Big banks rush to back Greenwood, Killer Mike’s Atlanta-based digital bank for underrepresented customers

Before even taking its first deposit, Greenwood, the digital banking service targeting Black and Latino individuals and business owners, has raised $40 million — only a few months after its launch.

Coming in to finance the new challenger bank are six of the seven largest U.S. Banks and the payment technology developers Mastercard and Visa.

That’s right, Bank of America, PNC, JPMorgan Chase, Wells Fargo, and Truist, are backing a bank co-founded by a man who declared, “I’m with the revolutionary. I’m with the radical policy,” when stumping for then Presidential candidate Sen. Bernie Sanders.

Joining the financial services giants in the round are FIS, a behind-the-scenes financial services tech developer; along with the venture capital firms TTV Capital, SoftBank Group’s SB Opportunity Fund, and Lightspeed Venture Partners. Sports investors Quality Control and All-Pro NFL running back Alvin Kamara also came in to finance the latest round.

Atlanta-based Greenwood was launched last October by a group that included former Atlanta mayor Andrew Young and Bounce TV founder, Ryan Glover.

“The net worth of a typical white family is nearly ten times greater than that of a Black family and eight times greater than that of a Latino family. This wealth gap is a curable injustice that requires collaboration,” said \ Glover, Chairman and Co-founder of Greenwood, in a statement. “The backing of six of the top seven banks and the two largest payment technology companies is a testament to the contemporary influence of the Black and Latino community. We now are even better positioned to deliver the world-class services our customers deserve.”

Named after the Greenwood district of Tulsa, Okla., which was known as the Black Wall Street before it was destroyed in a 1921 massacre, the digital bank promises to donate the equivalent of five free meals to an organization addressing food insecurity for every person who signs up to the bank. And every time a customer uses a Greenwood debit card, the bank will make a donation to either the United Negro College FundGoodr (an organization that addresses food insecurity) or the National Association for the Advancement of Colored People.

In addition, each month the bank will provide a $10,000 grant to a Black or Latinx small business owner that uses the company’s financial services.

“Truist Ventures is helping to inspire and build better lives and communities by leading the Series A funding round for Greenwood’s innovative approach to building greater trust in banking within Black and Latino communities,” said Truist Chief Digital and Client Experience Officer Dontá L. Wilson who oversees Truist Ventures, in a statement. “In addition to the opportunity to work with and learn from this distinguished group of founders, our investment in Greenwood is reflective of our purpose and commitment to advancing economic empowerment of minority and underserved communities.”

So far, 500,000 people have signed up for the wait list to bank with Greenwood.

#andrew-young, #atlanta, #bank, #bank-of-america, #banking, #bernie-sanders, #challenger-bank, #companies, #finance, #financial-services, #fis, #greenwood, #jpmorgan-chase, #lightspeed-venture-partners, #mastercard, #mayor, #national-football-league, #nfl, #oklahoma, #softbank-group, #tc, #tulsa, #united-states, #venture-capital-firms, #visa, #wells-fargo

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Argentina’s Digital House raises over $50M to help solve LatAm’s tech talent shortage

Digital House, a Buenos Aires-based edtech focused on developing tech talent through immersive remote courses, announced today it has raised more than $50 million in new funding.

Notably, two of the main investors are not venture capital firms but instead are two large tech companies: Latin American e-commerce giant Mercado Libre and San Francisco-based software developer Globant. Riverwood Capital, a Menlo Park-based private equity firm, and existing backer early-stage Argentina-based venture firm Kaszek also participated in the financing.

The raise brings Digital House’s total funding raised to more than $80 million since its 2016 inception. The Rise Fund led a $20 million Series B for Digital House in December 2017, marking the San Francisco-based firm’s investment in Latin America.

Nelson Duboscq, CEO and co-founder of Digital House, said that accelerating demand for tech talent in Latin America has fueled demand for the startup’s online courses. Since it first launched its classes in March 2016, the company has seen a 118% CAGR in revenues and a 145% CAGR in students. The 350-person company expects “and is on track” to be profitable this year, according to Duboscq.

Digital House CEO and co-founder Nelson Duboscq. Image Credits: Digital House

In 2020, 28,000 students across Latin America used its platform. The company projects that more than 43,000 will take courses via its platform in 2021. Fifty percent of its business comes out of Brazil, 30% from Argentina and the remaining 20% in the rest of Latin America.

Specifically, Digital House offers courses aimed at teaching “the most in-demand digital skills” to people who either want to work in the digital industry or for companies that need to train their employees on digital skills. Emphasizing practice, Digital House offers courses — that range from six months to two years — teaching skills such as web and mobile development, data analytics, user experience design, digital marketing and product development.

The courses are fully accessible online and combine live online classes led by in-house professors, with content delivered through Digital House’s platform via videos, quizzes and exercises “that can be consumed at any time.” 

Digital House also links its graduates to company jobs, claiming an employability rate of over 95%.

Looking ahead, Digital House says it will use its new capital toward continuing to evolve its digital training platforms, as well as launching a two-year tech training program — dubbed the the “Certified Tech Developer” initiative — jointly designed with Mercado Libre and Globant. The program aims to train thousands of students through full-time two-year courses and connect them with tech companies globally. 

Specifically, the company says it will also continue to expand its portfolio of careers beyond software development and include specialization in e-commerce, digital marketing, data science and cybersecurity. Digital House also plans to expand its partnerships with technology employers and companies in Brazil and the rest of Latin America. It also is planning some “strategic M&A,” according to Duboscq.

Francisco Alvarez-Demalde, co-founder & co-managing partner of Riverwood Capital, noted that his firm has observed an accelerating digitization of the economy across all sectors in Latin America, which naturally creates demand for tech-savvy talent. (Riverwood has an office in São Paulo).

For example, in addition to web developers, there’s been increased demand for data scientists, digital marketing and cybersecurity specialists.

“In Brazil alone, over 70,000 new IT professionals are needed each year and only about 45,000 are trained annually,” Alvarez-Demalde said. “As a result of such a talent crunch, salaries for IT professionals in the region increased 20% to 30% last year. In this context, Digital House has a large opportunity ahead of them and is positioned strategically as the gatekeeper of new digital talent in Latin America, preparing workers for the jobs of the future.”

André Chaves, senior VP of Strategy at Mercado Libre, said the company saw in Digital House a track record of “understanding closely” what Mercado Libre and other tech companies need.

“They move as fast as we do and adapt quickly to what the job market needs,” he said. “A very important asset for us is their presence and understanding of Latin America, its risks and entrepreneurial environment. Global players have succeeded for many years in our region. But things are shifting gradually, and local knowledge of risks and opportunities can make a great difference.”

#brazil, #digital-house, #digital-marketing, #e-commerce, #education, #funding, #fundings-exits, #globant, #latin-america, #marketing, #menlo-park, #mercado-libre, #mercadolibre, #online-courses, #private-equity, #recent-funding, #rise-fund, #riverwood-capital, #san-francisco, #software-development, #startups, #tc, #venture-capital, #venture-capital-firms, #web-developers

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A Dallas-based founder looks to tackle the student loan crisis with his startup, College Cash

Demetrius Curry has spent the last couple years chasing a dream.

His startup, College Cash, allows brands to petition users to create photo and video marketing content highlighting their product or service, with the wrinkle being that content creators are paid by the brands in the form of credits that go directly towards paying down their student loan debt. This model awards the brands involved a level of social good will and tax benefits.

The Dallas area founder was inspired to tackle student loan debt crisis after talking with his daughter about the prospect of eventually paying down her own loan debt. Curry has spent the past two years building out the nascent platform, tracking down brand partners, navigating accelerator programs, enticing users and pounding the pavement to find investors that are willing to bet on his vision.

College Cash has raised $105,000 to date, and is hoping to eventually wrap the funding into a $1 million seed round.

Filling out the round has been its own challenge for Curry who has struggled at times to find opportunity, even among historic levels of capital flowing into the startup ecosystem, a distinction that has been less noticeable for black founders that still make up just a small percentage of VC allocation. In the aftermath of last summer’s protests against police brutality, a number of venture capital firms issued statements decrying institutional racism and pledging to back more underserved founders, spinning up new programs for diverse founders.

Demetrius Curry, CEO of College Cash

While Curry says he appreciates the scope of the problem and the good intentions of those making the statements, he believes that venture capital networks still have a lot to learn about what being an “underserved” founder means and that plenty of the existing efforts feel like “lip service.” He says that even as Silicon Valley continues to idolize dropouts from prestigious universities, stakeholders have less interest in recognizing the accomplishments of founders who fought their way through poverty or found opportunity in geographies where opportunities are harder to come by.

“You can’t look for something different if you’re looking in the same places,” Curry tells TechCrunch. “When you look at the topic of ‘underserved founders,’ it’s not only a skin color thing, it’s also about where they came from and what they’ve been through.”

Curry says that it can be frustrating to compete for early stage opportunities when investors aren’t willing to meaningfully adjust their parameters. Of particular frustration to Curry has been navigating the world of “warm introductions” to even get a foot in the door for programs meant for diverse founders, or applying for early stage programs geared towards the “underserved” only to be told that they weren’t far enough along to qualify.

“Think about how much we had to go through to even get in the room with you,” Curry says. “I’ve sold plasma to pay a web hosting fee, nothing is going to stop me.”

College Cash’s mission of expanding opportunities for people struggling to manage their student loan debt is personal to Curry who saw his life turn around after going back to school.

Decades ago, fresh out of the military, Curry said he had a random conversation with a stranger while eating at a Hardee’s — the discussion about what more he wanted from life ended up pushing him to to go back and get his GED and later a business degree. What followed was a career in finance that eventually led towards his recent entrepreneurial pursuits with College Cash.

The platform is firmly an early-stage venture at the moment, but Curry has big ambitions he’s building toward. His next effort is building out a College Cash tipping integration with gig economy platforms, with the aim that users of those platforms could ultimately opt to tip a worker and route that money directly towards paying down that person’s student loan debt.

Curry says the team at College Cash has been working with a “national gig economy platform” to run a pilot of the integration and has run focus groups showing that users are more likely to tip when they know that money goes towards erasing loan debt.

#articles, #asian-cuisine, #business, #ceo, #college-cash, #content-creators, #corporate-finance, #dallas, #economy, #entrepreneurship, #finance, #private-equity, #startup-company, #startups, #student-debt, #tc, #techcrunch-include-company, #venture-capital, #venture-capital-firms

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Israel’s startup ecosystem powers ahead, amid a year of change

Released in 2011 “Start-up Nation: The Story of Israel’s Economic Miracle” was a book that laid claim to the idea that Israel was an unusual type of country. It had produced and was poised to produce, an enormous number of technology startups, given its relatively small size. The moniker became so ubiquitous, both at home and abroad, that “Israel Startup Nation” is now the name of the country’s professional cycling team.

But it’s been hard to argue against this position in the last ten years, as the country powered ahead, famously producing ground-breaking startups like Waze, which was eventually picked up by Google for over $1 billion in 2013. Waze’s 100 employees received about $1.2 million on average, the largest payout to employees in Israeli high tech at the time, and the exit created a pool of new entrepreneurs and angel investors ever since.

Israel’s heady mix of questioning culture, tradition of national military service, higher education, the widespread use of English, appetite for risk and team spirit makes for a fertile place for fast-moving companies to appear.

And while Israel doesn’t have a Silicon Valley, it named its high-tech cluster “Silicon Wadi” (‘wadi’ means dry desert river bed in Arabic and colloquial Hebrew).

Much of Israel’s high-tech industry has emerged from former members of the country’s elite military intelligence units such as the Unit 8200 Intelligence division. From age 13 Israel’s students are exposed to advanced computing studies, and the cultural push to go into tech is strong. Traditional professions attract low salaries compared to software professionals.

Israel’s startups industry began emerging in the late 19080s and early 1990s. A significant event came with acquisitor by AOL of the the ICQ messaging system developed by Mirabilis. The Yozma Programme (Hebrew for “initiative”) from the government, in 1993, was seminal: It offered attractive tax incentives to foreign VCs in Israel and promised to double any investment with funds from the government. This came decades ahead of most western governments.

It wasn’t long before venture capital firms started up and major tech companies like Microsoft, Google and Samsung have R&D centers and accelerators located in the country.

So how are they doing?

At the start of 2020, Israeli startups and technology companies were looking back on a good 2019. Over the last decade, startup funding for Israeli entrepreneurs had increased by 400%. In 2019 there was a 30% increase in startup funding and a 102% increase in M&A activity. The country was experiencing a 6-year upward funding trend. And in 2019 Bay Area investors put $1.4 billion into Israeli companies.

By the end of last year, the annual Israeli Tech Review 2020 showed that Israeli tech firms had raised a record $9.93 billion in 2020, up 27% year on year, in 578 transactions – but M&A deals had plunged.

Israeli startups closed out December 2020 by raising $768 million in funding. In December 2018 that figure was $230 million, in 2019 it was just under $200 million.

Late-stage companies drew in $8.33 billion, from $6.51 billion in 2019, and there were 20 deals over $100 million totaling $3.26 billion, compared to 18 totaling $2.62 billion in 2019.

Top IPOs among startups were Lemonade, an AI-based insurance firm, on the New York Stock Exchange; and life sciences firm Nanox which raised $165 million on the Nasdaq.

The winners in 2020 were cybersecurity, fintech and internet of things, with food tech cooing on strong. But while the country has become famous for its cybersecurity startups, AI now accounts for nearly half of all investments into Israeli startups. That said, every sector is experiencing growth. Investors are also now favoring companies that speak to the Covid-era, such as cybersecurity, ecommerce and remote technologies for work and healthcare.

There are currently over 30 tech companies in Israel that are valued over $1 Billion. And four startups passed the $1 billion valuation just last year: mobile game developer Moon Active; Cato Networks, a cloud-based enterprise security platform; Ride-hailing app developer Gett got $100 million ahead of its rumored IPO; and behavioral biometrics startup BioCatch.

And there was a reminder that Israel can produce truly ‘magical’ tech: Tel Aviv battery storage firm StorDot raised money from Samsung Ventures and Russian billionaire Roman Abramovich for its battery which can fully charge a motor scooter in five minutes.

Unfortunately, the coronavirus pandemic put a break on mergers and acquisitions in 2020, as the world economy closed down.

M&A was just $7.8 billion in 93 deals, compared to over $14.2 billion in 143 M&A deals in 2019. RestAR was acquired by American giant Unity; CloudEssence was acquired by a U.S. cyber company; and Kenshoo acquired Signals Analytics.

And in 2020, Israeli companies made 121 funding deals on the Tel Aviv Stock Exchange and global capital markets, raising a total of $6.55 billion, compared to $1.95 billion raised in capital markets in Israel and abroad in 2019, as IPOs became an attractive exit alternative.

However, early-round investments (Seed + A Rounds) slowed due to pandemic uncertainty, but picked-up again towards the end of the year. As in other countries in ‘Covid 2020’, VC tended to focus on existing portfolio companies.

Covid brought unexpected upsides: Israeli startups, usually facing longs flight to Europe or the US to raise larger rounds of funding, suddenly found that Zoom was bringing investors to them.

Israeli startups adapted extremely well in the Covid era and that doesn’t look like changing. Startup Snapshot found that 55% startups profiled had changed (or considered changing) their product due to Covid-19. Meanwhile, remote-working – which comes naturally to Israeli entrepreneurs – is ‘flattening’ the world, giving a great advantage to normally distant startup ecosystems like Israel’s.

Via Transportation raised $400 million in Q1. Next Insurance raised $250 million in Q3. Seven exit transactions with over the $500 million mark happened in Q1–Q3/2020, compared to 10 for all of 2019. These included Checkmarx for $1.1 billion and Moovit, also for a billion.

There are three main hubs for the Israeli tech scene, in order of size: Tel Aviv, Herzliya and Jerusalem.

Jerusalem’s economy and therefore startup scene suffered after the second Intifada (the Palestinian uprising that began in late September 2000 and ended around 2005). But today the city is far more stable, and is therefore attracting an increasing number of startups. And let’s not forget visual recognition company Mobileye, now worth $9.11 billion (£7 billion), came from Jerusalem.

Israel’s government is very supportive of it’s high-tech economy. When it noticed seed-stage startups were flagging, the Israel Innovation Authority (IIA) announced the launch of a new funding program to help seed-stage and early-stage startups, earmarking NIS 80 million ($25 million) for the project.

This will offer participating companies grants worth 40 percent of an investment round up to $1.1 million and 50 percent of a total investment round for startups in the country or whose founders come from under-represented communities – Arab-Israeli, ultra-Orthodox, and women – in the high-tech industry.

Investments in Israeli seed-stage startups decreased both absolutely and as a percentage of total investments in Israeli startups (to 6% from 11%). However, the decline may also be a function of large tech firms setting up incubation hubs to cut up and absorb talent.

Another notable aspect of Israel’s startups scene is its, sometimes halting, attempt to engage with its Arab Israeli population. Arab Israelis account for 20% of Israel’s population but are hugely underrepresented in the tech sector. The Hybrid Programme is designed to address this disparity.

It, and others like it, this are a reminder that Israel is geographically in the Middle East. Since the recent normalization pact between Israel and the UAE, relations with Arab states have begun to thaw. Indeed, Over 50,000 Israelis have visited the United Arab Emirates since the agreement.

In late November, Dubai-based DIFC FinTech Hive—the biggest financial innovation hub in the Middle East—signed a milestone agreement with Israel’s Fintech-Aviv. Both entities will now work together to facilitate the cross-border exchange of knowledge and business between Israel and the United Arab Emirates.

Perhaps it’s a sign that Israel is becoming more at ease with its place in the region? Certainly, both Israel’s tech scene and the Arab world’s is set to benefit from these more cordial relations.

Our Israel survey is here.

#app-developer, #artificial-intelligence, #biocatch, #business-incubators, #checkmarx, #computing, #dubai, #e-commerce, #economy, #entrepreneurship, #europe, #finance, #food-tech, #google, #healthcare, #insurance, #ipo, #israel, #jerusalem, #kenshoo, #lemonade, #microsoft, #middle-east, #mobile-game-developer, #mobileye, #money, #nanox, #ourcrowd, #private-equity, #roman-abramovich, #samsung-ventures, #startup-company, #tc, #technology, #tel-aviv, #united-arab-emirates, #united-states, #unity, #venture-capital, #venture-capital-firms, #waze

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Leading Edge Equipment has a technology to improve solar manufacturing and $7.6 million to go to market

Only a few weeks after the successful public offering of Array Technologies proved that there’s a market for technologies aimed at improving efficiencies across the solar manufacturing and installation chain, Leading Edge Equipment has raised capital for its novel silicon wafer manufacturing equipment. 

The $7.6 million financing came from Prime Impact Fund, Clean Energy Ventures and DSM Venturing and the company said it would use the technology to ramp up its sales and marketing efforts. 

For the last few years researchers have been talking up the potential of so-called kerfless, single-crystal silicon wafers. For industry watchers, the single-crystal versus poly-crystalline wafers may sound familiar, but as with many things with the resurgence of climate technology investment maybe this time will be different.

Silicon wafer production today is a seven-step process in which large silicon ingots created in heavily energy-intensive furnaces are sawed into wafers by wires. The process wastes large amounts of silicon, requires an incredible amount of energy and produces low-quality wafers that reduce the efficiency of solar panels.

Using ribbons to produce its wafers, Leading Edge’s manufacturing equipment uses the floating silicon method to reduce production to a single step, consuming less energy and producing almost no waste, according to the company.

Founded by longtime experts in the silicon foundry industry — Alison Greenlee, a quadruple-degreed graduate of the Massachusetts Institute of Technology who worked on floating silicon method that reduces waste in the manufacturing of silicon for solar cells; and Peter Kellerman, the progenitor of floating silicon method technologies.

The two founded Leading Edge Equipment to rejuvenate a project that had been mothballed by Applied Materials after years of research.

The two won $5 million in federal grants and raised an initial $6 million from venture capital firms in 2018 to kick off the technology.

Leading Edge expects that its equipment could become the standard for silicon substrate manufacturing.

Kellerman, now the emeritus chief technology officer, was replaced by Nathan Stoddard, a seasoned silicon manufacturing technology expert who has worked on teams that have brought three different solar wafer technologies from concept to pilot production. Stoddard, a former colleague of Greenlee’s at 1366 — one of the early companies devoted to new silicon production technologies — was won over by Greenlee and Kellerman’s belief in the old Applied Materials technology. 

The company claims that its technology can reduce wafer costs by 50 percent, increases commercial solar panel power by up to seven percent, and reduces manufacturing emissions by over 50 percent.

To commercialize the project, earlier this year the team brought in Rick Schwerdtfeger, a longtime innovator in solar technology who began working with CIGS crystals back in 1995. In the 2000s Schwerdtfeger spent his time in building out ARC Energy to scale next-generation furnace technologies. 

“After critical technology demonstrations and the development of a new commercial tool, we are now ready to launch this technology into market in 2021,” said Schwerdtfeger in a statement. “Having recently secured a 31,000 square foot facility and doubled the size of our team, we will use this new funding to prepare for our 2021 commercial pilots.”

 

#applied-materials, #chemistry, #crystals, #manufacturing, #massachusetts-institute-of-technology, #silicon, #solar-cell, #solar-manufacturing, #tc, #venture-capital-firms, #wafer

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Brazil’s banks try to outflank challengers by investing in a $15 million round for Quanto

Trying to outflank competition from neo banks and other potential challengers, two of Brazil’s largest financial services institutions, Bradesco and Itaú Unibanco, have invested in Quanto, a company developing technology to let retailers and other businesses access financial information and services.

Joining Brazil’s two largest banks are Kaszek Ventures, one of Latin America’s largest venture capital firms, and Coatue, the multi-billion dollar hedge fund. 

Bradesco joined the round through its InovaBra Ventures investment fund while Itaú invested directly and had its participation approved by Brazil’s Central Bank, according to a statement.

“Open banking changes the way we understand and consume financial services, but it’s quite exciting to see the Brazilian market embracing this new moment in such a positive way,” said Richard Taveira, Quanto’s chief executive, in a statement. “Brazil has the potential to lead the use of open banking worldwide, and this round is a testament to that.”

Brazil’s Central Bank is deeply invested in the prospect of opening up banking regulation to allow information and data sharing between payment processors and technology providers, retailers, and other service providers in the financial services value chain.

Quanto, which provides standardized bank data application programming interfaces that allow institutions to slash the time it takes to ccess bank account data.

“Open banking is an important evolution in the financial services market and we believe that Quanto can contribute in an impactful way in creating a more competitive market, focused on the customer experience,” said Rafael Padilha, Director at Bradesco Private Equity and Inovabra Ventures, in a statement.

The Quanto technology could enable financial product distribution through the same API platform as business to business services, the company said. Quanto claims that its services will make it easier for customers to access low-interest credit lines with a single sign-on model and to receive competitive interest rates by sharing banking data with multiple lenders in a single flow.

“Quanto provides the rail for banks and fintechs to compete, and consumers are the ones who win”, said Taveira.

#api, #bank, #banking, #brazil, #coatue, #companies, #director, #financial-services, #itau, #kaszek-ventures, #latin-america, #open-banking, #tc, #venture-capital-firms

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Why established venture firms should court emerging managers

Typically, institutional investors favor managers who’ve spun out of an established firm over those who’ve broken into venture from outside. Spin-outs are seen as a lower-risk, safer bet.

On the surface, that looks like a tried-and-true tack garnering much attention, appeal and capital. However, there’s an alternative path that deserves a spotlight: Spin-ins by emerging managers who have broken into VC by raising their own funds. The experiences of emerging managers, and even their personality traits, position them to be ready to scale within an established firm.

I’ve put together a few reasons I hold this view, based largely on my own experience. In 2015, I broke into VC by embarking on the fundraising process for my own fund. As a former aerospace person, I hate the term “building the airplane as you go,” because it’s just ridiculous, but I find it warmly applicable here. At the start, although I’d spent a decade launching satellites into space, I needed a serious crash course in venture capital. I vividly remember bringing on a partner and seeing the horrified look on their face when we shared our first “call for capital,” which we’d sent as email text. We were learning on the go.

Five years later, we’ve fully deployed MiLA Capital’s first fund, built an ecosystem for founders building tech you can touch, and invested in 22 companies. I can look back with reflection and gratitude on what I’ve learned.

Here are the top seven reasons emerging managers who built their own firms make great spin-in candidates:

  1. They’ve developed a personal brand and reputation that’s inherently theirs. They didn’t have to conform to a firm’s culture or pitch; they developed their own. Their thought leadership, their tweets, their way of working with founders — it’s proprietary. Authenticity enables them to both reach founders and win deals.
  2. They practice outbound recruitment as a way of life. A press release or call for submissions likely didn’t yield them torrential deal flow overnight, and so they’ve had to establish inroads with organizations, universities and other investors as a way to evolve their access to opportunities.
  3. They’ve hustled to get their portfolio to the next stage, because, survival. In order to jump over the valley of death that is the distance from fund one to fund two, the emerging manager had to show wins from their portfolio. This means that they were likely first in line to help a founder get over their hurdles and challenges, and that they know what it takes to act as a real partner to a startup.
  4. They’re used to spending time worrying about both the big and little things, and they’ll place a high value on your ability to reduce that cognitive load. Did we pay our taxes? Our internet bill? How can we scrape together the capital to hire an intern? Let me update our web page. Launching a firm brings incredible highs along with the pettiest of tasks. But it means that, much like founders, emerging managers are used to wearing dozens of hats and performing insane tasks, like unclogging the facility toilet and making a Costco run for air freshener.
  5. They built character through the fund development process. The emerging fund manager had to hit the road with an encyclopedia under their arm. They’ve practiced, learned and unlearned answers to “why now” and “why you” in their sleep. In 2019, according to First Republic Bank’s annual count, the number of micro VCs in the United States was approaching 1,000, up about 100 every year since 2015. Yet, the managers were able to differentiate themselves enough to win the opportunity to show proof of concept. This experience adds storytelling and grit to the toolbox.
  6. They likely sacrificed a lot for a career in venture. Building a fund takes time and doesn’t provide immediate pay in exchange for the work. Someone who accepts that reality and perseveres is embodying a long-term outlook (which is good for a VC) and commitment to this industry. There are a lot of sacrifices to make, often modulating an abundance mindset against the impact of the reality of their own life, and that says something about the manager’s character.
  7. Micro VCs attract a different, diverse pool of leaders. Emerging fund managers are driven by a desire to fill funding gaps. These are often related to gender and ethnicity. They are either outsiders inspired to deliver different outcomes, or insiders who become frustrated at their inability to execute where they see opportunity. This matters because founders have increasing choice and recognition of their power to counterselect investors, and this has become a critical crux, particularly in early-stage investing.

Consuelo Valverde (SV LatAm Capital), Christine Kenna (IGNIA), Jodi Sherman Jahic (Aligned Partners), Noramay Cadena (MiLA Capital), Lisa Feria (Stray Dog Capital), Miriam Rivera (Ulu Ventures), Ariel Jaduszliwer (Brainstorm Ventures). Image Credits: Noramay Cadena

I want to expand on this last idea, because diversity and access are increasingly the disruptors in venture. Today, 80% of investment partners at venture capital firms are white, compared with only 3% Latinx and 3% Black (NVCA). Latinx and Black-owned firms manage 1% of aggregate AUM in venture capital (Knight Foundation), even though, according to the NAIC, these types of diverse-owned firms can generate superior returns. Specifically, they achieve 15.2% median net IRR versus 3.7% for all PE firms in NAIC’s portfolio.

From experience, I’ve seen that diverse fund managers tend to be concentrated in micro VCs, with a few notable exceptions, including Miriam Rivera of Ulu Ventures . These micro VCs have been heads-down focused on building sustainable inroads and foundations, and on delivering on their visions to invest differently and with a gender and diversity lens.

In a VC ecosystem that has now looked up long enough to embrace the Black Lives Matter affirmation and the diversity conversations that have followed, firms are thinking creatively about how they access investment opportunities by underrepresented talent. Sidecar funds are being launched, pitch competitions are being promoted, VC job postings are being shared more widely, intros have been bypassed and processes are being streamlined and made more transparent.

That’s a great start. For sustainable change, firms interested in how they invest post-2020 should approach the journey top down and take a long hard look at spin-ins, as former emerging managers can catalyze their evolution toward a more representative, equitable and lasting venture capital firm.

#column, #corporate-venture-capital, #diversity, #entrepreneurship, #opinion, #private-equity, #tc, #ulu-ventures, #venture-capital, #venture-capital-firms

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Brazil’s BizCapital raises $12 million for its online lending service

BizCapital, an online lender based in Brazil, has raised $12 million from a clutch of investors including the German development finance institution, the corporate venture capital fund of MercadoLibre and existing investors Quona Capital, Monashees, Chromo INvest and 42K Investments.

“This latest round reinforces investors’ confidence in BizCapital’s ability to innovate in the Latin American credit market amid challenging circumstances caused by Covid-19,” said Francisco Ferreira, the company’s chief executive, in a statement. “We have seen four times as many business credit inquiries on our site year over year, and we are ready to serve them.” 

Founded in 2016, the company pitches itself as a fast and reliable way to access financing for working capital. It already has more than 5,000 customers across 1,200 cities in Brazil, according to a statement.

The company said it would use the money to develop new products for Brazilian small and medium-sized businesses and will expand into new distribution channels.

“With this new round of capital, we will continue to widen our product lineup, helping entrepreneurs during the entire lifecycle of their companies,” said Ferreira, in a statement. “There’s never been a more important time for innovation.” 

In a reflection of their American counterparts, Brazil’s venture capital firms had slowed down the pace of their investments, but now it seems like a slew of new deals are coming to market.

The investment reflects the longterm confidence that investors have in the increasingly central position e-commerce and technology-enabled services will have in the future of the Latin American economy.

 

 

#brazil, #corporate-finance, #economy, #finance, #funding, #fundraising, #mercadolibre, #money, #private-equity, #quona-capital, #tc, #venture-capital, #venture-capital-firms

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Remessa Online raises $20 million to become the TransferWise of Latin America

Remessa Online, the Brazilian money transfer service, said it has closed on $20 million in financing from one of the leading Latin American venture capital firms, Kaszek Ventures, and Accel Partners’ Kevin Efrusy, the architect of the famed venture capital firm’s Latin American investments.

Since its launch in 2016, Remessa Online has provided a pipeline for over $2 billion worth of international transfers for small and medium-sized businesses in the country. The company now boasts over 300,000 customers from 100 countries and says its fees are typically one eighth the cost of the local money transfer options.

“We understand that transferring money is just the beginning, and we are eager to build a global financial system that will make life easier for global citizens and businesses alike,” Liuzzi said.

Money transfer services are a huge business that startups have spent the last decade trying to improve in Europe and the U.S. European money transfer company, TransferWise has raised over $770 million alone in its bid to unseat the incumbents in the market. Meanwhile, the business-to-business cross-border payment gateway, Payoneer, has raised roughly $270 million to provide those services to small businesses.

Remessa Online already boasts a powerful group of investors and advisors including André Penha, the co-founder of apartment rental company QuintoAndar, and the former chief operating officer of Kraft Heinz USA, Fabio Armaganijan. With the new investment from Kaszek Ventures, firm co-founder Hernan Kazah, also the co-founder of the Latin American e-commerce giant MercadoLibre, will take a seat on the company’s board.

“We developed an online solution that is faster and substantially cheaper than traditional banking platforms, with digital and scalable processes and omnichannel customer support offered by a team of experts”, said Remessa Online’s co-founder and strategy director Alexandre Liuzzi, in a statement.

Last year, the company expanded its money transfer service to the U.K. and Europe, allowing Brazilians abroad to invest money, pay for education or rent housing without documentation or paperwork. The company’s accounts now come with an International Banking Account Number that allows its customers to receive money in nine currencies.

With the new year, Remessa has added additional services for small and medium-sized businesses and expanded its geographic footprint to include Argentina and Chile.

Latin American countries — especially Brazil — have been hit hard by the COVID-19 pandemic. While much of the economy is still reeling, the broad trends that are moving consumers and businesses to adopt e-commerce and mobile payment solutions are just as pronounced in the region as they are in the U.S., according to investors like Kazah.

“This crisis is accelerating the digitization process of several industries around the world and Remessa Online has taken the lead to transform the cross-border segment in Brazil, specially for SMBs,” he said in a statement.

Founded in 2016 by Fernando Pavani, Alexandre Liuzzi, Stefano Milo and Marcio William, Remessa Online was born from the founders own needs to find an easier way to send and receive money from abroad, according to the company.

In 2018, after a $4 million investment from Global Founders Capital and MAR Ventures, the company developed international processing capabilities and a more robust compliance tool kit to adhere to international anti-money laundering and know your customer standards. In the latter half of 2019, the company entered the SMB market with the launch of a toolkit for businesses that had been typically ignored by larger financial services institutions in Brazil.

“We believe in a world without physical borders. Our mission is to help our clients with their global financial needs, so that they can focus on what matters: their international dreams,” said Liuzzi.

#accel-partners, #advisors, #argentina, #bank, #banking, #brazil, #chief-operating-officer, #chile, #co-founder, #e-commerce, #economy, #europe, #finance, #financial-services, #global-founders-capital, #kaszek-ventures, #kevin-efrusy, #mercadolibre, #money, #money-laundering, #new-years-day, #tc, #united-kingdom, #united-states, #venture-capital, #venture-capital-firms

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The complicated calculus of taking Facebook’s venture money

Facebook is reportedly getting into the venture capital game, but for young entrepreneurs working in social media, ignoring or deleting that particular friend request could be the right call.

According to a report in Axios, the company is building up a corporate fund under the auspices of its “New Product Experimentation” team, which launched last year. The company posted a job opening looking for a “head of investments” for the new division and now has new job openings in the group for two “founder” positions in New York City and Menlo Park, California. 

Axios reported that the role would “manage a multimillion dollar fund that invests in leading private companies alongside top venture capital firms and angel investors,” according to a now-deleted post. The new hire will join Shabih Rizvi, a former partner at the Alphabet-backed corporate venture firm, Gradient Ventures, who began his career in venture at KPCB.

While Facebook said that the new investment arm would complement the work that the company already does to support startups through accelerators and hackathons, investors at some of Silicon Valley’s venture capital firms were skeptical. Perhaps with good reason, since the group that houses Facebook’s new investment team is hiring its own “founders” and has already developed a few apps that could compete with existing startups.

“[Money] of last resort,” one investor wrote in a text. Another said it would be a way for Facebook to spot potential acquisitions early enough to avoid triggering antitrust concerns, which may be good for Facebook, but bad for startups. “[Facebook] can’t buy 100 million-user apps any more,” this investor wrote in a direct message. “It needs to buy them closer to 10 million.”

#business-incubators, #corporate-finance, #corporate-venture-capital, #cvc, #entrepreneurship, #extra-crunch, #facebook, #finance, #fundings-exits, #fundraising, #market-analysis, #private-equity, #social, #social-network, #startups, #tc, #venture-capital, #venture-capital-firms

0

Software’s meteoric rise: Have VCs gone too far?

In both the private and public markets, valuations for B2B software companies continue to climb. The average publicly traded cloud company trades at nearly 12x forward revenue, while in the private markets, investors are considerably more aggressive. With record levels of private capital, continued outperformance in the public markets and a zero interest rate environment, it can be hard to imagine an impetus for slowing down this runaway software train (even the COVID-19 pandemic has not yet been successful!).

Yet, only four or five years ago, outsized exits in the enterprise sector were outliers. In 2016, we built the slide below (showing value at the time of IPO/acquisition) to demonstrate the dominance of large B2C exits. Back then, the 14 most significant venture-capital outcomes came from consumer companies, and the first enterprise outcome listed was LSI, a semiconductor company acquired for $6.5B in 2014.

Image Credits: Menlo Ventures/CB Insights

Times have changed. In 2019 alone, seven enterprise exits would make this chart (Slack, Qualtrics, Datadog, CrowdStrike, Cloudflare, 10x Genomics and Zoom). As I write this, 14 enterprise software businesses boast a market cap exceeding $20B.

To further illustrate this point, the two most valuable private venture-backed businesses (Stripe and SpaceX) are both enterprise businesses, and the top 25 most valuable companies are now nearly evenly split between consumer and enterprise. If this truly reflects the pipeline for the next generation of significant VC exits, we should expect the pendulum to continue to swing in favor of enterprise investing.

#10x-genomics, #cloud, #cloudflare, #column, #corporate-finance, #crowdstrike, #extra-crunch, #genomics, #market-analysis, #private-equity, #qualtrics, #saas, #software-as-a-service, #startups, #venture-capital, #venture-capital-firms, #vision-fund

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If you’re not investing in diverse founders, you’re a bad investor

We won’t sit here as we have for so many years with strong faces and encouraging words and pretend that we’re not tired.

We’re tired because we’ve spent yet another week mourning our Black brothers and sisters who died unjust deaths. We’re tired because we spent half of that week holding the hands of White allies as they were reminded that racism still exists and that it is, indeed, sad. We’re tired because we’re a broken record, telling firms and companies what they can do to fight racism and rarely getting the action they so emotionally promise they care about. We’re tired of holding back anger and sadness as we talk about these issues, knowing our industry isn’t even doing the bare minimum to support Black investors. On top of advising allies, mourning lives lost and working full time jobs, we also raised over $100,000. And we’re tired of racism.

Last week, BLCK VC hosted We Won’t Wait, a day of action where we called on venture firms to discuss, donate and diversify. We asked these firms to discuss Venture’s role in combating institutional racism, to donate to nonprofits that promote racial equity and to release their data on the diversity of their investment teams and portfolio founders. These are the first steps. If you haven’t done these, you’re likely not ready for “Office Hours.” So before we get ahead of ourselves, let’s address why these steps aren’t straightforward or sufficient.

Discuss. It took nationwide uprisings for many VC firms to discuss how they could combat institutional racism. Yet, 80% of firms don’t have one Black investment professional who can identify with what we go through in both our professional and personal lives. BLCK VC held its own discussion to share that perspective, centered on the experiences of Black investors and entrepreneurs.

During this discussion, Terri Burns of GV said, “when a Black person is murdered yet again by police, it is not correct to say that the system has failed, because the system was designed that way.” It is clear that systemic racism leads to the maltreatment, dehumanization and unjustified deaths of Black people across the country. Van Jones of Drive Capital drew a fitting analogy: “Being Black is like being in lane eight with a weight vest and cement boots.” Sounds uncomfortable. But that’s how every Black person in America feels stepping out of bed everyday. For Black founders, discrimination by VCs is par for the course. Elise Smith is not alone when she puts on her daily armor to allow herself to show up in the White-dominated industries of venture capital and Silicon Valley tech.

But we’re not going to repeat what they said. Because you can watch the video, and you can do the research, and you can understand the problem on your own. Truthfully, we have no interest in explaining the problem to White VCs again and again when so many of my brothers and sisters have already spoken on it. If you’d like to know why institutional racism made venture capital so homogeneous and exclusive and racist, please see here, here, here, here and here.

What we are interested in explaining is that these are just examples of what Black investors and entrepreneurs deal with everyday. For almost every Black person in tech, these examples are not only relatable, they are commonplace. These are not the stories that shock and surprise the Black community, these are the stories of the everyday. We didn’t talk about the times we heard the N-word from your colleagues or the times they said our natural hair and beards were unprofessional. We talked about the systems.

There are so many more stories and experiences out there besides what was shared by those seven voices, so please think about what perspectives are missing when you have your discussions. Not just your discussion about racism, but your discussions about the future of venture capital, and about aerospace investing, and about COVID-19 and D2C businesses, and about hiring, and about mentoring and about golf. Black voices are so often left out of the conversations where relationships are built and investment decisions are made, but discussions that lack a Black perspective are incomplete.

Donate. Many VC firms and investors spoke last week about donating their time and resources to Black entrepreneurs and investors — what an interesting way to talk about your job. Please do not donate your time or your money to Black investors or entrepreneurs.

Invest in Black founders because they’re some of the best entrepreneurs. Invest in them because they understand an issue that you do not. Invest in them for the same reason you invest in all of your entrepreneurs — because they’re good. When you frame what you’re doing as a donation, it not only demeans what these entrepreneurs are doing and perpetuates some of the most racist aspects of venture capital, but it also prevents you from understanding that you’re bad at your job. Yes, if you don’t have a diverse pipeline or a diverse portfolio you are bad at your job. Making a separate space and separate fund for Black entrepreneurs removes firms from the responsibility they have to search for, invest in and support Black founders.

If you would like to donate money, donate money to nonprofits that fight institutional racism. If you would like to donate time, volunteer. If you would like to become a better investor, figure out why your pipeline is so homogeneous and fix it.

Diversify. Let’s circle back to an important statistic: More than 80% of venture capital firms don’t have a single Black investor. This statistic is interesting because, as much as it’s about industry trends, it’s really about the failings of individual firms. Most firms don’t have a diverse investing staff. They don’t have a diverse investing staff because they don’t understand the value of racial diversity. They don’t understand the value of racial diversity because there are no diverse investors to force them to think about diversity. Rinse. Repeat.

The single most important part of diversifying a VC firm and diversifying VC broadly is tracking the lack of diversity. Most firms do not routinely track data on their investor, deal pipeline, event or investment diversity. As a result, they rarely think about racial diversity. This is where we ask firms to start. Yes, mentorship can be helpful, office hours can be helpful, but if you’re not tracking your firm’s diversity metrics, they will not improve.

What now? Okay, you’ve discussed racism with your partners, you’ve donated money to nonprofits and you (hopefully) started tracking the diversity of your firm. Now what? Racism resolved? Probably not.

Hopefully these conversations made you realize where your firm’s specific shortcomings are, and you have to address those. Most firms will realize they have a pipeline problem, so start there. Do all of your events, dinners and programs have Black representation? When you’re trying to fill an investor role, did you post the job on your website and in different Black online communities? Did your final round of candidates reflect the diversity of our country? Did you support the diverse investors you already employ so they don’t feel disadvantaged, under-advocated and left out? When you’re trying to write new checks, did you utilize Black scouts and consider businesses that don’t address you directly?

When you’ve done all of that, ask yourself this: When the protests quiet down, and articles about racial oppression aren’t at the top of your timeline, what will you be doing? Don’t let it just be office hours. Don’t let the enormity of the work ahead paralyze you against taking action now. Your actions matter. Your inaction matters.

The resilience of the Black community is unparalleled. That resilience means that no matter how tired we are, we will still fight to change this country and to change this industry. It means that no matter how many times we don’t want to advise allies, we will. And it means that no matter how many times we face oppression and mourn for our brothers and sisters, we will still rise to the challenges. And while the stories of overt racism and microaggressions will continue, so too will our drive to move forward and our action to break down barriers. We will continue to build a home for ourselves in this industry. We will continue to work to ensure that Black Lives Matter.

#column, #diversity, #entrepreneurship, #inclusion, #online-communities, #racism, #startups, #tc, #venture-capital, #venture-capital-firms

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What to consider before publishing your diversity memo

In the past few weeks, several venture capital firms have published different variations of the same pledge: we’ll do a better job supporting the Black community.

My timeline, and I’m assuming yours too, has been filled with statements from non-Black venture capitalists saying that they will rethink how to be more inclusive with their hiring and wiring.

There is no need to applaud firms for taking long overdue steps to treat others equally. What is more important is how we’re going to hold these firms accountable going forward, after a history of inaction.

In a memo published on Friday, Matchstick Ventures outlined a series of commitments to fight racism and underrepresentation. The firm, which manages nearly $37 million dollars and is led by Ryan Broshar and Natty Zola, turned to Black entrepreneur Clarence Bethea for advice on how to proceed.

The pledge stood out for two firm reasons: It is more robust than most promises we have seen by high-profile firms, and it has actual numbers and a deadline, which are key to benchmarking progress.

Disclose your current diversity statistics

Matchstick says 7% of the companies it has invested in have Black founders or founding team members, which is seven times the industry average. Portfolio diversity data needs to be more largely released by the VC community because it’s the only way to determine if progress is being made. So far, beyond Matchstick, we’ve only seen Initialized Capital release diversity metrics. Union Square Ventures said that of moe than 100 investments, only a few have been in self-identified Black founders.

#diversity, #entrepreneurship, #extra-crunch, #hiring, #inclusion, #initialized-capital, #market-analysis, #matchstick-ventures, #startups, #tc, #union-square-ventures, #venture-capital, #venture-capital-firms

0

Venture firms rush to find ways to support Black founders and investors

As protests against police brutality and economic manifestations of systemic racism in the U.S. continue, venture capital firms are joining the chorus of technology industry advocates lending their support to the cause.

For the past three days, technology company executives and the investors who backed them have issued statements of support for the protests and the Black Lives Matter movement. Firms like Benchmark, Sequoia, Bessemer, Eniac Ventures, Work-Bench and SaaSTR Fund founder Jason Lemkin all tweeted in support of the cause and offered to take steps to improve the lack of representation in their industry.

But some Black entrepreneurs and investors are questioning the motivations of these firms, given the weight of evidence that shows inaction in the face of historic inequality in the technology and venture capital industry.

“The way to find, hire and fund black people in the tech world is the same as finding, hiring and funding any other group. You build relationships with people in that group, you seek out thought leaders from the community and learn from them, you tell your hiring and investing teams that there’s a hole in the fund’s expertise stack and you fill it. It’s not about tokenizing one person or donating to a one time effort or writing it off as a pipeline problem,” wrote Sarah Kunst, the founding managing partner of Cleo Capital, in a text to TechCrunch. “It’s using the embarrassment of skills and resources these funds have to learn, build relationships and deploy capital.”

‘Make the hire, send the wire’

Entrepreneurs and investors say steps from investors must boil down to two main actions: hire the people and wire the investment.

In a Medium post today, the New York-based investment firm Work-Bench detailed steps it would take to make sure it is encouraging Black entrepreneurs and investors.

In addition to financial commitments to organizations, including the Equal Justice Initiative, the Southern Poverty Law Center and Color of Change, the firm is instituting new steps to ensure that its own operations also work to promote Black entrepreneurs and investors.

The firm detailed a number of other steps it will take “if there is interest,” including collating a public database of Black founders working on enterprise startups for other enterprise VCs, and working with HBCUvc and other Black VC firms.

Some firms are taking steps to go even further — including the creation of dedicated pre-seed investment funds that would focus exclusively on companies coming from historically Black colleges and universities.

These initiatives are in their early stages, and investors are not ready to disclose too much about the steps that they’re taking, but they extend far beyond dedicated funding. Investors are also looking to step up their recruitment at HBCUs and land-grant universities to focus more on diverse candidates and doing internal training from within portfolio companies to create a new generation of minority entrepreneurs through more extensive and robust entrepreneur-in-residence programs.

Firms are also looking to create benchmarks and internal surveys to monitor their progress and find out where their firms and portfolios are falling short. This could start with firms choosing to publish how many Black founders they have invested in to date, with annual follow-ups, for the spirit of transparency and accountability.

The data is accessible to investors internally, though few firms publish such statistics publicly. Initialized Capital disclosed on Monday that 7% of companies in its most recent fund are led by Black founders.

Problems with diversity extend into the funds themselves, as Backstage Capital founder Arlan Hamilton wrote in a direct message to us.

“Investors have been reaching out to me left and right asking what they can do. It’s not complicated: Invest in Black founders. You don’t have to invest in ALL Black founders. You can keep your thesis and yes even your so-called ‘standards’ and find multiple Black founders to invest in,” Hamilton wrote. “If you need help, I have 130 portfolio companies + I can introduce you to a curated list of a dozen Black investors to hire. My email address is ARLAN@BackstageCapital.com. No more excuses.”

Internal recruitment efforts for VC partners can be inherently biased. Think of it as a domino effect: if LPs only fund white GPs, then white GPs can stick to their preexisting networks for looking for other partners to bring on. Unless non-diverse VC firms break their existing networks, either through recruiters or underrepresented founders, this effect will continue.

‘And I do hope to write the check’

Partners at venture firms are committing to doing more themselves to support the community of Black entrepreneurs. 

I don’t do that many investments a year (I am a slow+quiet investor), but please email me your decks and pitches,” wrote Jason Lemkin on Twitter. “I will try to only meet/Zoom with black founders in June.”

Nihal Mehta, the founder of New York-based investment firm Eniac Ventures, announced on Twitter that he was taking no-charge appointments with Black founders via Superpeer, which sells one-to-one video calls. Within 24 hours of Mehta’s tweet, he was booked for the summer: 103 meetings with Black founders. 

“This means there is incredible demand, a large gap that needs to be filled, between Black founders and the tech community at large,” Mehta said. 

The entire Eniac Ventures team is also opening up free Superpeer consulting slots dedicated to chatting with and investing in Black founders. 

Ha Nguyen, a partner at Spero Ventures, is hosting a Black founders breakfast and AMA lunch on Friday. Nguyen also offered Black founders to reach out when they need help with the fundraising process, pitch deck and intros for their next check. “And I do hope to write the check,” Nguyen wrote in a LinkedIn post

Hustle Fund’s Elizabeth Yin encouraged founders to continue sending the firm cold inbound pitches, noting that 15% of Hustle Fund’s portfolio companies came from outside their network.

Yin also noted that the firm is working to build informal deal flow relationships with founders who have diverse networks, like the firm’s venture associate intern, Jasmin Johnson, who works with Score 3, or Lolita Taub, former principal at Backstage, and her investor-matching program. 

Taub has a Google form in her pinned tweet where she reviews startup submissions. Then, if the company is a fit for her she will reach out, and if the company is a fit for other investors (Backstage Capital, Harlem Capital, Hustle Fund, WXR Fund), Taub will connect the two parties. 

Taub has a decorated past in tech and venture capital, so her network is broad, but her investing program itself is simple. It is reproducible for any super connector out there in the Valley with a diverse network. 

‘The talent has always been there’

As the investment community rushes to voice its support for the Black community, Black investors and startup founders question their motives.

That it has taken a week of protesting and the deaths of countless Black men and women at the hands of police to wake up investors to the problems that the industry — and the country at large — faces is a sign of the depth of the problem.

The Black investor-led firm Precursor released a statement on Sunday:

Investors like Marlon Nichols at MaC Venture Capital and Kobie Fuller at Upfront Ventures have made the development of a diverse group of founders a priority through their own investment activities and the creation of startups like Valence — a network for African American talent.

The data on inequality in the industry is staggering, as Nichols noted in a post earlier today:

  • Blacks are underrepresented in the executive ranks of startups by 82%
  • More than 75% of all rounds raised go to all White founding teams
  • Diverse founding and executive teams generate higher median realized multiples (RMs) on acquisitions and IPOs than all White founding and executive teams (3.3x to 2.5x and 3.3x to 2x respectively)

So, if you are truly opposed to racism and discrimination, something you can start to do immediately is stop making excuses for not investing in startups and funds led by Black men and women. Instead, make the investments, extend your networks, hire us in leadership/ decision making roles, and hold us to the same standards that you do for White led startups and venture funds.

There’s still a long way for the industry to go and plenty of ways investors can improve.

“Every top MBA program has a black student organization, every top tech company has black ERGs, go recruit from those pools to start. There are very visible funds like Ulu, Precursor, my own fund Cleo Capital who are led by black tech leaders. There are very visible investors like Chris Lyons, Ken Chenault, Adrian Fenty and Megan Maloney,” Kunst wrote.

“We are all vocal about where we spend our time finding and supporting black tech people. We speak at events like Culture Shifting Weekend and Black Women Talk Tech, we support orgs like Code2040, HBCUVC and Blck VC…. Simply put, we’ve done the work and the talent has always been there. What’s left is for larger funds to follow that lead and make a real commitment to hiring black VCs as well as funding black founders and encouraging their portfolio companies to hire black people into positions of leadership.”

The efforts announced by large venture capital firms in the last few days should broaden the access that underrepresented founders have to venture capital money and decision-makers and could lead to some checks. But calendar invites and emails will not solve racial injustice. Nor will a dedicated month of talking to Black founders solve the pattern-matching that systemically sits within venture capital.

Therefore, more robust actions are needed by the venture community, because statements are only as powerful as the checks they write and hires they make.

#adrian-fenty, #arlan-hamilton, #backstage-capital, #benchmark, #cleo-capital, #diversity, #elizabeth-yin, #eniac-ventures, #harlem-capital, #hustle-fund, #initialized-capital, #jason-lemkin, #kobie-fuller, #mac-venture-capital, #marlon-nichols, #saastr-fund, #sarah-kunst, #sequoia, #superpeer, #tc, #upfront-ventures, #venture-capital-firms, #work-bench

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Big VCs stacked billions in Q1 while smaller firms saw their haul shrink

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

After spending perhaps more time than we should have recently trying to figure out what’s going on with the public markets, let’s return to the private markets this morning, focusing in on venture capital itself. New data out today details how U.S.-based VCs fared in Q1 2020, giving us a window into how flush the financial class of startup land was heading into the COVID-19 era.

The short answer is that big funds raised lots of cash, while smaller funds appear to have put in a somewhat lackluster quarter.

That big funds performed well in Q1 shouldn’t surprise. We’ve seen NEA stack $3.6 billion in March and Founders Fund raised $3 billion for its own investing work earlier in the quarter, to pick two examples TechCrunch covered.

The impact of these mega-raises, according to a report from Prequin and First Republic Bank, was to push up the total amount of capital raised by American venture capital firms in the quarter, while the decline in the number of funds that raised $50 million or less led to a slim number of total funds raised. It’s hard to call a surge in dry powder bearish, but the fall-off on smaller funds could limit seed capital in the future.

Notably, there have been warning signs since at least 2019 that seed volume was slowing; recent data from the U.S. underscores the trend. So what we’re seeing this morning in data-form is a summation of what we’ve previously reported in a more piecemeal fashion.

Let’s pick over the data to see what we can learn about how much spare capital the venture classes are sitting on today.

The rich get richer

The whole report is worth reading if you have time. Aside from the data concerning how much money VCs are raising themselves, it includes several interesting bits of information. For example, there were just 960 venture deals closed in the U.S. in Q1 — a pace that would make 2020 the slowest year since 2009 if it held steady.

Per the listed data, 83 U.S.-based venture capitalists closed (“held a final close”) a fund in Q1 2020. This was off about 24% from the Q1 2019 result of 109. However, while the number of funds raised was lackluster, they made up for it in dollar-scale. According to Preqin and First Republic Bank, the “funds that closed raised $27 [billion], a substantial total representing over half of the capital raised in 2019 ($50 [billion]).”

#coronavirus, #corporate-finance, #covid-19, #extra-crunch, #first-republic-bank, #founders-fund, #fundings-exits, #market-analysis, #preqin, #private-equity, #startups, #talent, #tc, #the-exchange, #venture-capital, #venture-capital-firms

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WeWork co-founder Adam Neumann accuses SoftBank of abusing its power in new lawsuit

WeWork co-founder Adam Neumann accused SoftBank Group of abusing its power in a new lawsuit filed Monday that alleges breach of contract and breach of fiduciary duty for pulling a $3 billion tender offer for WeWork shares.

The lawsuit, filed in Delaware Court of Chancery, included a motion to consolidate his case with a lawsuit filed last month by a Special Committee of WeWork’s board. Both lawsuits focus on Softbank Group and its Vision Fund’s decision to back out of a deal to buy shares of the co-working company.

Softbank Group pulled its $3 billion tender offer for WeWork shares April 1, citing COVID-19’s impact on the business but also closing conditions not being met. Specifically, it pointed to outstanding regulatory investigations, a growing body of litigation against the company, and the failure to restructure a joint venture in China as reasons to torpedo the agreement.

“SoftBank will vigorously defend itself against these meritless claims,” Rob Townsend, senior vice president and chief officer at SoftBank, said in a statement. “Under the terms of our agreement, which Adam Neumann signed, SoftBank had no obligation to complete the tender offer in which Mr. Neumann – the biggest beneficiary – sought to sell nearly $1 billion in stock.”

A deal was struck in October 2019 to buy out some of the equity held by Neumann, as well as the venture capital Benchmark Capital and many individual company employees. Neumann was set to receive almost $1 billion for his shares.

WeWork and Neumann gave control of the company to SoftBank, which increased its ownership at a significantly reduced price, according to the complaint.

“SoftBank has abused its position of power to “renege on its promise to pay [Neumann, shareholders, and hundreds of employees] for the benefits it already received,” the complaint said. The lawsuit claims that SoftBank was “secretly taking actions to undermine it” by pressuring investors not to waive certain rights and preventing the China roll-up transaction from closing.

The lawsuit further alleges that SoftBank’s financial condition influenced the company’s decision to terminate the tender offer.

The lawsuit alleges that SoftBank “abused its power” after WeWork’s special committee filed a lawsuit by insisting that only the board, which is controlled by Softbank, could take legal action.

“In real time, Softbank Group and Softbank Vision Fund are abusing their control of WeWork in an effort to stop the Special Committee’s meritorious lawsuit from being heard,” the complaint reads.

#adam-neumann, #benchmark-capital, #china, #co-founder, #companies, #softbank-group, #tc, #telecommunications, #venture-capital-firms, #wework

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Stocks fall again on continued coronavirus worries

Is it good news to say that stocks fell less sharply than they had on previous days?

That’s the bright side of another turbulent trading day across the Nasdaq and New York Stock Exchange. The major indices were down again — although their declines were less severe than they had been during the week.

Investors appeared to shake off positive labor statistics (the U.S. added 273,000 jobs, ahead of expectations), as the expanding number of coronavirus cases in the U.S. and lack of a coordinated response from the Trump administration took their toll on investor confidence that the impact on the economy would be minimal.

With that said, things could have been worse.

The Dow fell 256.50 points, or just under 1%, to close at 25,864.78, while the S&P stumbled 51.57 points, or 1.7%, to close at 2,972.37 while the Nasdaq slid 1.8%, or 162.98 to close at 8,575.62. The benchmark indices are in the territory of a market correction — hovering at around a 10% loss already on the year.

For startups, it’s important to note that these market pressures can have implications for their businesses. Jittery buyers may be inclined to curb spending and save to conserve cash on their own balance sheets; consumers may rethink priorities and focus on essential purchases as they tighten their own belts.

Sequoia Capital warned in a blog post yesterday that things may change as time rolls along and the global economy stutters.

Here’s their take:

  • Drop in business activity. Some companies have seen their growth rates drop sharply between December and February. Several companies that were on track are now at risk of missing their Q1 2020 plans as the effects of the virus ripple wider.
  • Supply chain disruptions. The unprecedented lockdown in China is directly impacting global supply chains. Hardware, direct-to-consumer and retailing companies may need to find alternative suppliers. Pure software companies are less exposed to supply chain disruptions, but remain at risk due to cascading economic effects.
  • Curtailment of travel and canceled meetings. Many companies have banned all “non-essential” travel and some have banned all international travel. While travel companies are directly impacted, all companies that depend on in-person meetings to conduct sales, business development or partnership discussions are being affected.

This isn’t the first time that one of the country’s most successful venture capital firms has warned its portfolio about the possibility of an economic crisis. In the wake of the 2008 financial crisis the firm issued an infamous slide deck warning “RIP Good Times.”

For financial markets the funeral bells are already tolling in the early part of the year. Now, a reckoning may be coming for startups that were on the edge of the bubble.

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