular industry sectors that you expect to do uniquely well or poorly, locally?

There are several industries that have a particularly strong presence in Chicago — namely finance, renewable energy, manufacturing and industry (it’s no coincidence that Energize plays in a bit of each of these arenas!). On the finance side, I think it is easier for that sector to transition to a more remote, distributed environment. For more asset-based industries like energy, manufacturing and commodities, we see this as more of a challenge. However, the highly distributed nature of our new world is accelerating adoption of digital technologies in these sectors, and this is what we’re most excited about!

For example, a company like Beekeeper, which provides a digital communication and collaboration tool for frontline workers, presents a compelling value proposition for energy and industrial businesses in Chicago that have had to entirely alter on-the-ground operations due to COVID-19. Another example of this is a drone software provider: DroneDeploy has seen five times as many flights among its energy customers this year given the spike in demand for remote services. There is a strong presence of “essential” industries in Chicago that we believe are here to stay, but how they operate will be different — and that is where technologies like these can play an important role in shaping the future of work and driving innovation.

In the short term, what challenges are facing Chicago’s startup scene?

Not having as strong of a reputation for its startup scene as cities on the coasts, Chicago can sometimes be overlooked by big-name investors who tend to stay local. In addition, now that many coastal VCs are retrenching, early-stage Chicago companies that would typically rely on them will need to find other sources of capital to fill the gap. That said, it’s more important than ever to raise awareness about rich and diverse startup ecosystem we’ve developed here.

Who are some founders (who you’ve invested in or otherwise) that are leaders in the community?

We haven’t invested of any of these founders, but if you would like intros we could possibly arrange: Jennifer Holmgren (LanzaTech), Matt Silver (Forager), Michael Polsky, the leading local energy entrepreneur who founded Invenergy (our anchor investor) and chairs Energize’s investment committee.

A lot of Bay Area founders and developers are looking to relocate. Why Chicago?

Chicago offers access to a high-quality, diverse pool of corporates and potential customers, particularly in industries like energy, critical infrastructure and manufacturing that are beginning to adopt emerging technologies at an accelerated pace. You also can’t beat those Midwestern values — stereotypes aside, we’re proud to be among neighbors who bring a grounded, get-it-done mentality! We believe Chicago is the perfect nexus of talent, grit and opportunity upheld by a committed community of investors and operators.

Any other thoughts you want to share with TechCrunch readers?

Energize is very bullish about the digital transformation we see happening right now. Companies in established industries are adopting technologies faster than ever before, and that’s not constrained to the West Coast. The core of our thesis is “accelerating digital innovation in energy and heavy industry,” and we’re seeing that play out across the globe. Innovation at scale is happening right here in Chicago, and we’re excited to be a part of that ecosystem. Lastly: If you’re building a company that provides software or business model innovation to help propel this exciting transformation, we’d love to hear from you!

Bess Goodfellow, principle at Hyde Park Angels

How much is local investing a focus for you now? If you are investing remotely in general now, are you filtering for local founders?

HPA focuses on the Midwest, so the pandemic hasn’t altered that focus; however, we certainly have engaged remotely with entrepreneurs more than before. We’ve completed 13 new deals this year already. Three deals were announced the past few weeks (Chowbus, Cohesion and Dispatch) and another new deal will be announced next week.

Long term, do you expect to be more or less locally focused?

The same.

What do you expect to happen to the startup climate in Chicago longer term, with the shift to more remote work, possibly from more remote areas. Will it stay a tech hub?

Absolutely. The macro trends are favoring many of the tech companies helping to accelerate growth, which is essential for the health of the tech community. We are optimistic that the companies that are hitting headwinds will be supported by those growing rapidly. Thankfully, we are seeing that already in our portfolio.

Are there particular industry sectors that you expect to do uniquely well or poorly, locally?

Digital health, direct-to-consumer and e-commerce are doing really well in Chicago.

Any other thoughts you want to share with TechCrunch readers?

We’ve seen recent success with Sprout Social and GoHealth going public. Other Chicago-affiliated companies like Tempus, Livongo and FourKites are emerging as clear industry leaders in their respective categories. We expect to see more of our portfolio and those throughout Chicago continue to do what hardworking Chicagoans do, and fight through this pandemic to emerge even stronger!

Rachel Stillman, associate at 7WireVentures

How much is local investing a focus for you now? If you are investing remotely in general now, are you filtering for local founders?

We have been and remain supporters of the Chicago community and continuously advise and meet with entrepreneurs in this ecosystem. With that said, we continue to have a national geographic focus as we are interested in growing great founders and teams first and foremost.

Long term, do you expect to be more or less locally focused?

Our focus long term with regard to local investments will remain the same, and we will continue to be actively engaged and supportive of the Chicago early-stage health care and technology ecosystem. We acknowledge that travel restrictions and adherence to social distancing guidelines may inhibit our ability to conduct onsite visits with founders outside of our local market, but we will continue to be creative about conducting remote diligence of management teams.

From that, what do you expect to happen to the startup climate in Chicago longer term, with the shift to more remote work, possibly from more remote areas. Will it stay a tech hub? (Will there be tech hubs? What is a tech hub now?)

We believe that Chicago will remain a technology hub and may actually stand to benefit from the shift to more remote work. As talent recruitment becomes democratized through location-agnostic roles, many of the functions that have been characterized by scarce talent pools (e.g., engineering, data science, product) will benefit from national recruitment capabilities. Additionally, strong candidates that prefer to remain in the Midwest were historically pushed to move to the coasts for career advancement. Decentralized (and remote) work will now allow for more investment in Chicago talent, both in recruitment efforts and capital investments. Chicago will continue to have strong universities and innovation ecosystem drivers — 1871, Matter Health, the Polsky Center for Entrepreneurship — that will produce and attract exciting technology companies. Entrepreneurs will still seek a sense of community and a place to ideate and engage with like-minded creators, and Chicago will continue to fulfill that need within the technology ecosystem.

Are there particular industry sectors that you expect to do uniquely well or poorly, locally?

We have seen a rise in the quantity and growth of companies across digital health and health care IT. Exits and liquidity events of successful digital health companies such as Livongo will drive a new wave and generation of technology founders equipped with capital and domain expertise. Ecosystem aggregators and incubators such as Matter Health will continue to support early growth from ideation to creation of healthcare solutions. Therefore, we remain bullish on the local healthcare ecosystem and believe it has yet to reach its full potential.

In the short term, what challenges are facing Chicago’s startup scene?

Historically, Chicago has received a lower amount of venture capital dollars relative to competing major metropolitan cities. With less initial funding, founders in Chicago may focus more on pragmatically growing companies with financially sound strategies (versus the “growth at all cost” mentality of the coasts). Additionally, less capital makes it harder to recruit talent in some cases, as companies located in coastal cities may have the financial resources to offer very attractive packages, particularly to technologists, who then will leave the Chicago market. Given the workforce changes driven by COVID-19, we have started to see a shift in companies’ willingness to recruit from remotely located talent pools. Companies located in coastal markets with deeper capital pools will be able to afford to pay a higher premium for quality talent in Chicago, enabling these top talent recruits to remain in the city. Over the past two years, Chicago has attracted an increased amount of venture dollars and incited the development of new venture firms and additional funds, with venture capital deployed to Chicago companies exceeding $2 billion in 2019. With Chicago reported to be one of the strongest cities for venture capital returns, we believe that firms seeking opportunities to maximize ROI will continue to invest in Chicago and further fuel the growth we’ve observed in the city.

Who are some founders (who you’ve invested in or otherwise) that are leaders in the community?

There are several prominent founders across the Chicago startup community; we have highlighted two across our portfolio but note that these alone certainly do not capture the full market of founders across this highly impressive ecosystem.

Across 7wireVentures investments, Stephen Smith, founder and CEO of NOCD, is a leader we are incredibly proud to have within our portfolio. Faced with the challenges of receiving appropriate obsessive compulsive disorder (“OCD”) treatment himself, Stephen was inspired to found NOCD, a specialty telehealth platform that identifies and manages people with OCD by delivering personalized therapy. In addition to servicing people with NOCD, the company has scaled to create high-profile local jobs in the Chicago market and the Midwest.

Additionally, we are incredibly proud of two of our co-founders, Dave Jacobs and David Greenberg, who built and scaled Homethrive alongside our team through the 7wireVentures hatch model. Homethrive is a tech-enabled platform supporting aging-in place by providing seniors and their caregivers personalized insight, advice and validated resources for key nonclinical services. The company has created over 40+ jobs in Chicago and supported hundreds of family caregivers across Chicago, the Midwest, and the country. The “Dave’s” (as they are referred to at 7wire) have been pivotal in the ideation, development and successful growth of the company.

I would also be remiss not to mention my long-time business partner, Glen Tullman, executive chairman and founder of Livongo. Despite the success we have had over the years exiting multiple companies, Glen and I both have committed to remain in Chicago, a city and technology ecosystem we both believe in. Glen has committed his career to improving the safety, empathy and efficiency of the U.S. health care system. His vision and efforts to bring together health and technology were pivotal in scaling Livongo to what is now a $13 billion+ company and as a result, created hundreds of jobs across the Chicago health care and technology ecosystem.

A lot of Bay Area founders and developers are looking to relocate. Why Chicago?

While other major cities may offer a concentrated hub of technology experts, Chicago uniquely embodies the culture of strong “Midwestern work ethics.” The city attracts and grows talent pools influenced by Midwestern values and humility, with an unwavering willingness to work thoughtfully. As a result, the Chicago technology community is tightknit but still welcoming to outsiders, and deeply values collaboration and shared ideation. For founders and developers looking to relocate, Chicago offers a community of bright-minded individuals at a cost of living discount relative to its large metropolitan city companions.

In addition to the strong culture, Chicago offers a unique talent pool characterized by a combination of corporate-bred individuals bringing institutional knowledge, and a growing pipeline of employees raised in startups. Illinois is home to 66 of the Fortune 500 companies (the number four state in the U.S.), while a new wave of successful Chicago-based technology companies have complemented the candidate pool with technology talent from the likes of Salesforce, Groupon, Livongo, Grubhub and Braintree.

Finally, founders located in Chicago stand to benefit from the proximity and local access to their target customers, many of which are not residing in the coastal cities but here in the Midwest. In the early stages of building a company, it is fundamental to intimately understand and know the problems of your customer. There is no better strategy to learn and share the values of your target clients than to live among them in the Midwest.

#chicago, #coronavirus, #covid-19, #d2c, #ecommerce, #investor-surveys, #manufacturing, #startups, #tc, #telehealth, #venture-capital

0

Six Toronto VCs discuss COVID-19 and the post-pandemic era

As North America’s fourth-largest city, Toronto is one of the world’s top startup ecosystems.

After spawning companies like Eventbrite and Crowdmark, Ontario’s capital has attracted international talent that complements its homegrown population of entrepreneurs and technical talent.

Six investors we surveyed who work and live in the area said they believe Toronto will continue to thrive after the COVID-19 storm passes. Some of them focus exclusively on the region, while others invest elsewhere as well. As they explained, the city has a lot going for it: It’s diverse, has access to locally trained engineering and business workers, and the area has already fostered many companies that are doing very well.

Investors expect Toronto to remain a fintech hub

Fintech is one of the city’s top industries, and the investors in this survey expect this to continue. Stephanie Choo, head of investments at Portag3 Ventures, said “fintech continues to see massive tailwinds from the fallout from COVID-19 as incumbents struggle to fully digitize their offerings.”

Ameet Shah of Golden Ventures listed fintech as one of Toronto’s key industries. Eva Lau of Two Small Fish Ventures agreed, adding that “blockchain has also been doing well because many blockchain-related technologies or companies were started in Toronto.”

Other investors point to fintech business leaders in Toronto like CEOs Mike Katchen of Wealthsimple, Daniel Eberhard of Koho, Andrew D’Souza and Michele Romanow of Clearbanc and Kirk Simpson of Wave Financial.

Diversity is one of Toronto’s strengths

Nearly all of the surveyed investors cited diversity as a key reason to live and work in Toronto. Probal Lala, chairman of Maple Leaf Angels, says, “Beyond having a vibrant technology ecosystem, Toronto has one of the most diverse communities in North America and is not only a great place to find the intellectual horsepower and funding to build a great global startup, but also the mosaic of social communities that makes it a great place to live and raise a family.”

Choo said the United States’ current battles over immigration could benefit Canada. “Small, nimble teams that need to move fast may still choose to co-locate in person — and many will still want access to amenities that only a large, vibrant and diverse city like Toronto can offer.”

She also pointed to Toronto’s claim of being one of the most diverse cities in the world. “[This] not only makes the city interesting but also very welcoming for those who relocate from elsewhere; a strong startup and tech scene, and, lastly, a vibrant cultural and food scene, especially through the lens of cost-of-living compared to comparable major cities.”

Shopify’s executives are key players in Toronto’s ecosystem

Several VCs listed Shopify executives as local leaders, while others acknowledged the growing unicorn’s impact. Ameet Shah of Golden Ventures says, “Toronto has traditionally been strong in fintech, B2B SaaS, crypto and AI. The explosion of Shopify should also benefit companies focused on e-commerce and supply chain solutions.”

Adam McNamara and Ameet Shah, when asked about local business leaders, both listed Satish Kanwar. Kanwar is GM and VP of Product at Shopify after the company purchased Jet Cooper, a startup co-founded by Kanwar. McNamara also points to Farhan Thawar, Shopify’s VP of Engineering, as a local leader.

Who we spoke to:

  • Probal Lala, chairman, Maple Leaf Angels Capital Corporation
  • Stephanie Choo, head of investments, Portag3 Ventures
  • Adam McNamara, founding partner, Ramen VC
  • Ameet Shah, partner, Golden Ventures
  • Matt Golden, founder and managing partner, mGolden Ventures
  • Eva Lau, founding partner, Two Small Fish Ventures

Probal Lala, Maple Leaf Angels Capital Corporation

How much is local investing even a focus for you now? If you are investing remotely in general now, are you filtering for local founders?

Prior to COVID-19 hitting, a requirement for the majority of my investments was a face-to-face visit with the founding team. For the most part, this meant founders spending time in Toronto. As we primarily invest in seed and pre-seed, this usually meant local founders.

When the pandemic hit, we shifted our process to primarily Zoom meetings (including due diligence) and as a result the mix of founding teams has expanded beyond our typical catchment area (two-hour drive from the city) to a broader base. Investment cycles appear to have slowed a bit due to the remote approach but our reach to founding teams has expanded to a broader base of geographically distributed founding teams (Mostly Canadian although we have recently seen a number of international opportunities).

#advertising-tech, #artificial-intelligence, #coronavirus, #covid-19, #cryptocurrency, #ecommerce, #extra-crunch, #fintech, #investor-surveys, #remote-work, #saas, #shopify, #startups, #tc, #toronto, #venture-capital

0

9 Berlin-based VCs discuss how COVID-19 has changed the landscape

A breeding ground for European entrepreneurs, Berlin has a knack for producing a lot of new startups: the city attracts top international, diverse talent, and it is packed with investors, events and accelerators. Also important: it’s a more affordable place to live and work when compared to many other cities in the region.

Berlin ranked 10th place in the 2019 Global Ecosystem Report, trailing behind only two other European cities: London and Paris. It’s home to unicorns such as N26, Zalando, HelloFresh and pioneers of the scene such as SoundCloud.

Top VCs include Earlybird, Point Nine, Project A, Rocket Internet, Holtzbrinck Ventures, and accelerators such as Axel Springer Plug and Play Accelerator, hub:raum and The Family.

To get a sense of how the novel coronavirus has changed the landscape, we asked nine investors to give us an insight into their thinking during these pivotal times:

Jorge Fonturbel, Target Global

Which trends are you most excited about investing in, generally? 
Mobility, logistics, automotive, industry automation, supply chain.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
70% Europe and Israel, 30% rest of world.

Luis Shemtov, Lunar Ventures

Which trends are you most excited about investing in, generally? 
We invest in the overlap of deep tech and software. in 2020 we’re focused on low data machine learning, private computation, shift to MLops, edge cloud, dev tools consumerization expanding into other software fields.

What’s your latest, most exciting investment? 
Latest is Neurolabs.eu — developing a platform for computer vision synthetic data.

What are you looking for in your next investment, in general?
Pre-seed/seed global minded technical founders.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
We’re Europe-wide, less than half in Berlin.

How should investors in other cities think about the overall investment climate and opportunities in your city? 
Berlin is rapidly evolving from its consumer/rocket past into a global hub for diversified software technology.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
At pre-seed stages, there are still major advantages to hubs by A stage and Silicon Valley by B stage, which remote work cannot solve.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times? 
None. We invest in hard software. Some go-to-market strategies slowed down, but we’re not seeing correlation so far.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
So far most of the portfolio startups have accelerated. The biggest worry is investor behavior in line with the LP fundraising environment uncertainty for seed/Series A.

Mike Lobanov, Target Global

#berlin, #coronavirus, #covid-19, #entrepreneurship, #europe, #extra-crunch, #finance, #fintech, #food, #food-delivery, #gaming, #health, #investor-surveys, #private-equity, #startups, #tc, #venture-capital

0

6 VCs on the future of Michigan’s startup ecosystem

The Michigan startup scene is growing and venture capitalists see several key areas of opportunities. What follows is a survey of some of the top VCs in the state and how they see COVID-19 affecting the growth of Detroit, Ann Arbor and all of Michigan’s startup ecosystem. According to the Michigan Venture Capital Association (MVCA), there are 144 venture-backed startup companies in Michigan, which is an increase of 12% over the last five years.

The amount of capital available in the state hit a four-year high in 2019 after shrinking from record levels in 2015. The MVCA says the total amount of VC funds under management in Michigan is $4.3 billion. Out of that, 71% of the capital has been invested into companies and the MVCA states its members estimate an additional $1.2 billion of venture capital is needed to “adequately fund the growth of Michigan’s 144 startup companies in the next two years.”

As the VCs say below, life sciences is a large part of the Michigan ecosystem, attracting 38% of all investments made in the state. Information technology comes in second, receiving 34% of the total capital invested, with 85% going to those focused on software. Mobility, often thought as Michigan’s mainstay, only received 7% of the capital in 2019. Here’s who we spoke to:

  • Chris Stallman, partner, Fontinalis Partners
  • Patricia Glaza, EVP and managing director, ID Ventures
  • Chris Rizik, CEO and fund manager, Renaissance Venture Capital
  • Tim Streit, partner, Grand Ventures
  • Turner Novak, general partner, Gelt VC

VCs remain bullish on Michigan’s life science startups

Michigan has long been a hub for life science startups and the venture capitalists polled expect that to continue. Chris Stallman of Fontinalis Partners points to Michigan’s long-standing reputation in this field and expects this to continue.

Tim Streit of Grand Ventures agrees and sees the pandemic as accelerating the sector’s growth. In recent weeks he says his firm has seen a “number of promising digital therapeutics deals based in or near Michigan … and the timing couldn’t be more perfect for these kinds of companies to succeed.”

Chris Rizik of Renaissance Venture Capital notes that drug development will continue to drive growth around the country and is a strength of the Michigan ecosystem. He also points to Jeff Williams, CEO of NeuMoDx, as a leader in the life science community and who has led a number of Michigan’s most successful startups.

The notable exception to this are startups directly serving hospitals, according to Patricia Glaza of ID Ventures. She sees this as a challenging market in the era of COVID-19, saying “Hospitals are bleeding cash without elective surgeries and hard to prioritize nonessential technologies.”

Ann Arbor is becoming a hub for security companies

Duo Security’s impressive exit to Cisco in 2018 is still resonating in the scene. As such, many venture capitalists are seeing Ann Arbor becoming a home for security startups.

Stallman of Fontinalis states, “I think the cybersecurity realm will be a bright spot as some of those spillover effects from the 2018 acquisition of Duo Security by Cisco take hold (this is still in its early days — employees will reach the end of their employment agreements and will start new companies, etc.).” Rizik of Renaissance Venture Capital said something similar: “The success of Duo Security highlighted Michigan’s growing reputation as a cybersecurity hub. The University of Michigan has always been strong in this area, and we now see a number of interesting startups in this field popping up around Ann Arbor.”

When asked about leaders in the Michigan startup scene, nearly all of the VCs listed Duo Security founders Dug Song and Jon Oberheide as key players. Perhaps Rizik said it best: “Dug Song is a great leader, who not only created a monster success for the region with Duo Security, but also has devoted much of his time to strategically working to help Michigan move forward as a responsible, startup-friendly community.”

Michigan is well-suited to benefit from remote work

Of course Michigan-based venture capitalists would be bullish on their own state, but nearly all of the VCs share the same reasons on why Michigan is a good place. They list low cost of living, amazing STEM-focused schools and a community of founders, VCs and business leaders eager to help each other.

Few VCs mention mobility as a bright spot for Michigan startups

Surprisingly, few of the VCs in the survey mention mobility or automotive as a highlight of the Michigan startup scene, which runs counter to the national narrative. Stallman sums up the situation this way: “The mobility space will see both headwinds and tailwinds. Companies vying for automotive customers may find that the industry’s challenges have resulted in a shorter ‘priority list’ for many automakers and suppliers; on the other side, companies helping to remove enterprise risk through innovation in supply chain, automation, workforce efficiency, etc. will have arguably more opportunity going forward.”

Chris Stallman, partner, Fontinalis Partners

How much is local investing a focus for you now? If you are investing remotely in general now, are you filtering for local founders?

We have always been a thematically focused investor rather than a geographically focused investor; prior to COVID-19, we had invested 99% of our capital outside of Michigan. With that said, we’d love to invest more in Michigan and support more local founders.

What do you expect to happen to the startup climate in Detroit/Ann Arbor/Michigan longer term, with the shift to more remote work, possibly from more remote areas. Will it stay a tech hub?

Southeast Michigan has always been a story of two different startup worlds: health/life sciences and hardware/software tech. On the life sciences side, this region has a long-standing reputation of innovation and university research, and I expect that to remain largely the same going forward. It would seem to me that life sciences companies may not have as easy of a time adapting to new remote-work environments since much of the innovation work remains lab/clinic/facility-based.

For the world of other technology, I think there will certainly be more embracing of remote work and distributed teams — this area has always had some degree of that since it’s not uncommon to see companies with another office elsewhere or a few remote employees that come from very specific backgrounds that are hard to recruit for locally. Since this area has always had some of that, I could see a case that this new paradigm will be an easier adjustment for this region. However, the flip side of that is that so much of tech innovation and developing an ecosystem is about density and serendipitous collisions — for an area that was still on the come-up, losing what ground had been gained in recent years will no doubt make the spillover benefits of this aspect harder to come by. I worry a bit that angel and seed activity will slow locally (and hopefully that the growth in seed funds nationally will offset that).

Are there particular industry sectors that you expect to do uniquely well or poorly, locally?

I think a larger theme that is arising out of this COVID-19 situation is that people have a heightened sense of health, safety and security. Life sciences will remain resilient so long as there’s funding for continued research, and I think the cybersecurity realm will be a bright spot as some of those spillover effects from the 2018 acquisition of Duo Security by Cisco take hold (this is still in its early days — employees will reach the end of their employment agreements and will start new companies, etc.).

The mobility space will see both headwinds and tailwinds. Companies vying for automotive customers may find that the industry’s challenges have resulted in a shorter “priority list” for many automakers and suppliers; on the other side, companies helping to remove enterprise risk through innovation in supply chain, automation, workforce efficiency, etc. will have arguably more opportunity going forward.

In the short term, what challenges are facing Michigan’s startup scene?

Detroit has not yet hit a full critical mass from a startup ecosystem standpoint, and that is most evident in the more limited amount of angel and seed capital available to companies here; and, to a lesser extent, a more shallow pool of mentors and advisors for founders than what you would find in SF, LA, NYC, Boston, etc.

Who are some founders (who you’ve invested in or otherwise) that are leaders in the community?

Here are some of the prominent ones (note that we have invested in any): Dug Song and Jon Oberheide (Duo Security), Mina Sooch (has founded and led several prominent biotech companies), Amanda Lewan (Bamboo Detroit), Kyle Hoff (Floyd), Josh Luber and Greg Schwartz (StockX).

A lot of Bay Area founders and developers are looking to relocate. Why Michigan?

Quality research institutions, access to talent locally and ability to pull from Toronto/Ohio/etc., significant industry (automotive, logistics, manufacturing and financial services) in its footprint, supportive state programs for startups, cost of living, international airport with easy access (when the world moves again, that is), etc.

Patricia Glaza, EVP and managing director, ID Ventures

#detroit, #extra-crunch, #fontinalis-partners, #gelt-vc, #grand-ventures, #investor-surveys, #michigan, #startups, #tc, #turner-novak, #venture-capital

0

Six leading investors assess the remote-work startup landscape

The COVID-19 pandemic has shaken up the startup world, slowing some high-growth unicorns and promoting others onto the coveted list. In the earlier-stages of startup land, the same patterns of acceleration and braking can be found.

TechCrunch wanted to dig more deeply into the cohort of startups that are seeing acceleration, so we put together a list of investors who have put money to work in startups building remote-work tooling and sent them a raft of questions. We wanted to better understand if SaaS fatigue is real for the startups in question, where open-space still exists in the remote-work world and how the economics of the companies compare to other software shops.

And, yes, we did ask about valuations and intra-venture competition for the rounds that we keep hearing about. 

Not every deal from these venture capitalists fits the remote-work mold, but they and their firms and funds are involved with enough in our view to give them good perspective about what’s going on in the space as the world continues to get into shape regarding remote work. This week’s news from Google makes it plain that tech companies are prepping for a long run of forced remote work, let alone the more hybrid remote-and-office future that seems to be the new conventional expectation.

A lasting COVID-driven remote-work boom is predicated on remote-work services not only meeting the moment, but iterating to support a world that just got pushed into a faster digital transformation than anyone expected. It’s a busy space for good reason.

Here’s who TechCrunch collected notes from this time around:

As usual, we’re going to riff over some key trends and themes that stood out from the group’s collected answers, after which we’ll share their answers at length, edited for clarity and formatting.

Trends, themes

Picking through the answers we received, one thing that stood out was the simple fact that VCs do not believe that the remote-work services and tooling world is solved. In fact, the group was not shy of suggesting areas where there’s still more work to be done.

As you might expect, the issue of security came up a few times. Processes are being digitized across workplace verticals but there’s plenty of room for improvement in bringing security and compliance standards into the remote-work age.

“All the security [and] compliance while being remote is still largely untapped as companies are figuring out the answer,” said Techstars’ Cazalot, to pick one quote from a few.

Other items that popped up include front-of-office collaboration and personal remote process automation. Once basic communications are sorted, the sorts of tools and services that folks-at-a-distance need to work well both alone and and as a team will be varied.

It would be simple to presume that a growing library of apps and services would lead to software (SaaS) fatigue, but our VC group isn’t too worried about the concept.

Then there was the talk concerning economics and fundraising. TechCrunch wanted to know if remote-work startups have better or worse economics than other startups that are delivered along similar channels (SaaS, etc.). Our summary of answers it that their economics are at least as good, with some exceptions that their performance could in fact be better than other groupings of their business-model peers.

Regardless, the wave of companies hunting up new apps and services to fuel and empower their suddenly remote workforce is driving venture interest in the companies welcoming the demand. But notable is that prices, per our collected investors, are not as wild as you might think. Bessemer’s Robinson said prices were not low (“growth equity investors are paying high multiples to get a shot at the category defining [remote work-focused] app companies”), but most others offered some more tempered notes.

Reading their answers, it appears that the further an investor is from the Silicon Valley startup hub, the more reasonable prices look; that was likely true before the pandemic, mind, but that the pattern is holding up during COVID-19 implies that there is available price arbitrage available in the market that persists even into this hot niche.

That’s our first read, but there’s a lot more below.

Minn Kim, investor, Bloomberg Beta

It’s now common knowledge that the digital transformation has been accelerated by COVID-19. What portion of your active portfolio benefits from this change in pace?

Given our firm’s focus on the future of work, we’ve observed that a little over half of our portfolio companies have benefited from the digital transformation accelerated by COVID-19. These have been in areas like digital productivity, security, developer collaboration tools, network infrastructure and online education. This is also because several of our portfolio companies were built with a remote workforce in mind, including coaching platform Sounding Board and team success software Range.  

Will the influx of single-purpose remote-work apps and services lead to app fatigue, and thus a return of more bundled solutions?

For those of us fortunate enough to do most of our work online, the rise of single-purpose remote-work apps reflects the limitations of the tools that we relied on in our previous “work stack.” If there is new bundling, I believe we may see it on platforms we’re newly relying on heavily, such as those offering great ways to run online sprints, remote offsites, and collaborative screen sharing.  

Is there an upper limit to the number of tools that a single company may want to buy? Put another way, is SaaS fatigue real?

An upper limit for tool purchasing is more likely indication that a product is not yet hitting on the most important priority for its customer at the right time or price. SaaS fatigue is real until a solution comes along that addresses the user’s pain point in a clear, compelling and differentiated way. 

As companies begin to go back to the office, do you think they are going to trend back toward their old processes and ditch some of their new remote software?

For knowledge work, I believe some behaviors will naturally default back to old processes, such as in-person water cooler conversations in a shared common space. Even when companies begin to go back to the office, I imagine some people on our teams will continue to be remote, at least for awhile. With this in mind, I foresee an ongoing reliance on tools like Pinpoint, for helping software engineers collaborate more efficiently, and Bonusly, for ongoing encouragement and recognition to team members (in-person and remote).

Are there areas inside of the world of remote tools and services that you think are under-served, places where you’d like to place a bet?

I’d love to see more founders building solutions around lightweight automations (“personal RPA”), software for better decision-making and products that use digital nudges to make unstructured collaboration more effective, such as gesture recognition or sentiment notifications in video conversations. There are also many opportunities to build useful products that use the metadata in our online interactions to help us become more effective teammates. For example, we’re investors in a company called Cultivate that analyzes a team’s digital conversations to help leaders improve and get notified when they’re sending too many emails during evening hours or sharing recognition unevenly across a team. 

Does the availability of ample private capital give remote-tooling startups the flexibility to put off going up-market to the mid-market and enterprise areas?

It’s less about the flexibility of delaying moving up-market. It’s more about the freedom to experiment, iterate and get a product closer to product-market-fit with its earliest representative customer segment. 

Do remote-tooling-focused startups have similar, better or worse economics than the average venture-backed SaaS startup?

This answer will vary depending on what you’re comparing. Because many of the newer remote-tooling-focused companies offer freemium business models to encourage new users, the sustainability of a company comes down to the cost to serve each new customer. We’ve seen that remote-tooling-focused startups that are laser-focused on a specific use case and narrow the pool of potential early customers are often in a better position to understand their unit economics. 

How competitive are remote-work tooling venture rounds now? Are prices out of control?

It feels like the right time to build and raise for a Zoom competitor was at the beginning of 2020. Now, we’re seeing competitive rounds for companies building on top of Zoom or around workflow-specific features, such as event and community management or meeting analytics. That said, prices at the pre-seed and seed stages haven’t changed dramatically since pre-Covid-19. 

Elliott Robinson, growth equity partner, Bessemer

#alexa-von-tobel, #clement-cazalot, #eamonn-carey, #elliott-robinson, #extra-crunch, #fundings-exits, #future-of-work, #investor-surveys, #minn-kim, #remote-work, #ryan-kuder, #security, #startups, #tc

0

Operator Collective brings diversity and inclusion to enterprise investing

When Mallun Yen started Operator Collective last year, she wanted to build an investment firm for people who didn’t have a voice in Silicon Valley. That meant connecting women and people of color with operators who have been intimately involved in building companies from the ground up, then providing early-stage investment.

She then brought in Leyla Seka as a partner. Seka helped build the AppExchange at Salesforce into a powerful marketplace for companies built on top of the Salesforce platform, or that plugged into the platform in some meaningful way to sell their offerings directly to Salesforce customers. Through that role, she met a lot of people in the startup world, and she saw a lot of inequities.

Yen, whose background includes eight years as a VP at Cisco, and co-founder of Saastr with Jason Lemkin, wanted to build a different kind of firm, one that connected these operators — women like herself and Seka, who had walked the walk of running substantial businesses — with people who didn’t typically get heard in the corridors of VC firms.

Those operators themselves tend to be underrepresented at investment shops. The firm today consists of 130 operator LPs, 90% of whom are women and 40% people of color (which includes Asians). One way that the company can do this is by removing rigid buy-in requirements. LPs can contribute as little as $10,000, all the way up to millions of dollars, depending on their means, and that makes for a much more diverse pool of LPs.

While Seka admits they are far from perfect, she says they are fighting the good fight. So far, the company has invested in 18 startups with a more diverse set of founders and executives than you find at most firms that invest in enterprise startups. That means that 67% of their investments include people of color (which breaks down to 44% Asian, 17% Latinx and 6% Black), 56% include a female founder, 56% have an immigrant founder and 33% have a female CEO.

I sat down with Yen and Seka to discuss their thinking about enterprise investing. While they have a far more inclusive philosophy than most, their general approach to enterprise investing isn’t all that different than what we’ve seen in previous surveys with enterprise investors.

Which trends are you most excited about in the enterprise from an investing perspective?

#diversity, #diversity-and-inclusion, #enterprise, #enterprise-investing, #extra-crunch, #investor-surveys, #leyla-seka, #mallun-yen, #operator-collective, #techcrunch-include, #venture-capital

0

VCs are cutting checks remotely, but deal volume could be slowing

When COVID-19 began to shutter the United States economy, startups jumped into cost-cutting mode as expectations rose that venture capital was about to get a heck of a lot harder to raise. After all, prior downturns in the broader economy, and tech sector in particular, had taken a bite out of the ability for startups to attract new funds.

PitchBook research shows that, in the wake of the 2008 financial crisis, the amount of money venture capitalists invested fell, with early-stage deal and dollar volume enduring the largest cuts. Late-stage valuations during the same period came under steep pressure. The connection between a slipping economy and a rapidly deteriorating venture capital market, therefore, seems strong.


The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, and now you can receive it in your inbox. Sign up for The Exchange newsletter, which drops every Friday starting July 24.


The historically-grounded feeling from startups in Q2, as the stock market sold off and unemployment rose, was one of concern: VCs were about to cut their deal pace, and the number of dollars that they were willing to put into each deal would likely fall as well. Throw in the fact that investors would need to shake up their process and do deals remotely, was not confidence inspiring.

We don’t have full Q2 VC numbers yet, so it’s too soon to say that Q2 was worse, or better than expectations. But what we can say, thanks to a new survey from OMERS Ventures, is that VCs moved with reasonable speed to get over the technology and cultural hurdle of remote-dealmaking to keep the checks flowing. Indeed, according to OMERS Ventures’ research, 69% of the VCs it surveyed in June were willing to do fully-remote deals; for startups worried that the venture class was simply going to pack up its checkbook and take an extended vacation, it’s good news.

But the news isn’t all rosy — most VC firms from the 150 in North America and Europe that the venture group surveyed have yet to actually execute a remote deal. And, there’s some indication that overall deal volume could be slowing, perhaps due to “dwindling supply of companies formally going to market,” according to OMERS Ventures’ Damien Steel, a managing partner.

This morning let’s examine which VCs have been the most active, and the least, to find out which types of firms are still investing, and where investors are seeing more deal flow, and less.

Remote deals, fewer deals

Most VCs have decided that remote dealmaking is, at minimum, something that they need to become accustomed to. Only 4% of surveyed VCs said that they would not do remote deals, full-stop. Another 23% said that they were find with remote deals, albeit with some ability to meet entrepreneurs in person.

#coronavirus, #covid-19, #damien-steel, #extra-crunch, #fundings-exits, #investor-surveys, #market-analysis, #omers-ventures, #remote-work, #startups, #tc, #the-exchange

0

14 VCs discuss COVID-19 and London’s future as a tech hub

The UK has created 63 tech unicorns in the past decade (according to Dealroom), and it almost goes without saying that the vast majority of those companies were based out of London, the country’s largest tech hub.

Famously, London’s DeepMind, an AI startup, was acquired by Google in 2014 for $500 million, but it has resolutely refused to move to Silicon Valley; founder Demis Hassabis says the city’s diversity of talent meant the powerhouse needed to stay put.

London has produced fintech upstarts like Revolut, Monzo and Starling and attracted early Skype team members who went on to create TransferWise. In 2019, London’s startups received $9.7 billion in venture capital funding, more than Berlin, Paris, Amsterdam and Madrid combined.

Furthermore, last year Pitchbook found that up to $4.4 billion worth of deals had involved at least one U.S.-based investor, with London receiving over $12.5 billion from American investors in the previous five years – almost twice as much as Berlin (on $6.5 billion of investment from U.S. VC firms).

Brexit uncertainty may impact startups’ ability to recruit and sale, and the UK government’s points-based system for immigration is unlikely to satisfy the industry’s voracious appetite for talent. But London is a tech supertanker that other European cities are unlikely to be able to match any time soon, Brexit or no Brexit.

But in the era of COVID-19, will major hubs like London still be able to attract future tech unicorns, and will these be in the same sectors as before? Will geography be replaced by mere time zones?

We surveyed many of London’s top VCs to get their insights. Here’s who we heard from:

  • Ruth Foxe-Blader, partner, Anthemis Capital
  • Yana Abramova, partner, Pretiosum Capital
  • Leila Zegna, co-founding partner, Kindred Capital
  • Rob Moffat, partner, Balderton Capital
  • Nic Brisbourne, managing partner, Forward Partners
  • Sean Seton-Rogers, general partner, PROfounders Capital
  • Simon Murdoch, managing partner, Episode 1 Ventures
  • Nenad Marovac, founder and managing partner, DN Capital
  • Andrei Brasoveanu, partner, Accel Partners
  • Jan Lynn-Matern, founder and partner, Emerge Education
  • Rob Kniaz, founding partner, Hoxton Ventures
  • Harry Briggs, partner, OMERS Ventures
  • Hussein Kanji, partner, Hoxton Ventures
  • Eileen Burbidge, partner, Passion Capital

Ruth Foxe-Blader, Anthemis Capital

How much is local investing even a focus for you now? If you are investing remotely in general now, are you filtering for local founders?

Neither our investment thesis, nor our geographic focus has changed: we are a global investor, focused on the US, UK and Europe. We are filtering, even more, for the best founders, as geography feels less important in lockdown.

From that, what do you expect to happen to the startup climate in London longer term, with the shift to more remote work (post COVID-19), possibly from more remote areas. Will London stay a tech hub or will the ecosystem become more dispersed across the country?

As a global financial hub with substantial infrastructure (including capital) designed to support emerging technology, London will remain a critical node in the fintech ecosystem.

Long-term, do you expect to be more or less locally focused, especially in light of COVID-19 or in other ways?

We’re anticipating a pretty substantial change to working norms, at least over the near term (6-12 months). The long-term impact is likely to level the playing field for great founders operating outside of established tech hubs. Remote assessment of companies, while challenging, has the potential to create more equitable investment practices.

From that, what do you expect to happen to the startup climate in London longer term, with the shift to more remote work (post COVID-19), possibly from more remote areas. Will London stay a tech hub or will the ecosystem become more dispersed across the country?

As a global financial hub with substantial infrastructure (including capital) designed to support emerging technology, London will remain a critical node in the fintech ecosystem.

Will there be tech hubs post-COVID-19? What is a tech hub now, by your definition?

To the extent that culture, regulation and capital play a large role in favoring certain types of economic activity, I expect existing tech hubs to remain important bastions of innovation. That said, I think we will see the rise of complementary tech hubs, as well as teams “in the middle of nowhere” emboldened to start great companies.

Are there particular industry sectors that you expect to do uniquely well or poorly, locally?

Given the proximity to the City and the heritage in financial technology innovation, the London tech ecosystem will continue to produce great fintech and insurtech companies.

#coronavirus, #covid-19, #europe, #extra-crunch, #investor-survey, #investor-surveys, #london, #remote-work, #startups, #tc

0

8 Black investors discuss the intersection of race, tech and funding

Since the killing of George Floyd at the hands of four police officers heightened awareness about racial justice, the experiences of Black people in tech — and the industry’s lack of racial diversity — are getting new attention.

In the tech ecosystem at large, the industry is still predominantly white and male, and venture capital is no different. Just 3% of investment partners are Black, according to a 2018 survey from by the National Venture Capital Association and Deloitte. Meanwhile, more than 80% of VC firms don’t have a single Black investor and just 1% of venture-backed startups have a Black founder, according to BLCK VC.

“Venture capital certainly plays a role,” GV Principal Terri Burns told TechCrunch about the overall lack of diversity in tech. “VC is a tool that can enable businesses to scale greatly and quickly, and historically, this tool hasn’t been equally distributed. For example, VC has traditionally focused on founders from a small number of institutions and pedigrees that are not particularly diverse (in 2016 we learned from Richard Kerby, general partner at Equal Ventures, that 40% of VCs went to either Harvard or Stanford). With more equal distribution of funds across backgrounds, underrepresented people will have a greater chance at success.”

Burns shared the above and more as part of our survey of a handful of Black VCs in tech. Burns, and others, described what they’re looking for in their next investment, identified overlooked opportunities that are ripe for innovation and offered advice for founders navigating COVID-19 amid this racial justice uprising.

“Both COVID-19 and the racial justice uprising have had really profound impacts on our society and the tech ecosystem,” Precursor Ventures Managing Partner Charles Hudson told TechCrunch. “For me, the main takeaway from COVID-19 is that planning in an uncertain environment is extremely stressful for founders. Advice that made sense in March and April might not apply in May and June. We went from a world where it felt like we might shelter-in-place through the fall to an attempted reopening of the economy. I think the racial justice uprising is a different thing. It’s bigger than technology, it’s about our society coming to grips with some really important, structural issues.

“While I think everyone is really struggling with the impacts of COVID-19, I think employees and founders of color are being particularly impacted by the racial justice issue and it is weighing heavily on the minds and hearts of many who are trying to process what’s happening while also trying to be productive and engaged at work. I think it’s important to be aware of that and do what you can to support folks who are struggling under the weight of this.”

Below, we’ve gathered insights from:

Arlan Hamilton, managing partner, Backstage Capital

Image Credits: Photo by Kimberly White/Getty Images for TechCrunch)

What are the industries you’re most interested in right now?

I am into things that promote sustainability, that are clever. I like the senior care industry, but also pushing that a little further into senior activity and thriving entrepreneurship, et cetera. And media. I think media has a really interesting, exciting opportunity right now because of the way representation is so important, has always been, but it’s even more now. I’m seeing more and more interesting and unique media options rather than the status quo.

What are you looking for in your next investment?

I’m looking for people who can break down barriers within their industries, who can offer something exciting, and new, and innovative to their end user, and someone who is daring, and risk-taking, and not afraid to go against the grain. That’s really the main thing I’m looking for.

What are some overlooked opportunities that are ripe for innovation?

Again, I think senior care is something a lot of people are thinking about, thankfully. At the same time, we don’t spend a lot of time thinking about what value seniors can bring to the ecosystem, to even tech. I think you have millions and millions of people who have a gained experience that no one else has, that’s their junior, and you have all this technology at their fingertips. I’ve noticed that a lot of seniors I know have some sort of… it’s intuitive, some of this tech, like voice. They’re used to having to track down their children, and so they’re used to yelling out in the middle of an empty room, to be honest. I think that’s part of where it comes from.

They don’t have the same vanities that a lot of younger people have, and so they’re willing to take more risk when it comes to trying something new. It’s not necessarily something they want to be dangerous about because they are, by and large, taking care of themselves and caring about damage to their bodies, but they’re not afraid to look silly or to sound silly when they’re trying out a new device. I think that’s something that we can really tap into, because a lot of these people who are 70, 75, 80 years old, there’s still 20 years purchasing power there, at the least, and it’s just important that we don’t discard them and forget about them.

#coronavirus, #covid-19, #diversity, #extra-crunch, #george-floyd, #investor-surveys, #racism, #startups, #tc, #techcrunch-include, #venture-capital

0

Top LA investors discuss the city’s post-COVID-19 prospects

When it comes to venture capital, Los Angeles is a city on the rise.

In the past year, it’s seen one of the most profitable venture-backed exits of any tech ecosystem (with the $4 billion sale of Honey to PayPal) and investors are minting billion-dollar companies in the region at a torrid pace. It’s also the city where investors are spending the most money outside of venture capital’s big major hubs: San Francisco, Boston and New York.

While Los Angeles has a lot going for it, that also means it potentially has a lot to lose in the current economic downturn. California continues to be hard-hit by COVID-19, despite local and state officials working to reopen businesses.

TechCrunch surveyed some of the city’s leading investors in sectors like property technology and cannabis to get their take on how the city may survive — and potentially thrive — in a new era ushered in by the response to the pandemic.

From larger fund investors like Mark Suster and Kara Nortman at Upfront Ventures to Dana Settle at Greycroft Partners; to early-stage investors like Will Hsu at Mucker Capital; TX Zhuo at Fika Ventures, the responses were generally upbeat about the future opportunities for Los Angeles startups.

Even specialist fund investors like Karan Wadhera of the cannabis-focused investment firm Casa Verde Capital and Brendan Wallace at the real estate-focused firm Fifth Wall believe that Los Angeles will thrive in the post-COVID world.

As Mucker Capital co-founder Hsu writes, “There are far more great companies than there are venture dollars here in LA. Investors in other cities should continue to see LA as an underserved ecosystem with huge opportunities.”

  • Mark Suster, managing partner, Upfront Ventures
  • Kara Nortman, partner, Upfront Ventures
  • Will Hsu, Mucker Capital
  • Dana Settle, Greycroft Partners
  • Karan Wadhera, Casa Verde Capital
  • Brendan Wallace, Fifth Wall
  • TX Zhuo, Fika Ventures

LA Traffic

Image Credits: Getty Images/ROBYN BECK/AFP

Mark Suster, managing partner, Upfront Ventures

How much is Upfront focused on investing in the local LA ecosystem versus less geographically focused? 

Upfront invests about 40% of its investment dollars in the great LA market and invests about 40% split between the Bay Area and NYC. Upfront has always invested nationally and internationally with the final 20% and we have produced significant exits in Chicago, Baltimore, Paris, London and Las Vegas to name a few.

Where we do invest outside of LA of course we bring all of our contacts and relationships to bear, which makes us a logical choice for any startup raising capital where having access to the biggest influencers, media companies, academic institutions and medical professionals can help propel the company’s success.

How do you think COVID-19 will change entrepreneurial activity in Los Angeles?

It’s true that some startup businesses have been impacted by this pandemic but as we’re learning a few short months in, there has been much more acceleration of the trends leading toward technology growth that were already in place.

Specifically addressing some LA-based companies we can share with you the trends we see directly with demand data:

We already knew that telemedicine made sense for doctors and patients and now this trend has accelerated, regulations being lessened and cultural barriers overcome. We see a huge growth in food production and preservation (Apeel Sciences, for example) and food distribution (such as ChowNow). The need to reduce people in warehouses has propelled demand for robotics/automation for companies like inVia Robotics and the need for remote monitoring has helped LA-based DroneBase.

#casa-verde-capital, #covid-19, #dana-settle, #extra-crunch, #fifth-wall, #fika-ventures, #greycroft-partners, #investor-surveys, #kara-nortman, #karan-wadhera, #los-angeles, #mark-suster, #mucker-capital, #startups, #tc, #tx-zhuo, #upfront-ventures, #venture-capital, #venture-funding, #will-hsu

0

13 Boston-focused venture capitalists talk green shoots and startup recovery

Welcome back to the second half of our two-part Boston investor survey.

Catching you up, TechCrunch reached out to a host of Boston-area venture capitalists to get their take on the current state of their market, and what they think might be coming up in the future. More VCs than we initially anticipated got back to us, so we broke the survey into two pieces so that there was enough room to include everyone.

Today, in contrast, we’re looking a little further ahead: Are they seeing green shoots? When is a recovery likely to begin? What’s making them feel hopeful in this tenuous era? Here’s who took part:


Boston VC’s vision of tomorrow

Recovery is going to be slow, but most importantly, the comeback is not going to look like one, sole aha moment for any startup or entrepreneur. After poring through dozens of responses, we distilled that Boston-focused VCs think that recovery will favor Boston-area companies to some degree, as the areas they are working on, or the problems that they are working to solve, will still matter after COVID-19.

On the slowness of recovery, NextView’s Rob Go provided TechCrunch with the most vivid prognostication, saying that “while it’s difficult to predict” when the post-COVID recovery will begin, he anticipates “a swoosh-shaped recovery is more likely” than anything V-shaped. “The recovery is likely to be painfully slow,” the VC added.

It’s perhaps unsurprising then that green shoots and fruitful deals are thinner on the ground in Boston today than its startup community probably would have hoped. Momentum through dollars or deals will lead to more sustained recovery. Flare Capital’s Michael Greeley said that it is “still too early” to see green shoots, while other VCs noted that, on a sector-by-sector basis, there are some positive signs that give hope.

Glasswing is an AI-focused fund, making the following comment from its Rudina Seseri interesting, if niche. On the question of green shoots, Seseri said that her firm has “been surprised by the number of companies that are leveraging AI to drive automation, cost savings, optimization and higher performance.” The result of that surprise has been that “over the last five months these companies have beaten their pre-COVID budgets and forecasts for growth.”

The other side of that coin is startup areas that touch on travel or food. It’s hard to find recovery there, for obvious reasons.

The Victress Capital team put the dynamic well: “We’ve also been encouraged by the increased pace in innovation that we’ve seen across sectors where innovation has been slow in the past. From edtech to telehealth to food and beverage and more, we are seeing nimble entrepreneurs pivot or change their businesses to respond to the needs of today.”

Our broadest takeaway is that VC firms have not fully written off any sectors given today’s turbulence. The future, largely according to Boston-focused VCs, is startups that are important after the world opens again and focus on the next generation of businesses. It means that investments might look a bit like a risky game of hopscotch. They’re all trying to land on the deal that accounts for the next generation of businesses.

With that, let’s get into full questions and answers.


Lily Lyman, Underscore VC

When do you expect a startup recovery to begin?

“Recovery” is hard to speak to. We’ve been evaluating different phases of behavior and how that will affect the economy and the startup ecosystem. We have been thinking in terms of (1) lockdown opening up (summer 2020); (2) period of remaining social distancing behavior, likely with intermittent periods of lockdowns (into spring 2021); and (3) new normal (spring/summer 2021). But this changes and we are constantly reassessing it. For startups, we remain believers that great companies with great leadership can not only survive but find ways to thrive in this new environment.

Are you seeing green shoots regarding revenue growth, retention or other momentum that you didn’t expect a few weeks ago?

Again, it varies by industry. We have seen a surge in demand for players in the cloud infrastructure space such as CloudZero or for remote collaboration software (an investment not yet announced).

Tell us about the most interesting, Boston-based company you’ve invested in recently.

We are really excited about Popcart and how they are positioned as the world rapidly migrates to e-commerce. The founding team is a pair of engineer leaders from Endeca. Popcart offers consumers price and availability transparency across retail platforms (Amazon, Target, Walmart, etc.). The cross-platform capabilities are particularly unique. When COVID-19 hit, the team quickly created the Supply Finder to help consumers find goods that are in short supply and ensure they are protected against price gouging.

What is a moment that has given you hope in the past 30 days? This can be professional, personal or a mix of the two.

I’m inspired by the great leadership I’ve seen our founders display. They’ve made hard decisions with imperfect information and managed a difficult time with both empathy and conviction.

I’m also appreciating the humanizing reality that working from home and operating in uncertainty brings that unites people. My hope is that pieces of this uniting and empathy will persist.

#battery-ventures, #boston, #coronavirus, #covid-19, #extra-crunch, #flare-capital, #flybridge-capital, #glasswing-ventures, #investor-surveys, #lily-lyman, #pillar-vc, #startups, #tc, #underscore-vc, #venture-capital, #victress-capital

0

Where to open a game studio

With the game industry booming, more entrepreneurs are evaluating where to base their new startup or open a new office for their existing company. The U.S. government’s block on H1-B and L-1 visas will encourage American game startups to add an office abroad much sooner than they otherwise would have. But where?

This spring, I surveyed a number of gaming-focused VCs about which cities are the best hubs for game studios targeting the Western games market. Several locales stood out as heavily recommended — which I’ve shared below — but the most interesting takeaway was the lack of consensus.

Game studios are far less geographically concentrated than other categories of VC-backed startups. While there are odes on Twitter and conference stages that “you can build a successful startup anywhere,” most investors will push founders to locate themselves in the SF Bay Area, or at least in LA, NYC or London. Meanwhile, the most common piece of advice from those I spoke to: You should probably not base a gaming startup in the San Francisco Bay Area.

Access to the right talent is the top priority, as is the ability to retain them. Proximity to investors matters, but a successful game quickly turns a profit, which reduces the need for outside funding beyond Series A (and U.S. and European VCs who focus on gaming tend to be very international in scope). Quality of life, ease of obtaining visas and access to strategic partners all play into the decision as well and will weigh these recommendations differently depending on who you are and the games you’re developing.

Three notes:

  • I focused on qualitative research, gauging the assessments of top investors who track new startups in the sector about where the action is right now. 
  • The scope of this survey is limited to studios targeting the Western gaming market, so leading hubs in Asia weren’t included.
  • I group cities by metropolitan area so, for example, San Francisco includes Redwood City and Seattle includes Bellevue.

North America

In North America, Los Angeles is the clear favorite with Montreal, Seattle, San Francisco, Toronto and Vancouver all receiving many endorsements as the other top hubs. Regarding cities with the most interesting gaming startups recently, Ryann Lai of Makers Fund said, “It is hard to name a single best location, but Toronto, Culver City (in Los Angeles), Orange County (next to Los Angeles) have gotten increasingly popular among gaming founders lately.”

#entertainment, #entrepreneurship, #extra-crunch, #gaming, #investor-surveys, #tc

0

5 VCs agree: COVID-19 reshaped adtech and martech

We last surveyed VCs about their advertising and marketing investment strategies back in January — which is to say, in a completely different world, before the coronavirus pandemic began to wreak havoc on the global economy.

While there don’t appear to be any comprehensive numbers yet about the effect on digital advertising (which is, after all, still playing out), early data and anecdotes suggest a rapid decline, with some categories of ad spend disappearing entirely.

And as we noted in our previous survey, Crunchbase data shows that adtech had already fallen at a roughly 10% compounded annual growth rate over the last five years.

So what does the landscape look like now, and where are the remaining opportunities? To find out, we’ve compiled updated answers from two investors who participated in the previous survey and brought in three new perspectives:

For the most part, they acknowledged the landscape’s challenges — not just the pandemic, but the general maturity of the industry — while also pointing to opportunities in areas like machine learning. As Elton put it succinctly, “Marketing and advertising are not going away.”

Eric Franchi, MathCapital

How much time are you spending looking at marketing tech or adtech startups right now? Are you more focused on one or the other?

Adtech and martech are our main categories as a fund. We selectively invest in categories that might benefit from it (think DTC brands or media) or be of benefit to it (think next-generation CRM or HR tech). But 90%+ of our focus is adtech and martech.

What are you looking for in your next investment?

As always — team first. We look for founding teams with talent, vision and grit. We keep a fairly wide berth in terms of products and categories but we are spending much of our time focused on two themes: the post-privacy era in marketing (i.e. new, cookieless, compliant forms of identity and infrastructure) and future of digital media (i.e. video, OTT, audio, etc.).

How has COVID-19 impacted the adtech and martech investing landscape? Are there still opportunities?

Dealflow is down somewhat, but we are still seeing great opportunities. We have several investments in the pipeline for Q2. The challenges right now are similar to other sectors: spending time getting to know teams and calibrating expectations for growth in a Zoom-only (for now) world.

What kind of advice are you giving to your portfolio companies?

Right now, two months post-lockdown, most adjustments have been made to budgets and plans, teams (and customers) are adjusted to being fully remote and things have somewhat stabilized. Now is the time to get teams focused on sales and marketing. It’s a unique and rare time to outflank larger, slower-moving competitors and adapt to the market.

Christine Tsai, 500 Startups

#500-startups, #advertising-tech, #bowery-capital, #christine-tsai, #coronavirus, #covid-19, #eric-franchi, #extra-crunch, #greylock-partners, #investor-surveys, #mathcapital, #media, #northzone, #par-jorgen-parson, #tc, #venture-capital

0

9 top VCs discuss the future of New York startups

New York City was an initial U.S. hotspot for the COVID-19 pandemic, and it’s also one of the most expensive cities in the world — so you might think startups would be anxious to leave.

However, when we surveyed a number of New York-based venture capitalists, they seemed bullish about the city’s future as a startup and technology hub. As AF Ventures’ David Levinson put it, “New York simply has too much to offer, from its richly diverse population, cultural significance and vast collection of industries to lose its entrepreneurial spirit.”

Lest you think this is just reflexive NYC boosting, several of our respondents offered stats and historical analyses to back up their arguments. They also discussed industries that are likely to flourish and how the shift to remote work will affect local startups.

Here’s who we interviewed:

Keep in mind that if you’re on the hunt for an investor, several of these VCs are industry specific, which they note in their answers.

Eric Hippeau, Lerer Hippeau

How much is local investing a focus for you now?

We are NY-first investors and the most active VC firm in the city. Local investing has always been our priority, and it is more so now than ever before given the pandemic’s impact on New York. However, we make a large number of investments outside of New York, particularly if our extensive NY network can be useful to the company.

In the short term, how do you think local startups have been affected by the fact that New York is the epicenter of the pandemic?

Some categories are performing well during this period, and others have been hit hard. Companies have had to rethink roles, benefits, office space, communication and KPIs, which is easier for early-stage companies to some degree than larger organizations. Companies that entered this period strong will come out stronger and those who were struggling will feel the impact the most. This is true for New York and elsewhere.

What do you expect to happen to the startup climate in NYC longer term, particularly if the shift to remote work continues? Will it still be a startup hub?

New York is resilient and will come back stronger than ever, but it will take some time. The most innovative businesses are often started in a downturn. These periods shine a light on systematic gaps and key problems that fuel creative solutions and entrepreneurism.

Remote working is a trend that will continue to be integrated into every business as appropriate once offices begin to reopen. Businesses are looking to make up for losses they’ve experienced, so we’ll see many companies rethink their physical office space needs and rely even more heavily on digital resources for employees to work effectively. New York excels at software, so we expect to see innovation in remote working, learning and healthcare software continue to accelerate.

Are there particular industry sectors that you expect to do uniquely well or poorly, locally?

Healthcare technology and telemedicine have done well as they have become a necessity. COVID-19 has also shed a light on where there are gaps in health care. We’ve seen our New York-based health care investments including K Health, Medly and Klara step up in a real way to address patient needs during this time — be it telemedicine, on-demand prescription delivery or doctor-patient communication. We expect to see new innovations in healthtech emerge with New York as a hotspot.

On-demand fitness is another industry that’s seeing a boost. There was a rising popularity for at-home, on-demand fitness services before the crisis, and COVID-19 has accelerated the industry’s mass appeal. Mirror, one of our investments, is one example. Peloton is another that’s clearly benefiting. And ClassPass has adapted as well. All are New York companies.

Remote working and learning software have been essential, and we should expect these businesses to continue to have strong performance as they’re more universally adopted. Companies of all sizes need software collaboration tools in place to support their changing workforce. Air, which is workplace collaboration software for creative teams and one of our more recent investments, is well-positioned to address that need. I expect to see new innovations emerge as New York figures out how to get back to work in the months to come.

#andrew-ackerman, #coronavirus, #covid-19, #dreamit-ventures, #eniac-ventures, #eric-hippeau, #extra-crunch, #firstmark, #hans-morris, #health, #investor-surveys, #lerer-hippeau, #matt-turck, #metaprop, #nyca-partners, #security, #space, #venture-capital, #zach-aarons

0

13 Boston-focused VCs share the advice they’re giving portfolio companies

TechCrunch is focusing a bit more on the Boston-area startup and venture capital ecosystem lately, which has gone pretty well so far.

In fact, we had originally intended on releasing this regional investor survey as a single piece, but since so many VCs took part, we’re breaking it into two. The first part deals with the world we live in today, and the remainder will detail what Boston-area investors think about the future.

We broke our questions into two parts to better track investor sentiment. But, we were also curious what was going to come when things got back closer to normal. So, this first entry in our Boston investor survey covers our questions concerning what’s going on now. On Thursday we’ll have the second piece, looking at what’s ahead.

Here’s who took part:

What follows is a quick digest of what stood out from the collected answers, though there’s a lot more that we didn’t get to.

Boston VC in the COVID-19 era

Parsing through thousands of words and notes from our participating VCs, a few things stood out.

Boston startups aren’t having as bad a time — yet, at least — as area investors expected

Fewer companies than they anticipated are laying off staff for example. From our perspective, the number of Boston investors who noted that their portfolio companies were executing layoffs or furloughs (we asked for each to be precise) was very low; far more Boston-area startups are hiring than even freezing headcount. Layoffs appear somewhat rare, but as we all know cost cutting can take many forms for startups. Especially startups on the seed and early-stage side, which makes up the majority of these firm’s portfolio companies.

According to Glasswing’s Rudina Seseri, startup duress has come in “significantly under what [her firm was] expecting at the beginning of COVID-19.”

This may be due to a strong first quarter helping companies in the city and its surrounding area make it another few quarters. We might not know the full bill of COVID-19 and its related disruptions until next year.

More investors than we expected noted that their Boston portfolio companies aren’t raising this year

So what we’re gleaning from that fact is that any decline in Q2 and Q3 VC data is not because companies can’t raise, but because they don’t need to. Comments echoed a theme we wrote about in April: Boston broke records in Q1 in terms of dollars raised, but saw a dip in the number of checks cut.

Pillar VC’s Jamie Goldstein said that “about 15% of our companies are planning to raise capital this year,” which felt about average. Underscore VC’s Lily Lyman simply noted that, “Yes,” her Boston-area portfolio companies would hunt for new capital this year. Bill Geary of Flare Capital is on the other side of that coin, saying that “each of [his firm’s] Boston-based investments has successfully recently raised capital and will not be raising additional funds until 2021.”

It’s hard not to wonder if what happened to Boston unicorns Toast and EzCater was the exception and not the rule

 You see, Boston’s startup scene skews relatively early stage, so smaller companies don’t have high-profile cuts because, to be frank, there isn’t much staff to cut in the first place. It puts Boston in a unique setting to focus in on its early stage market, and investors all agreed that this is an important moment for the ecosystem.

The March-era stress tests are now months in the rearview mirror, and every startup has shaken up their spend and growth plans. Perhaps we have met the new normal, and it’s time to let the runway do the talking.

With that, let’s get into full questions and answers.

Rudina Seseri, Glasswing Ventures

What is the top-line advice you’re giving your portfolio companies right now?

This is a pivotal time, be efficient and drive execution. Cut costs where possible but at the same time don’t be afraid to spend for growth acceleration.

What percentage of your Boston-based portfolio companies are still hiring, not including those merely backfilling?

About 60%.

What percentage of your Boston-based portfolio companies have frozen new hires?

About 20%.

What percentage of your Boston-based portfolio companies have furloughed staff?

None.

What percentage of your Boston-based portfolio companies have cut staff?

One company that represents about 4% of the portfolio.

Are your Boston-based portfolio companies looking to raise new capital this year?

Most have raised recently, and consequently are not looking to raise at this time.

If not, are they often delaying due to COVID-19?

No, because of their recent raises, their fundraising considerations will take place in 2021.

Has duress amidst your Boston-based portfolio companies undershot, matched or overshot your expectations from March?

It has been significantly under what we were expecting at the beginning of COVID-19.

How has your investment appetite changed in terms of pace and location, if at all?

We have been very active and closed deals in this environment. Our expectation is that our investment appetite will remain the same going forward.

Are you making investments in Q2 into net-new founders and companies?

Yes, as a matter-of-fact we just closed a yet-to-be announced investment this month.

Are there particular sectors of startups in Boston that you expect to do well, aside from SaaS businesses that are benefiting from secular trends? Are there any sectors you have become newly bearish on?

Yes, those that are in our core focus areas — solutions that bring down the cost of cloud and data, platforms and tools leveraging AI, those that facilitate cost reduction, and intelligent solutions in cybersecurity that protect the enterprise.

How does the uncertainty of schools reopening impact the startup ecosystem?

This will further drive and institutionalize distributed teams and remote working as a go-forward mode of operating.

#battery-ventures, #bill-geary, #boston, #coronavirus, #covid-19, #enterprise, #extra-crunch, #flare-capital, #flybridge-capital, #fundings-exits, #glasswing-ventures, #investor-surveys, #jeff-bussgang, #lily-lyman, #neeraj-agarwal, #nextview-ventures, #pillar-vc, #rob-go, #startups, #tc, #underscore-vc, #victress-capital

0

What’s next for space tech? 9 VCs look to the future

Space is a special category of VC investment in the best of times — and the COVID-19 pandemic is not the best of times.

Still, investors focused on and familiar with space see a lot of opportunity in the market, regardless of any prevailing global economic difficulties. One big reason why is that regardless of how tight pursestrings get tied, space still represents a significant — and growing — source of government and defense spending. It’s also the source of some of the most important technological development since the advent of the internet, including the satellite-based Global Positioning System (GPS), which has revolutionized any number of businesses and industries.

That’s unlikely to be an exception in terms of the potential commercial impact of space — more like a model for future innovation, according to our respondents, who include:


Chad Anderson, Space Capital

What are you looking for in your next investment?

The mass distribution of Earth Observation (EO) data has begun. Much the same way that Trimble, Magellan and Garmin distributed the GPS signal in the 1980s and ’90s and ultimately gave rise to Location-Based Services (LBS). Companies like Waterloo, Ontario-based SkyWatch are aggregating supply and making EO data easily accessible through an API, which will give rise to millions of new applications. We are just now beginning to see the first of those applications come online, focused on serving large markets like agriculture, insurance, energy and more. Once this unprecedented amount of new data gets into the hands of consumers, it will fundamentally change the way we interact with our planet. We believe the investment opportunity in this segment will be as big, if not bigger, than LBS.

With roughly a decade of exponential growth in GPS applications, this is only the beginning. Even while GPS infrastructure and distribution continues to improve, the next generation of applications are testing its technical limits, with the need for persistent coverage in dense urban areas, centimeter location accuracy for both indoor and outdoor environments, alternative solutions in GPS-denied environments, and protection against GPS spoofing attacks. Computer vision and GPS are combining to enable a new level of precise positioning and we are actively looking at these new use cases.

We are also very interested, and actively investing, in cybersecurity. Ten years ago, the number of actors in space was extremely limited, so security was clearly less of a concern. There is an old adage with regards to commercial sat comms — it’s not that their security is bad, it’s that they have no security (of course, military assets are a different story — e.g., GPS is very secure). With the sudden entrance of hundreds of new companies and dozens of new space agencies operating in space, cyber threats suddenly pose a very real risk to business continuity and government operations. Combine this with new technological advances being applied to the space domain and there is clearly a lot of catching up to do. Fortunately, companies like Singapore-based SpeQtral are leveraging quantum technologies to offer a secure, scalable solution for distributing symmetric encryption keys using satellites as trusted key exchanging nodes. We continue to look at this area.

What advice do you have for your portfolio companies in terms of new and emerging opportunities?

#aerospace, #coronavirus, #covid-19, #extra-crunch, #investor-surveys, #private-spaceflight, #rob-coneybeer, #saic, #satellite, #space, #spaceflight, #spacex, #startups, #tess-hatch, #venture-capital

0