Fintech startup Finix closes on $3M in Black and Latinx investor-led SPV

Many founders talk about their desire for a more diverse investor base. Richie Serna took that desire and made it a reality.

Serna, who founded payments infrastructure startup Finix in 2016, had raised more than $95 million in venture funding from the likes of Lightspeed Venture Partners, American Express Ventures, Homebrew, Precursor Ventures, Insight Partners, Bain Capital Ventures, Visa and Activant Capital.

The San Francisco-based fintech last raised $30 million in an extension of its Series C round last August. At the time, Finix — which says its mission is to make every company a payments company — said it had seen its transaction volume more than quadruple from Q2 2019 to Q2 2020.

But Serna, a first-generation Mexican-American who was the first in his family to go to college (Harvard), wanted to broaden his company’s cap table even further. So he created a special purpose vehicle (SPV) that ultimately raised an additional $3 million and brought more than 80 “traditionally marginalized” investors onto Finix’s cap table. 

“This is very personal for me as a founder of color — making sure we have a diverse representation of people in our investor base,” Serna said.

Finix CEO and founder Richie Serna – Image courtesy of Finix

The effort, Serna added, was more than just diversifying his company’s cap table. It was also an initiative aimed at giving Black and Latinx investors access to an opportunity they may not have otherwise had. Indeed, the numbers are dismal. A recent NVCA-Deloitte Human Capital Survey found that 80% of investment partners at VC firms are white, and just 3% are Black and 3% are Hispanic/Latinx.

“This is about helping historically underrepresented groups build track records and get attribution for the work to help them start their careers and hopefully one day start their own fund,” Serna told TechCrunch. “So this is just one way that we at Finix can construct a rewrite of the story about the lack of diversity in Silicon Valley.”

It’s also not a one-time thing. Moving forward, in all subsequent rounds, Finix will be allocating 10% of each round to Black and Latinx investors.

Jewel Burks Solomon, managing partner of Collab Capital and head of Google for Startups, U.S. said the opportunity to invest in “a high growth company like Finix at a time that is typically reserved for a very select group of highly connected (usually white) investors is a big deal.”

“Access is the primary determinant of wealth creation,” Atlanta, Ga.-based Solomon added. “So creating an opportunity for access to folks who might not otherwise have it is game-changing.”

For Tiffani Ashley Bell, founder and executive director of The Human Utility (and now Finix investor), the SPV gives “talented, knowledgeable investors and operators from diverse backgrounds — especially Black and Latinx people — who have traditionally been excluded from investing early in rocket ship startups” a chance to be able to do so. 

While fundraising, Finix was also hiring for senior executive positions and through the process was able to find a few who came with a breadth of experience to help the company advance on its long-term goals — including the possibility of going public one day. As a result, its C-suite is now made up of a Mexican American (CEO), a woman (COO), a Black American (CGO, or chief growth officer) and an Indian American (CTO). 

For example, the company recently hired Fiona Taylor — who helped steer Solar City’s IPO and acquisition by Tesla and most recently served as Marqeta’s SVP of operations — to serve as its COO. 

The startup also tapped Ramana Satyavarapu to serve as its CTO. Satyavarapu was a founding member of Microsoft Office 365 and the head of engineering for Google Play Search. He also led software infrastructure engineering at Uber and was most recently the head of data platforms & products at Two Sigma, a quantitative hedge fund. 

Today, Finix has about 100 employees, 50% of whom Serna says he’s never met. The company plans to double its headcount over the next year.

On whether the new hires mean that an IPO was in Finix’s future, Serna replied: “We always like to think that we’re not just building for the next year, we’re building for the future. And I think if you look at the group that we’ve brought together, it’s pretty clear in terms of the direction that we’re trying to head as an organization.”

In looking ahead, Serna said he’s also excited about the potential of the SPV to add diversity to his company’s cap table.

“Black investors and other Latinx entrepreneurs were the first people to believe in me and back Finix,” he added. “I’m honored to pay it forward by creating the SPV, and I hope other founders are inspired to do the same.”

#activant-capital, #american-express-ventures, #bain-capital-ventures, #diversity, #finance, #finix, #funding, #homebrew, #insight-partners, #lightspeed-venture-partners, #payments, #precursor-ventures, #recent-funding, #richie-serna, #san-francisco, #startups, #techcrunch-include

What should banking look like for modern couples?

Zeta co-founder Aditi Shekar has spent the past three years tracking the ways couples share and manage their finances, from each card swipe to every split bill. Her effort led to tens of thousands of couples signing up for a free budgeting app experiment. Today, those learnings have been formed into a venture-backed startup.

Zeta is a new fintech platform that helps couples join their finances. Zeta isn’t creating the concept of joint accounts; it’s simply trying to rebuild them for the modern family. Currently, joint accounts lack transparency or the option to add multiple users that come from different relationships in your life. Many standard joint accounts just give every user entire access to other users’ finances, versus tiered ways to spend.

Shekar, who started the company after experiencing the stress of dividing and dealing with money in her own relationship, says the goal of Zeta is to take the “cognitive load” of dealing with money off of people in a relationship.

Off that vision, Shekar and her co-founder Kevin Hopkins have raised $1.5 million in a round co-led by Deciens Capital and Precursor with participation from executives from Chime, Square, PayPal, Venmo, Google, Facebook and Weight Watchers. Shekar says that 57% of its cap table is women or people of color.

“In some ways, we see ourselves as part of a replacement for Venmo,” Shekar said. “We saw couples Venmoing back and forth to each other sometimes six times a day…we want to take over your money chores.” While Zeta is entering the market as a tool for couples, Shekar sees the startup’s moonshot as being the go-to operational account for any modern household.

A tool like Zeta is trying to give already existent transactions — begging for a rent check, splitting the grocery bill, going halfsies on dinner, giving allowance — an easier way to be completed.

In reality, the startup works as a First Republic or Chase replacement, providing a digital layer of banking services that can integrate with pre-existing bank accounts. Couples who download Zeta will each get a Zeta joint card and a joint account to layer atop their finances. The joint card will serve as the way that couples can spend from the same account.

So far, users use their Zeta account in two main ways: have it take over standing bills such as rent or mortgage, or have it serve as a savings account for mutual goals, such as a post-COVID trip or big shared purchase like a car or home. Users can direct-deposit as much money as they want from their main bank accounts into Zeta, and then use the Zeta debit card to swipe couple money instead of individual money.

“There are a lot of fintechs that will go after the direct deposit,” Shekar said. “But we really thought about Zeta as the layer on top of existing accounts so you don’t have to move everything over.”

Similar to Chime, Zeta makes money from interchange fees, the cost it takes for a merchant to process your payment, on card transactions. A portion of the interchange fee is paid to Zeta, and a portion goes to your bank.

“If you and your partner wanted to share rent and pay bills together we’d be the natural place to plug into,” she said.

“Frankly, institutions have treated people as single-player games,” Shekar said. “Fintech is way more social than we realize.”

The success of Zeta hinges on the idea that people want to share their finances in an ongoing and meaningful way, and that the world of finance is ready to shift from individualism to collectivism earlier and louder. It sounds daunting, but we already know that social finance is big, as shown by apps like Venmo and Splitwise, and phenomena like the GameStop saga from just a few weeks ago.

Other startups have taken notice too, entering the world of multiplayer fintech, a term that categorizes socially focused and consumer-friendly financial services. Braid, a group-financing platform, is trying to make transactions work for various entities, from shared households to side hustles to creative projects.

Braid founder Amanda Payton breaks down the concept of multi-player, social finance into two phases: if 1.0 was Venmo, then 2.0 will “enable sharing money at the account and transaction level,” she says.

“I think about it this way: The current set of mainstream financial products supports my money and your money. Social finance 2.0 will be all about our money,” Peyton said.

“Banks have historically prioritized growing their own customer base. They haven’t invested a lot in products that promote sharing money, regardless of where your primary checking account lives…Zelle is a noticeable exception here,” she said. “And it’s not hard to see why, there’s little tangible benefit for them to do so.”

Zeta differentiates from Braid in that it is solely focused on couples and families, which lets it do things like pay bills and save money to plan for the financial future. Shekar says that it plans to support families in broader ways over time, such as being part of taxes or prenuptial agreements. That said, Zeta currently only supports two people per account, while Braid already has the capability to add multiple parties to its joint account.

The biggest hurdle for Zeta is if people trust each other enough to get into operational accounts with each other to do it. Individualism isn’t just a lazy reaction to lack of tooling out there; for many people, keeping your money to yourself is a preference. Of course, the flip-side of shared finances is dealing with the repercussions of ending that relationship if life gets in the way.

Image Credits: Zeta

“Break-up was the first feature we ever built,” Shekar said. Right now, there are no clear ways that Zeta can define what happens to the money in the shared account if people break up (no, there’s no clause that requires you to split money down the middle).

The startup is thinking about adding a feature during on-boarding that asks users what they prefer happens “in the event of a closure.”

“The psychology you need to have to open an account together is that you really trust your partner,” she said. “If you don’t trust your partner you might not be ready for this.”

Image Credits: Zeta

#aditi-shekar, #bank, #deciens-capital, #early-stage, #finance, #fintech, #funding, #neobank, #precursor-ventures, #recent-funding, #startups, #tc, #zeta

TrustLayer raises $6M seed to become the ‘Carta for insurance’

TrustLayer, which provides insurance brokers with risk management services via a SaaS platform, has raised $6.6 million in a seed round.

Abstract Ventures led the financing, which also included participation from Propel Venture Partners, NFP Ventures, BoxGroup and Precursor Ventures. Interestingly, the startup also got some industry validation in the way of investors. Twenty of the top 100 insurance agencies in the U.S. (as well as some of their C-suite execs) put money in the round. Those agencies include Holmes Murphy, Heffernan and M3, among others.

BrokerTech Ventures (BTV), a group consisting of 13 tech-focused insurance agencies in the U.S. and 11 “top-tier” insurance companies, also invested in TrustLayer. The funding actually marked BTV’s first investment in a cohort member of its inaugural accelerator program. 

TrustLayer co-founder and CEO John Fohr said the company was founded on the premise that verification of insurance and business credentials is a major pain point for millions of businesses. The process takes time and is not always trustworthy, which can lead to money lost in the long run.

To help solve the problem, San Francisco-based TrustLayer has used robotic process automation (RPA) to build out what it describes as an automated and secure way for companies to verify insurance. It sells its software-as-a-service either through insurance brokers or directly to the companies themselves.

TrustLayer says that companies that use its platform can automate the verification of insurance, licenses, and compliance documents of business partners such as vendors, subcontractors, suppliers, borrowers, tenants, ride-sharing and franchisees. (By verification of insurance, we mean confirming that a company is actually insured and not just pretending to be.)

Recent traction includes companies working in the construction, property management, sports and hospitality industries. Insurance fraud is a real and expensive concern for companies working in those spaces, according to Fohr, who noted that the seed round was “heavily oversubscribed.”

TrustLayer’s long-term goal is to work with dozens of the largest brokers and carriers in the U.S. to build out a digital, real-time proof of insurance solution for businesses of all sizes, across all industries. 

“The best analogy to describe what we do is calling us the Carta for insurance,” Fohr told TechCrunch. “We’re automating a process that is hugely painful and manual to help our carrier and broker partners provide better services to their customers and help companies reduce risk and make sure their business partners  have the right coverage.”

David Mort, partner at Propel Venture Partners, said that nearly every business relationship requires one or both parties to prove they have the insurance required for engagement. 

TrustLayer comes in by “attacking a messy, data-rich, and unstructured problem within the insurance industry that is a major friction source for commerce.”

Mort appreciates that TrustLayer is tackling the problem not by becoming the insurance broker, but by working with the incumbents as a software solution.

Propel is no stranger to investing in fintech, having backed the likes of Coinbase, DocuSign, Guideline and Hippo. Mort acknowledges that much of the innovation in fintech has historically focused on the banking industry while the insurance industry has been slower to innovate.

“The most interesting opportunities we see are around modernizing legacy infrastructure, reducing friction, and improving the customer experience,” he told TechCrunch. “More generally, insurtech companies are well-positioned for this market environment, where recurring revenue (or policies in this case) is valued, and more people are at home shopping for digital financial services. The need for insurance is only increasing.”

Meanwhile, Ellen Willadsen, chief innovation officer at Holmes Murphy and executive sponsor of BrokerTech Ventures, noted that TrustLayer’s expanded digital proof of coverage software “is seeing high adoption” among member agencies.

TrustLayer will use its new capital to (naturally) some hiring of sales, marketing and engineering staff. It also plans to team up with The Institutes RiskStream Collaborative (considered to be one of the largest blockchain insurance consortiums in the U.S.) and insurance carriers to build out its digital proof of insurance offering.

Per a recent TechCrunch data analysis and some external data work on the insurtech venture capital market, it appears that private insurtech investment is matching the attention public investors are also giving the sector.

#abstract-ventures, #artificial-intelligence, #finance, #funding, #insurance, #insurance-broker, #insurance-fraud, #precursor-ventures, #propel-venture-partners, #startups, #tc

Salut raises $1.25M for its virtual fitness service

This morning Salut, an app-based service that allows fitness trainers to host classes virtually, announced that it has raised $1.25 million in a new financing event. The round was led by Charles Hudson, an investor at Precursor Ventures.

Founder Matthew DiPietro, formerly of Twitch, told TechCrunch that Salut soft-launched in mid-September, with a wider release coming today.

DiPietro thought up the concept behind Salut before the pandemic hit, he said during an interview, but after COVID-19 appeared the idea took on new urgency. The company put together what DiPietro described as a no-code alpha version of the service in May to test the market, allowing the then-nascent startup to validate demand on both sides of its marketplace — it’s famously difficult to jumpstart two-sided marketplaces, as demand tends to follow supply, and vice-versa.

The test allowed the company to get to confidence on demand existing from both trainers and exercise fans, and in its initial economic model.

With the new round in the bank and its product now formally launched, it’s up to Salut to scale rapidly. The company currently has 55 registered trainers on its platform, a reasonable start for the seed-stage startup. It will need to grow that figure by a few orders of magnitude if it wants to generate enough revenue to reach an eventual Series A.

But Salut is not focused on early-revenue generation, taking no cut of trainer revenue today. Indeed, per an email the company sent out to its users this morning, the startup is passing along 100% of post-Apple income that trainers generate, or 85% of the gross.

Currently users can donate to, or tip, trainers that host classes. DiPietro told TechCrunch that subscription options are coming in a quarter or two. The startup also announced today that trainers can now allow their classes to be replayed, what the startup called one of its “most requested features.”

Anyone familiar with Peloton understands why this matters; only a fraction of classes on the Peloton ecosystem are live at any point in time, but the bike comes with a library of content that users can simply load up whenever they like. This also allows Peloton to release more niche content than it otherwise might, as even the heavy metal-themed rides can accrete a reasonable ridership over time (something they might not be able to manage if all classes on the platform were only live once and then gone forever).

DiPietro is bullish on building income streams for trainers, especially during a pandemic that has locked many gyms, leaving fitness processionals with little to no income in many cases.

There’s some early signal that users are willing to pay, the company said, with early users willing to pay $5 or $10 for an hour of fitness training. And with a focus on the long-tail of trainers who can’t attract 10,000 fans to a single class, Salut thinks there are a large number of trainers who have enough pull to generate more income from its service, in time, than they could at a traditional studio.

Salut supports group video classes, of course, so trainers can collect monies from cohorts of users at a time.

The company’s fundraising is largely earmarked for engineering, with the company having what its founder called an ambitious product roadmap.

The startup also announced a new project with Fitness Mentors, a company that helps trainers get certified, to create what the two companies are calling “the industry’s first Virtual Group Fitness Instructor (V-GFI) course and certification.”

You can see why Salut would want the certification to exist; its existence will allow users of its service to find trainers that are worth their time on its service, and may raise the overall level of quality of classes provided.

Let’s see how far Salut can get with $1.25 million.

#apps, #charles-hudson, #fundings-exits, #peloton, #precursor-ventures, #startups

Fortnite is actually a SaaS company

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

What a week from us here in the United States, where the election is still being tabulated and precisely zero people are stressed at all. But, no matter what, the wheels of Equity spin on and so Danny and Natasha and Alex and Chris got together once again to chat all things startups and venture capital.

  • Up top there was breaking news aplenty, including a suit from the US government to try and block the huge Plaid-Visa deal. And, it was reported that Airbnb will drop its public S-1 filing early next week. That IPO is a go.
  • Next we turned to the gaming world, riffing off of this piece digging into the venture mechanics of making and selling video games. Our hosting crew had a few differences of opinion, but were able to agree that Doom 3 was a masterpiece before moving on.
  • Then it was time to talk Ant, and what the hell happened to its IPO. Luckily with Danny on deck we were in good hands. What a mess.
  • Prop 22 was passed, which effectively allows Uber, Instacart, and Lyft to keep their gig workers labeled as independent contractors, instead of employees. As a result, Uber and Lyft stocks soared, while gig worker collectives said that the fight is still on.
  • Natasha scooped a series of Election Day filings from venture capital firms. In the mix: Precursor Ventures Fund III, Hustle Fund II, and Insight Partner’s first Opportunity Fund.
  • And finally, despite Election Day turning into an entire week, the public markets are rallying. Will we see a boom of IPOs?

And, as a special treat, we didn’t even mention Maricopa county for the entire episode. Take care all!

Equity drops every Monday at 7:00 a.m. PDT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

#airbnb, #equity-podcast, #plaid, #precursor-ventures, #prop-22, #tc, #venture-capital

Insight Partners, Precursor Ventures join Hustle Fund in raising new fund money

Even as the country is in the final days of a polarizing election, the cogs of VC never stop turning. On this ever-so-quiet, non-election-news Tuesday, venture firms still managed to file paperwork with the SEC indicating newly raised funds. Precursor Ventures and Insight Partners will join Hustle Fund in closing new capital.

The filings are noteworthy because they signal new capital coming into the startup world, which could look dramatically different in the coming weeks. Still, Precursor Ventures and Hustle Fund are both still fundraising, so expect them to (hopefully) add more capital in the coming months.

Precursor Ventures, led by Charles Hudson, has raised a new tranche of capital to invest in pre-seed companies. The firm first filed in March 2020 that it had plans to raise a $40 million fund, and today it appears that it has closed $29 million of that goal. Recent investments from Precursor include The Juggernaut, mmhmm and TeamPay. The fund made headlines recently because it promoted Sydney Thomas, its first hire, to principal. Hudson was unable to comment due to fundraising activity.

We also saw a filing from Insight Partners, which closed a $9.5 billion fund in April for startups and growth-stage investments, indicating that it has raised money for its first-ever Opportunity Fund. The SEC filing shows that Insight Partners has raised $413 million for the opportunity fund. Insight did not return a request for comment.

Earlier today, SEC filings also showed that Hustle Fund has raised $30 million for a second fund, surpassing its previous fund of $11.5 million. Interestingly, paperwork for this new fund was first filed in May 2019 with the intention to raise $50 million. Today’s news, thus, is its first close. While the firm is still fundraising, it’s a long gap between filing and first close. The fund was launched in 2018 by ex-500 Startup partners Eric Bahn and Elizabeth Yin to, similar to Precursor, invest in pre-seed startups. Hustle Fund invests $25,000 checks into 50 startups per year.

Yin declined to comment due to ongoing fundraising activity.

While the spree of funds on Election Day was noteworthy, it was somewhat expected. Generally speaking, funds want to get their paperwork cleared and closed before a potentially chaotic event or time of unrest. We saw closes from OpenView, Canaan, True Ventures and more, while firms including First Round and Khosla filed paperwork for new funds. Time will tell if this is a final exhale of news until January 1, or if the VC world will continue pushing droves of capital, holidays be damned.

#500-startups, #elizabeth-yin, #first-round, #hustle-fund, #insight-partners, #precursor-ventures, #tc, #venture-capital

With thousands of subscribers, The Juggernaut raises $2 million for a South Asian-focused news outlet

As paid newsletters grow in popularity, Snigdha Sur, the founder of South Asian-focused media company The Juggernaut, has no qualms about avoiding the approach entirely. In October 2017, Sur started The Juggernaut as a free newsletter, called InkMango. As she searched for news on the South Asian diaspora, she found that articles lacked original reporting, aggregation was becoming repetitive and mainstream news organizations weren’t answering big questions.

Then InkMango crossed 700 free readers, and Sur saw an opportunity for a full-bodied media company, not just a newsletter.

One year and a Y Combinator graduation later, The Juggernaut has worked with more than 100 contributors (both journalists and illustrators) to provide analysis on South Asian news. Recent headlines on The Juggernaut include: The Evolution of Padma Lakshmi; How Ancestry Test Results Became Browner; and How the Death of a Bollywood Actor Became a Political Proxy War. The network approach, instead of a single newesletter approach,aggreff is working so far: Sur says that The Juggernaut has garnered “thousands of subscribers.” During COVID-19, The Juggernaut’s net subscribers have grown 20% to 30% month over month, she said.

On the heels of this growth, The Juggernaut announced today that it has raised a $2 million seed round led by Precursor Ventures to hire editors and a full-time growth engineer, and expand new editorial projects. Other investors in the round include Unpopular Ventures, Backstage Capital, New Media Ventures and Old Town Media. Angels include former Andreessen Horowitz general partner Balaji Srinivasan; co-founder of Kabam, Holly Liu; and co-founder of sports-focused publication The Athletic, Adam Hansmann.

Currently, The Juggernaut charges $3.99 a month for an annual subscription, $9.99 a month for a monthly subscription and $249.99 for a lifetime subscription to the news outlet. It also offers a seven-day free trial (with a conversation rate to paid at over 80%) and has a free newsletter, which Sur says will remain free to bring in top-of-the-funnel customers.

The Juggernaut is part of a growing number of media companies trying to directly monetize off of subscriptions instead of advertisements, such as The Information, The Athletic, and even our very own Extra Crunch. If successful, the hope is that paid subscriptions will prove more sustainable and lucrative than advertising, which still dominates in media.

But Sur is purposely pacing herself when it comes to expenses in the early days. The team currently has only three full-time staff, including Sur, culture editor Imaan Sheikh and one full-time writer, Michaela Stone Cross.

Snigdha Sur, the founder of The Juggernaut.

“Sometimes at media companies people over-hire and over-promise, and then don’t deliver on the profitability or return,” she said. For this reason, The Juggernaut largely works with “freelancers who would probably never join any specific publication,” Sur said. While The Juggernaut hopes to have full-time staff writers eventually, the contributor approach helps temper spending.

Beyond pace, The Juggernaut is looking to build up its subscriber base by writing stories that require deep, creative thinking. The publication intentionally does not cover commoditized breaking news, which could have the potential to bring in more inbound traffic, or anything that doesn’t have a South Asian connection.

Sur is living the stories that she is working to tell. Born in Chhattisgarh, India, she grew up in the Bronx and Queens in New York City, and spent time living and working in Mumbai, India. Since founding The Juggernaut, her goal for the publication has been to be a place for not just South Asians, but for “anyone who has a form of curiosity and appreciation” for South Asian culture.

“We try not to translate words we don’t have to do, we’re not trying to dumb this down, we’re not trying to write for the white teen,” she said. “We’re trying to write for the smart, curious person. And we’re going to assume you know stuff.”

#fundings-exits, #future-of-media, #india, #media, #precursor-ventures, #recent-funding, #snigdha-sur, #startups, #tc, #the-athletic, #the-juggernaut

Businesses reducing trash and plastic consumption are beginning to look like treasure to some VCs

Zuleyka Strasner didn’t set out to become an advocate for zero-waste consumption.

The former manager of partner operations at Felicis Ventures had initially pursued a career in politics in the UK before a move to San Francisco with her husband. It was on their honeymoon on a small island in the Caribbean that Strasner says she first saw the ways in which plastic use destroyed the environment.

That experience turned the onetime political operative into a zero-waste crusader — a transformation that culminated in the creation of Zero Grocery, a subscription-based grocery delivery service that sells all of its goods in zero-waste packaging.

Strasner returned from Corn Island with a purpose to reduce her plastic use and found inspiration in the social media posts and work of women like Anamarie Shreves, the founder of Fort NegritaLauren Singer, who became known for her TedX Teen talk on living waste free and launched Package Free; and Bea Johnson, who became a social media celebrity for her work reducing consumption and living waste-free.

Following in the zero-waste footsteps of others eventually led Strasner from her home in Redwood City, Calif. to San Francisco’s Rainbow Grocery, a food co-op dedicated to sustainable business practices. That 45 minute drive and hour spent in a store juggling jars, bottles, and shakers to perform basic shopping tasks convinced Strasner that there had to be a better way to shop zero-waste — especially for busy parents, professionals, and singles.

So she built one.

“I may have had no team and no money, but I had data. I spent 6 months alpha testing the early version of Zero. I was working from my apartment (cue cliché) getting real sign-ups, servicing real customers and doing a lot of growth hacking,” Strasner wrote in a post on Medium about the company’s early fundraising efforts. “It was really janky, but going between research reports, market data and the data I was collecting from real-people, I had something tangible to put under investors noses to back up how Zero looks at scale.”

Living through COVID-19 is a literal trash heap 

Strasner’s push to create alternatives to single-use plastic in grocery delivery comes as the use of single use plastics skyrockets and grocery delivery services surge — putting her new company in the enviable position of solving an obvious problem that’s becoming more apparent to everyone.

An August study from the investment bank Jefferies on single-use plastic identified the surge in plastic use and laid the blame at the feet of the pandemic.

“Bans and taxes have been rolled back, physical and chemical recycling activity has decreased, and virus concerns may have reduced consumers’ desire to minimize consumption of single-use plastics,” said the report, entitled “Drowning in Plastics,” which was quoted in Fortune.

While much of the use in home delivery and consumer goods has been offset by reductions in the use of plastics in manufacturing as industries slowed down production, the reopening of international economies means that there’s the potential for renewed industrial use even as consumers renew their love affair with plastic.

Companies like Strasner’s present a way forward for consumers willing to pay a premium for the waste reduction — and she’s not alone.

Changing the supply chain for food and consumer packaged goods 

Lauren Singer was already two years into operating her (profitable and cash-flow positive since “day one”) Brooklyn-based and e-commerce stores when she raised $4.5 million for her plastic free and zero-waste wares last September.

The image of the years worth of waste she claimed to be able to fit into a single jar had made her a viral sensation on Instagram and she’d managed to turn that post, and her celebrity, into a business. She wasn’t alone. Bea Johnson, another star of the zero-waste movement wrote the book on going zero waste and has turned that into a business of her own.

At Package Free, products range from a line of plastic-free and zero-waste lifestyle products like bamboo toothbrushes and mason jars, to natural tooth powder alongside natural pacifiers, and a dog shampoo bar. The company’s packaging is composed of 100% up-cycled post-consumer box with paper wrapping and paper tape, according to the company.

Meanwhile, another New York-based startup, Fresh Bowl, raised $2.1 million in January to bring zero-waste packaging and circular economic principles to the bowl business. The company, founded by Zach Lawless, Chloe Vichot and Paul Christophe, uses vending machines around New York that could hold roughly 220 prepared meals with a five-day shelf-life. Those meals were distributed in reusable containers that customers could return for a refund of a deposit.

Before the pandemic hit in the early months of the company’s financing each of its machines were on track to bring in $75,000 in revenue — and roughly 85% of the company’s containers were being returned for re-use according to a January interview with chief executive officer Zach Lawless.

Roughly 40% of landfilled material is food or food packaging, Lawless said. “For consumers it’s hard to make that trade-off between convenience and sustainability,” he said. Companies like Fresh Bowl and Strasner’s Zero Grocery are each trying to make that tradeoff a little easier.

Designing a zero-waste delivery service

Zero Grocery currently counts around 850 unique items in stock and expects to be over 1,000 items at the end of the year — and all delivered in reusable or compostable packaging, according to Strasner.

“Our aim is to not create anything that would go into the landfill and really limit what would need to be recycled. For the products that are single use… they are banded toilet rolls and they’re wrapped in a single sheet of paper. It’s all compostable,” said Strasner. 

Zero Grocery’s current operations are confined to the Bay Area, but the company has seen its growth triple when the pandemic hit in March and then grow twenty times over the ensuing months, according to Strasner. And unlike companies like Singer’s and Lawless’, Strasner didn’t have the luxury of reaching out to a handful of investors for a small cap table.

“I have continuously raised throughout this period to get to this moment in time. Initially i believed that we would have a more typical round structure, maybe myself misunderstanding that I’m an atypical founder,” Strasner said. As a Black, trans, woman, the path to “yes” from investors involved over 250 pitches and an undue amount of “no’s”. 

An early champion was Charles Hudson, the founder of Precursor Ventures, who helped lead a seed round for the company back in 2019. Hudson’s investment allowed the company to launch its first service, an exclusive, á la carte, home delivery service. It was basically Strasner wheeling a cart brimming with produce, grains and compostable items into customers’ homes and filling their own jars.

Zero Grocery chief executive Zuleyka Strasner on an early delivery run for her company. Image Credit: Zero Grocery

Ultimately untenable, the first service gave Strasner a view into the ways in which grocery delivery worked, and allowed her to create the second version of the service.

That was more like a latter day milkman service, where the company would deliver next-day, door-to-door delivery of over 100 zero-waste products. These were pre-packaged goods that the company just dropped off and then had customers return (a similar thesis to Fresh Bowl’s retail strategy).

That was around November 2019, when the company launched publicly across the Bay Area with our new offering. The initial traction allowed Strasner to raise another $500,000 from existing investors and new firms like Chingona Ventures and Cleo Capital.

“At that point we had sixty members on the platform and had done four figures of revenue of that month,” Strasner said.

Then COVID-19 hit the Bay Area and sales started soaring. To meet the needs of a strained supply chain — since the company doesn’t use any third-party services for delivery and involves a heavy bit of sanitization of containers so they can be re-used — Zero Grocery raised another $700,00 from Incite.org, Gaingels, Arlan Hamilton and MaC Ventures.

As Strasner wrote in a Medium post:

When COVID-19 hit the US, our team was among the first companies to go into lockdown. By late February, only essential personnel were on the warehouse floor for order preparation and delivery in head-to-toe PPE. Soon after that, the Bay Area went into full shelter-in-place.

Much like other companies in the grocery delivery space, our demand skyrocketed. To keep up, we grew our team in half the time we anticipated and launched features that were half-baked. Customer experience is tantamount, and our underdog team fought tooth-and-nail to preserve that despite long hours, little sleep, and no time for planning. We abandoned our notions of roles and split up the responsibilities of customer service, order packing, feature development, and more.

Strasner’s experiences as an immigrant, Black, trans founder mean that she thinks about sustainability not just in environmental terms, but also social sustainability. That’s why she works with the staffing service R3 Score to provide opportunities for people who had criminal records. The service provides a risk analysis for employers of job applicants who have a criminal record, to give employers a better sense of their viability as an employee.,

As she told Fast Company, “This is a highly capable, untapped labor force who is ready to work and is actively looking for opportunities… This is not merely a COVID stopgap measure for us; it’s something we’re incorporating into our business for the long-term.”

More money, fewer problems? 

Zero Grocery now counts many thousands of customers on its service and has just raised another $3 million, led by the investment firm 1984, to grow the business. The company charges $25 for a membership that includes free deliveries and collects empty containers. Non-members pay a $7.99 delivery free for groceries priced competitively with Whole Foods and other higher end grocery options.

Right now, Zero Grocery occupies the as the only fully zero-waste online grocery store in the U.S., and its numbers are growing quickly.

But that kind of success can breed competition, and there are certainly no shortage of would-be competitors waiting in the wings.

Already some of the largest consumer packaged goods companies in the U.S. have rolled out a version of zero-waste delivery services for their products. These are companies like Procter & Gamble and Froneri, the owner of ice cream brand Haagen Dazs (and others). In April, their reusable, no-waste delivery service Loop launched nationwide to provide customers across the country with recyclable and reusable packaged containers.

The commercialization of new kinds of packaging technologies from companies like NotPla, Varden, and Vericool mean that compostable material packaging could become a wider solution to the waste dilemma.

Still, these solutions to packaging waste come with their own issues, like the sustainability of the supply chain used to make them and the carbon footprint of the manufacturing processes. In instances like these reducing the need to manufacture new material is likely the most sustainable option.

And, in many cases, companies like Zero Grocer help their vendors do a lot of the work to reduce the footprint of their own supply chains.

“A lot of work is to enable them to exist within a plastic free supply chain using our technology,” said Strasner of the work she’d done with vendors. 

“I started Zero to make zero-waste grocery shopping effortless and empower people to protect the planet while shopping conveniently,” she said. That’s a notion everyone can treasure. 

#arlan-hamilton, #charles-hudson, #cleo-capital, #economy, #felicis-ventures, #food, #grocery-store, #haagen-dazs, #lauren-singer, #mac-ventures, #precursor-ventures, #procter-gamble, #tc, #varden, #vericool, #whole-foods

Founders can raise funding before launching a product

It’s possible to raise VC funding even if you haven’t built a real product, according to Charles Hudson, founder and managing partner at seed-stage firm Precursor Ventures. It’s just very, very difficult.

I interviewed Hudson during TechCrunch Early Stage, our virtual event for startup founders. He gave a short talk titled “How to sell an idea when you don’t have a product,” then answered questions from me and from attendees watching at home.

Hudson said Precursor invests in about 25 startups every year and that a majority are pre-launch and pre-traction. So when he’s considering startups where there “isn’t any evidence or traction,” he and other investors are basically considering two things: How well the founder knows the industry, and how well the investors know the founder.

Of course, if you’ve already had success and you know everyone on Sand Hill Road, it might not be that hard to get that first check. But what about everyone else?

Below, I’ve quoted some highlights from Hudson’s thoughts about how to raise money pre-product. You can also watch the full presentation/conversation at the end of this post.

‘You need to have a unique and durable insight that will still be true in 12 to 18 months’

You need to have a unique and durable insight that will still be true in 12 to 18 months … The unique part is important because you still haven’t launched your product yet. And so whatever it is that you’re doing, if it’s not unique, if it’s a really obvious insight, you’ll probably have 10 or 12 competitors that are launched in the market by the time you get your product out.

#charles-hudson, #entrepreneur, #entrepreneurship, #extra-crunch, #fundraising, #marketing, #precursor-ventures, #product-management, #startups, #tc, #techcrunch-early-stage, #venture-capital, #zenefits

Extension rounds help some startups play offense during COVID-19

The venture capital world is constantly changing, and its evolution can sometimes flip pieces of conventional wisdom on their heads. For example, a recent flurry of extension rounds from Silicon Valley’s hottest startups like Stripe and Robinhood seem to signal that the investment type has suddenly become cool.

Extensions evolving from unloved to hot is not the first time that a type of VC deal has gained, or lost luster. In past times, for example, raising consecutive rounds from the same lead investor was often perceived as a negative signal; why couldn’t the startup find a new, different lead investor? Today, in contrast, venture capitalists are using inside rounds to double-down on winning startups, a way of helping ensure returns for their own backers.

The recent phenomenon of extensions becoming vogue is a tale of the times, in which the best startups get to play offense, and startups that can’t show accelerating growth are left behind. Let’s explore what has changed.

A series of fortunate extensions

TechCrunch first wrote about the new extension-round trend after seeing what felt like a wave of the deals crop up. Some were large, like MariaDB’s huge $25 million add-on to its Series C, or Robinhood’s biblical $320 million addition to its Series F.

But most were smaller events like Sayari adding $2.5 million to its Series B, or CALA adding $3 million to its seed round. Even more recently, Eterneva raised another $3 million on top of its seed round, and also out this week was a million pounds more for Edinburgh-based Machine Labs’ seed round.

One reason for the growth of extension rounds in 2020 has been runway — making sure that a startup has enough. Upstarts often raise on an 18-month cadence. But because of COVID-19 and its constituent economic disruptions, many have reduced costs in a bid to bolster how long they have until their cash stores reach zero.

#analysis, #charles-hudson, #coronavirus, #covid-19, #freestyle-capital, #funding, #fundings-exits, #homebrew, #hunter-walk, #jenny-lefcourt, #precursor-ventures, #robinhood, #startups, #stripe, #tc

As media revenue struggles, subscription startups see growth

The COVID-19 pandemic hasn’t been a friend to the media business. Its economic impacts slashed advertising budgets, diminishing a key revenue plank for many publications. The results of falling ad spend have been felt across the industry, with a wave of layoffs hitting publications large and small, niche and general.


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


Other forms of publisher income, like events, have also been reduced. But the pain of 2020’s media downturn hasn’t been felt equally in the industry. Publications that had built subscription revenue bases were in a better position to weather declines in other media incomes than peers who hadn’t; revenue diversification can provide real shelter when the economy rapidly shifts.

Subscription incomes are not enough for publications to avoid all pain; The Atlantic’s subscription base famously surged during the early months of COVID-19, but the company still saw layoffs. The Athletic’s subscription business was predicated on sports events taking place — it too underwent cuts despite a membership-first model.

In this era, the healthiest publications tend to have a subscription component. The paywalled New York Times and Wall Street Journal are hiring, as is Business Insider, which launched a membership service in 2017. But not all subscription publications that are succeeding are large. Indeed, thanks to a growing set of publisher-friendly subscription services, there are a number of options in the market for supporting publications as small as a single author.

Perhaps most famously, Substack has seen good growth in the last year. The venture-backed newsletter-and-blogging service provides authors with the ability to charge for their writing. But other startups are competing in the space, helping publications derive more income directly from readers.

Pico, which provides paid-subscription tooling for publishers, has seen strong growth in the COVID-19 era. TechCrunch caught up with its co-founder Jason Bade to chat about what his company has seen in recent months. And a few months ahead of COVID-19’s arrival, publishing platform Ghost launched its paid subscription product into beta. TechCrunch asked Ghost about the reception, and growth of the membership portion of its business to better understand today’s media market.

What emerges from data and conversations concerning the startup-supported media membership landscape is something hopeful. Some writers are going to build micro-pubs that can finance their existence. And larger publications have never had more available help to wean their businesses off of ads, pageviews, and Google’s favor.

#extra-crunch, #fundings-exits, #ghost, #market-analysis, #media, #pico, #precursor-ventures, #startups, #substack, #tc, #the-exchange

Hear Charles Hudson explain how to sell an idea (without a product) at Early Stage

Startups often dance between selling dreams and building products, and we’ve enlisted the help of noted investor Charles Hudson to help founders sell an idea before they’ve built a product. Hudson is speaking at TechCrunch’s inaugural, virtual event TechCrunch Early Stage. The two-day event runs July 21 and 22 and will feature sessions targeting all aspects of building a startup.

Hudson has seen a lot of startups over his career as an investor and knows what it takes to sell an idea when there isn’t yet a product. As he’ll explain, this is often a tough skill to learn, and it takes practice to craft the correct message that shows obtainable goals while putting the investor at ease.

Charles Hudson is a managing partner at Precursor Ventures, where he focuses on pre-seed investments in companies building B2B and B2C software applications. Before this role, he was an investor at Uncork Capital (formerly SoftTech VC) and In-Q-Tel, the VC arm of the U.S.’s Central Intelligence Agency. Along the way, he’s held various executive and board positions at startups and organizations.

Hudson’s session at TC Early Stage is a must-watch for early-stage founders. Startups begin as an idea, and often that idea needs funds to turn into a product. Hudson will help show founders how to get an investor to buy into the concept before the product is built.

TC Early Stage takes place over two days in July and features 50+ experts across startup core competencies, such as fundraising, operations, and marketing. The virtual event features some of the best operators, investors, and founders in the startup world. Hear from Ann Miura-Ko on how to find a product-market fit. Ali Partovi is set to talk about how to hire early engineers, and Caryn Marooney’s session will explore how to make your brand stand out.

What’s more, most of the speakers, who happen to be investors, are participating in TechCrunch’s CrunchMatch, our program that connects founders to investors based on shared interests.

Here’s the fine print. Each of the 50+ breakout sessions is limited to around 100 attendees. We expect a lot more attendees, of course, so signups for each session are on a first-come, first-serve basis.

Buy your ticket today, and you can sign up for the breakouts we are announcing today, as well as those already published. Pass holders will also receive 24-hour advance notice before we announce the next batch. (And yes, you can “drop” a breakout session in favor of a new one, in the event there is a schedule conflict.) 

Get your TC Early Stage pass today and jump into the inside track on the sessions we announced today, as well as the ones to be published in the coming days.

Possible sponsor? Hit us up right here.

#charles-hudson, #early-stage, #precursor-ventures, #tc

This startup is tackling women’s bladder leakage with grace (and a subscription business)

No one likes to talk about urinary incontinence, but the loss of bladder control is something that impacts millions of people around the globe. Women are especially prone to developing related issues because of pregnancies, childbirth, and menopause, all of which can affect the urinary tract and the muscles that support it. According to a 2018 University of Michigan poll of 1,000 women ages 50 to 80, nearly half said that they sometimes leak urine. Meanwhile, an estimated 20% to 30% of younger women experience leakage at least once per year.

Unsurprisingly, the market for disposable incontinence products is sizable. A $9.5 billion market as of 2018, it is projected to reach $15 billion by 2025, and it will presumably only grow from there, given that Americans ages 65 and older are projected to nearly double in number from 52 million in 2018 to 95 million by 2060.

More shocking is how limited and clunky offerings in the space remain — the best known of these being Kimberly-Clark’s Depend undergarments. It’s precisely the opportunity to update the industry that married cofounders Alex Fennell and Mia Abbruzzese are chasing with their new startup, Attn:Grace. It’s a direct-to-consumer startup that just today began selling a selection pads, briefs, liners, and wipes that are more elegantly packaged.

It was because Abbruzzese was so pained after catching her chic, Whole Foods-shopping, salon-going, 90-year-old mother disposing of a cumbersome product in a plastic newspaper sleeve, that she sprang into action. Abbruzzese already knew quite a bit about running a consumer business, having founded and run a kids’ shoe brand called Morgan & Milo for roughly 16 years. (It was acquired last fall by another children’s brand, Zutano.)

After enlisting the help of her wife, Alex — an attorney who’d been litigating patent cases for 15 years — the couple began figuring out a bladder leakage solution that be less embarrassing generally and also didn’t involve a trip to CVS or the kind of heavy packaging that someone elderly might need help in transporting out to their car. Indeed, though the site sells items as standalone products, part of the brand’s appeal is sure to be its subscription delivery of products that are delivered right to customers’ doors.

Attn:Grace is also — like most newer brands — also selling products designed to be both kinder to the human body and to the environment. Gone are the parabens, latex and synthetic fragrances associated with more traditional rivals. Instead of the petroleum-based synthetics found in the top sheets of some products, Attn:Grace says its top sheets and its back sheets are made of natural fibers derived from sugarcane waste. It also says its packaging was developed with an eye toward minimizing its carbon footprint,  including through boxes made from wood fibers sourced exclusively from FSC certified forests.

Older customers are just as interested in making a difference where they can, insists Fennell, who says there are a lot of misconceptions about women of a certain age. She notes, for example, that many VCs with whom they met were reluctant to believe that older women are interested in new products that are discussed in part on social media. “A lot of people we pitched had this idea that you hit a certain point after 50 and you stop using your phone. But we know that women still use channels like Instagram and that those channels are very viable,” she says.

Thankfully for the pair, they were able to raise $1 million — from XFactor Ventures, Precursor Ventures, 37 Angels, and individuals — to try and prove skeptics wrong.

It won’t be easy. The two are the only full-time employees on the payroll, though they have built up a network of consultants, including a designer of some renown, Adam Larson, the founder and creative director at Boston-based adam&co. a multi-disciplinary creative studio specializing in brand identity.

They are also competing against some very deep-pocketed personal care companies that have bottomless marketing dollars, comparatively.

Then again, sometimes a new brand that comes out at the right time can break through through smart packaging, word of mouth, and community, which is another aspect of Attn:Grace that Abbruzzese and Fennell have plans to foster.

Certainly, addressing a largely unmet market need helps, and on this front, Attn:Grace is confident that it can break new ground, especially if it can ultimately capture the attention of caregivers, gynecologists, and others who can spread the word.

“There’s a tremendous amount of stigma and shame and embarrassment associated with bladder leakage,” says. Abbruzzese. It’s time, she says to “destigmatize aging.”

#37-angels, #direct-to-consumer, #funding, #precursor-ventures, #social, #tc, #venture-capital

Precursor Ventures’ Charles Hudson on ‘the conversation no one has during an upmarket’

For pre-seed startups, precarious times are baseline until they secure their first customer, first hire and first check. But no matter how built-in turbulence might be for a pre-seed founder, we’re entering a period where stresses are amplified and outlooks are unpredictable.

In light of the new market conditions, a harder fundraising market and slower expected growth, Charles Hudson (founder and general partner of Precursor Ventures) is urging his portfolio companies to reassess their futures with a refreshingly human question: “Are you excited and prepared to run this company for the next two years?

If not, you might want to do something else. Why? Because if a super early-stage company manages to survive the COVID-19 era, making it out the other end, it’s not clear that they’ll be venture-ready when markets recover. As Hudson put it, “there’s never been a better time to maybe fold.” That’s because, he explained, startups that merely survive won’t be judged merely against their peers that also survived; they will also compete with brand-new startups for capital and companies that didn’t need to hunker down during lean times.

It’s possible to make it through, but it won’t be an easy path.

TechCrunch spoke with Hudson earlier this week as part of our ongoing Extra Crunch Live series that brings leading founders and investors to our (virtual) stage. Between our editors and journalists and the best questions from the audience, we’re working with guests to understand the new world that we find ourselves in. That we’re hosting these events virtually instead of in-person is testament to our changed reality.

But the chat was far from all gloom; Hudson is bullish on a number of things. Niche publications with subscription economics? Yes. Social services targeting particular audiences? Yep! Precursor is still cutting checks into net-new deals, and while it’s wrapping up its second main fund and first opportunity fund, the firm is also raising a new, larger capital pool.

The conversation ran the full hour we had set aside for it, meaning we had to condense some later discussions about fintech and the new trade-off between growth and profit, but we did get to diversity in venture and startups in the future, and what impact a recession might have on both (it’s a bigger possible impact than you’re considering).

Hit the jump for the best Hudson takeaways and the full audio recording from the session. Head here if you need Extra Crunch access; there are some trials for just a few bucks, so everyone can access the chat. Let’s go!

Raising a fund in the COVID-19 era

#charles-hudson, #clubhouse, #consumer, #coronavirus, #covid-19, #events, #extra-crunch, #extra-crunch-live, #finance, #precursor-ventures, #startups, #stripe, #tc, #vc, #venture-capital

Extra Crunch Live: Join Charles Hudson for a look at today’s seed-stage landscape

Earlier this week, we kicked off our Extra Crunch Live series with an interesting chat with Cowboy’s Aileen Lee and Ted Wang. Today, we will be back at 3 p.m. PST/6 p.m. EST/10 p.m. GMT with a new guest: Charles Hudson, the general partner of Precursor Ventures.

Extra Crunch members will find an AddEvent link below to drop the details directly into their calendar and folks who want to participate directly can hit up the Zoom link (also below). We’ll ask as many audience questions as we can, so please make them sharp — no pitches, please.

Charles Hudson founded Precursor Ventures to invest in pre-seed and seed-stage companies. Earlier this year, the firm filed paperwork to put together a $40 million third fund after previously raising two main funds and one $10 million “opportunity” fund.

As we await hard and accurate numbers on how COVID-19 is impacting fundraising, we’ll ask Hudson to walk us through the changes he has seen and will cover some basics: The best way to pitch him, what his to-do list looks like these days and if the pandemic has made Precursor newly bullish or bearish on certain sectors.

Then, we’ll get much nerdier: Will we see the number of party rounds fall further now that it’s harder to gather investors in real life? Do you think we’ll see pre-seed raises ask for more ownership terms? And what is the latest with the wacky world of early-stage valuations?

There’s a lot to talk about. And we haven’t even mentioned YC’s pro rata change yet.

After Hudson, we have a stacked lineup of Extra Crunch live guests, including Mitch and Freada Kapor, Mark Cuban, Roelof Botha and Kirsten Green, with more to be announced soon.

You can find information below with details for joining today’s discussion, as well as an AddEvent link to put the details directly onto your calendar.

Sign up for Extra Crunch to get access to all these episodes where you can view the talks live, participate in the Q&A with industry leaders and watch later on-demand if you can’t make the live timing. Talk soon!

Details

#aileen-lee, #charles-hudson, #extra-crunch, #extra-crunch-live, #freada-kapor-klein, #fundraising, #general-partner, #kapor, #kirsten-green, #market-analysis, #precursor-ventures, #roelof-botha, #startups, #tc, #ted-wang, #venture-capital

Pepper’s bra wants to solve the woes of small-chested women

Ask any woman and she will tell you that most of her bras do not fit her optimally. In fact, a majority of women end up wearing the wrong size. A large part of the problem is that sizing is standardized, unlike women’s bodies. With every passing year, more people are shopping online, meaning fewer opportunities to actually try on bras — a trend that’s only accelerating given the shutdown the world is experiencing right now.

One particular problem, and a widespread one, according to entrepreneurs Jaclyn Fu and Lia Winograd, is that bras are generally too big for small-chested women. It’s the reason the former co-workers came together to found Pepper, a three-year-old, Denver-based startup that’s expressly focused on creating bras that fit smaller cup sizes.

As Fu explains it, most bra companies use a size, say 36C, then apply that same design to other bra sizes, like a 32A. While the step is logistically sound — applying a standard base design to other sizes — it doesn’t translate well into actual fit.

“It means a person who is a 32A is wearing a design that was intended for a 36C, causing fit issues like cup gaps,” says Fu.

Usually, women try to resolve the problem by tightening their bra straps or changing sizes, but Pepper’s solution is to create its own, smaller cup molds from a factory in Medellin, Colombia, where Winograd grew up.

Fu made the first prototype for Pepper based on her own chest size. Since then, she’s gone to customers’ houses to conduct fittings and research. Beyond cup size, Pepper also addresses underwire woes, making its products less curved and shorter to follow the natural size of a smaller-chested woman.

To increase customer engagement, Pepper started virtual one-to-one fit sessions for customers who are buying a bra online for the first time, and like other companies has a “fit quiz” for people to take online, too.

Pepper now sells a wide variety of sizes, all the way from from 30A to 38B, and prices range from $48 to $54.

Pepper certainly isn’t the only startup trying to fit into the bra industry. Companies like Kala, SlickChicks and ThirdLove all tout comfort and inclusivity in sizing and fitting.

The biggest of the three is ThirdLove, a San Francisco DTC bra and underwear company that has raised $68.6 million in known venture capital to date, per Crunchbase. ThirdLove brands itself as a brand that sells a “bra for every body” with inclusive sizes, and is now expanding into retail, international markets and swim and athletic wear. The company was last valued at more than $750 million.

It’s unclear how many new brands the market can support, or that can survive this pandemic. Even companies with meaningful market share and fresh capital are struggling to stay afloat as shoppers reduce their spend right now. Earlier this month, ThirdLove laid off 30% of its staff, citing COVID-19’s impact on business.

Even still, Pepper’s founders remain optimistic. Pepper’s Kickstarter $10,000 launch campaign — staged in 2017 — was separately funded in less than 10 hours, Fu notes.

The success of that campaign just helped the company secure $2 million in seed funding from investors, including Precursor Ventures, New York University Innovation Fund and Denver Angels. Others participating include the co-founder of MyFitnessPal, Albert Lee.

She adds that the company, which employs three people, is “close to profitability” on a $3 million revenue run rate. In 2019, most of its sales came directly from consumers on their site — a good sign that its growth ties to user loyalty versus relying on partnerships with retailers.

The nuance of buying a bra has long been an in-person ordeal. But now, because of COVID-19’s spread and the resulting shut down of many brick-and-mortar stores, those who need a new bra might have to turn online for the very first time. It’s an opportunity for companies like Pepper to prove that they can master fit without measuring tape and a changing room.

#bra, #precursor-ventures, #startups, #thirdlove

Extra Crunch Live: Join Precursor’s Charles Hudson for a Q&A this Thursday

The new Extra Crunch Live series is taking flight this week. Today we’re talking to Cowboy Ventures’ Aileen Lee and Ted Wang. This Thursday we’re keeping the parade of well-known investors coming, when Charles Hudson will join Natasha Mascarenhas and I for a deep-dive into all things pre-seed and seed.

Extra Crunch Live Episode 2: Charles Hudson will air at 3 PM PT/6 PM ET this Thursday. Important Note: Extra Crunch members will be able to ask their own questions live on the call.

Hudson has been a guest on Equity a few times and even popped up onstage at Disrupt. Why? Because he’s made a number of notable investments and he has a penchant for explaining the seed venture market in useful, easy-to-grok terms.

Precursor Ventures, Hudson’s firm, has raised a number of funds, and filed paperwork to put together a $40 million third fund earlier this year. If closed, the new vehicle would be Precursor’s largest to date. The firm previously raised two main funds, and one $10 million “opportunity” fund.

Hudson, along with senior associate Sydney Thomas and analyst Ayanna Kerrison, tends to invest in software, internet-focused and e-commerce companies, according to Crunchbase data. However, other data indicates that the firm’s investment pace may have slowed in 2019 as the world unwittingly marched toward the new, COVID-19 era.

The new world we live in is precisely why we wanted to get Charles back for a chat. The last time we spoke with him Airbnb was still going public in 2020 on the back of a direct listing. We also chatted about which Y Combinator companies were the biggest. Now Airbnb’s been forced to borrow expensive capital, cut its valuation and is generally expected to delay its public debut. And Y Combinator is pulling back on its investing cadence.

A new world, a changed world.

Before we let you go, while prepping for our talk with Hudson, we discovered that Precursor put money into both payment firm Finix’s seed round and Series A, according to Crunchbase data. The startup later raised a Series B that would wind up being more complicated than it first seemed.

If you aren’t a member of Extra Crunch just yet, join up and don’t miss any of the next few months’ worth of live chats that are going to be pretty damn cool.

You can find all the Zoom information below, as well as an AddEvent link to put the details directly onto your calendar.

See you soon!

#aileen-lee, #airbnb, #analyst, #aol, #california, #charles-hudson, #cowboy-ventures, #crunchbase, #ecommerce, #events, #extra-crunch, #extra-crunch-live, #finix, #pinterest, #precursor-ventures, #tc, #ted-wang, #websites, #y-combinator