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From Unity to Disrupt, tech has an especially optimistic week

4 hours 21 min ago

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While TechCrunch was busy producing our first-ever online Disrupt this week, the IPO market got even more exciting than expected — so here’s a quick look. Snowflake, Jfrog, Sumo Logic and Unity each raised price ranges days before IPO, to meet what had seemed like growing enthusiasm from public markets. Yet each still opened higher than its offering price, with cloud data-warehousing company Snowflake’s value doubling to make it the largest software IPO in history and Unity up 30%.

Despite the pandemic and various major turmoils around the world, the promise of these companies is helping to maintain optimism from retail investors to people thinking about founding a company.

Here’s a quick look at our coverage of the main companies in the IPO process this week, in chronological order:

Snowflake and JFrog raise IPO ranges as tech markets stay hot (EC)

As it heads for IPO, Palantir hires a chief accountant and gets approval from NYSE to trade

What’s ahead in IPO land for JFrog, Snowflake, Sumo Logic and Unity (EC)

JFrog and Snowflake’s aggressive IPO pricing point to strong demand for cloud shares (EC)

Unity raises IPO price range after JFrog, Snowflake target steep debut valuations

Go public now while software valuations make no sense, Part II

In its 4th revision to the SEC, Palantir tries to explain what the hell is going on

It’s game on as Unity begins trading

Unity Software has strong opening, gaining 31% after pricing above its raised range

And don’t miss Alex Wilhelm’s additional notes coming later today over on The Exchange weekend newsletter.

Image Credits: Canix

Disrupt 2020

Our tenth annual startup conference was remote-first this year, but it managed to capture the same sort of vibe in my humble opinion.

First, a cannabis SaaS company took home the grand prize at the Startup Battlefield competition… we are truly living in the cloud these days. Here’s more, from Matt Burns:

Growing cannabis on an industrial scale involves managing margins while continually adhering to compliance laws. For many growers, large and small, this consists of constant data entry from seed to sale. Canix’s solution employs a robust enterprise resource planning platform with a steep tilt toward reducing the time it takes to input data. This platform integrates nicely with common bookkeeping software and Metrc, an industry-wide regulatory platform, through the use of RFID scanners and Bluetooth-enabled scales. Canix launched in June 2019, and in a little over a year (and during a pandemic), acquired over 300 customers spanning more than 1,000 growing facilities and tracking the movement of 2.5 million plants.

Next, here’s an especially pithy take on the future of startups, from senior Benchmark partner Peter Fenton.

I think this opportunity to build the tools for a world that’s ‘post place’ has just opened up and is as exciting as anything I’ve seen in my venture career. You walk around right now and you see these ghosts towns, with gyms, classes you might take [and so forth] and now maybe you go online and do Peloton, or that class you maybe do online. So I think a whole field of opportunities will move into this post-place delivery mechanism that are really exciting. [It] could be 10 to 20 years of innovation that just got pulled forward into today.

The truth is that I have not had time to watch all of the talks — I was busy with the Extra Crunch stage and other stuff, and that’s not even counting other programming we had going on. So check out the quick selection of picks below. To catch up more, you can browse the full agenda and watch the videos here.

We’ll also be offering coverage of the EC stage plus analysis from our conversations in the coming weeks, for subscribers (which includes anyone who bought a ticket and redeemed it for an annual subscription).

Quantum startup CEO suggests we are only five years away from a quantum desktop computer

Daphne Koller: ‘Digital biology is an incredible place to be right now’

Dropbox CEO Drew Houston says the pandemic forced the company to reevaluate what work means

Airtable’s Howie Liu has no interest in exiting, even as the company’s valuation soars

Indian decacorn Byju’s CEO talks about future acquisitions, coronavirus and international expansion

Fabletics’ Adam Goldenberg and Kevin Hart on what’s next for the activewear empire

Southeast Asia’s East Ventures on female VCs, foreign investment, consolidation

Ride-hailing was hit hard by COVID-19 — Grab’s Russell Cohen on how the company adapted

(Photo Illustration by Sheldon Cooper/SOPA Images/LightRocket via Getty Images)

Tik Tok and geopolitics

Over in the real world, Tik Tok is still on track for a full shut-down despite the frantic dealmaking efforts by innumerable parties. At one point this week, it looked like Oracle and various business interests had a plan to keep Tik Tok alive as an independent company that would IPO (with some sort of national security oversight), and maybe that will still come about? I doubt Trump and his advisers will go along with that plan, given the national security problem of leaving algorithms controlled from China, and the long-term trade problem of US consumer tech being banned there too.

Meanwhile, the Bytedance-owned company also just announced 100 million users in Europe. Apparently it was a press push to counter the bad news, but as Ingrid Lunden notes, it’s hard to know what this user base means without the US. To which I’d add, European regulators are already busy going after foreign tech companies. I can’t imagine that they’ll leave an app this popular alone.

It’s another reminder that the next era will not offer startups the same possibilities for global success.

How to hire your first engineer (if you’re a nontechnical founder)

Lucas Matney talked with technical leaders and startup founders to figure out a key problem that many readers of this newsletter have had before (including me). How to get someone who can make your company a tech company? Here’s the intro, with the full thing on Extra Crunch:

Their advice spanned how to handle technical interviews, sourcing technical talent, how to decide whether your first engineering hire should become CTO  — and how to best kick the can down the road if you’re not ready to start worrying about bringing on an engineer quite yet. Everyone I spoke to was quick to caution that their tips weren’t one-size-fits-all and that overcoming limited knowledge often comes down to tapping the right people to help you out and lend a greater understanding of your options.

I’ve broken down these tips into a digestible guide that’s focused on four areas:

  • Sourcing technical candidates.
  • How to conduct interviews.
  • Making an offer.
  • Taking a nontraditional route.
Across the week

TechCrunch

Calling VCs in Zurich & Geneva: Be featured in The Great TechCrunch Survey of European VC

Opendoor to go public by way of Chamath Palihapitiya SPAC

Black Tech Pipeline proves the ‘pipeline problem’ isn’t real

Gaming companies are reportedly the next targets in the US government’s potentially broader Tencent purge

Equity Monday: The TikTok mess, two funding rounds and Nvidia will buy ARM

Extra Crunch

3 VCs discuss the state of SaaS investing in 2020

The stages of traditional fundraising

Making sense of 3 edtech extension rounds

Facebook investor Jim Breyer picks Austin as Breyer Capital’s second home

Are high churn rates depressing earnings for app developers?

#EquityPod: Schools are closing their doors, but Opendoor isn’t

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

This week Natasha MascarenhasDanny Crichton and myself hosted a live taping at Disrupt for a digital reception. It was good fun, though of course we’re looking forward to bringing the live show back to the conference next year, vaccine allowing.

Thankfully we had Chris Gates behind the scenes tweaking the dials, Alexandra Ames fitting us into the program and some folks to watch live.

What did we talk about? All of this (and some very, very bad jokes):

And then we tried to play a game that may or may not make it into the final cut. Either way, it was great to have Equity back at Disrupt. More to come. Hugs from us!

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

Categories: Business News

Unity Software has strong opening, gaining 31% after pricing above its raised range

2020, September 19 - 8:25am

Whoever said you can’t make money playing video games clearly hasn’t taken a look at Unity Software’s stock price.

On its first official day of trading, the company rose more than 31%, opening at $75 per share before closing the day at $68.35. Unity’s share price gains came after last night’s pricing of the company’s stock at $52 per share, well above the range of $44 to $48 which was itself an upward revision of the company’s initial target.

Games like “Pokémon GO” and “Iron Man VR” rely on the company’s software, as do untold numbers of other mobile gaming applications that use the company’s toolkit for support. The company’s customers range from small gaming publishers to large gaming giants like Electronic Arts, Niantic, Ubisoft and Tencent.

Unity’s IPO comes on the heels of other well-received debuts, including Sumo Logic, Snowflake and JFrog .

TechCrunch caught up with Unity’s CFO, Kim Jabal, after-hours today to dig in a bit on the transaction.

According to Jabal, hosting her company’s roadshow over Zoom had some advantages, as her team didn’t have to focus on tackling a single geography per day, allowing Unity to “optimize” its time based on who the company wanted to meet, instead, of say, whomever was free in Boston or Chicago on a particular Tuesday morning.

Unity IPO aims to fuel growth across gaming and beyond

Jabal’s comments aren’t the first that TechCrunch has heard regarding roadshows going well in a digital format instead of as an in-person presentation. If the old-school roadshow survives, we’ll be surprised, though private jet companies will miss the business.

Talking about the transaction itself, Jabal stressed the connection between her company’s employees, value  and their access to that same value. Unity’s IPO was unique in that existing and former employees were able to trade 15% of their vested holdings in the company on day one, excluding “current executive officers and directors,” per SEC filings.

That act does not seemed to have dampened enthusiasm for the company’s shares, and could have helped boost early float, allowing for the two sides of the supply and demand curves to more quickly meet close to the company’s real value, instead of a scarcity-driven, more artificial figure.

Bear and bull cases for Unity’s IPO

Regarding Unity’s IPO pricing, Jabal discussed what she called a “very data-driven process.” The result of that process was an IPO price that came in above its raised range, and still rose during its first day’s trading, but less than 50%. That’s about as good an outcome as you can hope for in an IPO.

One final thing for the SaaS nerds out there. Unity’s “dollar-based net expansion rate” went from very good to outstanding in 2020, or in the words of the S-1/A:

Our dollar-based net expansion rate, which measures expansion in existing customers’ revenue over a trailing 12-month period, grew from 124% as of December 31, 2018 to 133% as of December 31, 2019, and from 129% as of June 30, 2019 to 142% as of June 30, 2020, demonstrating the power of this strategy.

We had to ask. And the answer, per Jabal, was a combination of the company’s platform strength and how customers tend to use more of Unity’s services over time, which she described as growing with their customers. And the second key element was 2020’s unique dynamics that gave Unity a “tailwind” thanks to “increased usage, particularly in gaming.”

Looking at our own gaming levels in 2020 compared to 2019, that checks out.

This post closes the book on this week’s IPO class. Tired yet? Don’t be. Palantir is up next, and then Asana .

Categories: Business News

SaaS Ventures takes the investment road less traveled

2020, September 19 - 6:15am

Most venture capital firms are based in hubs like Silicon Valley, New York City and Boston. These firms nurture those ecosystems and they’ve done well, but SaaS Ventures decided to go a different route: it went to cities like Chicago, Green Bay, Wisconsin and Lincoln, Nebraska.

The firm looks for enterprise-focused entrepreneurs who are trying to solve a different set of problems than you might find in these other centers of capital, issues that require digital solutions but might fall outside a typical computer science graduate’s experience.

Saas Ventures looks at four main investment areas: trucking and logistics, manufacturing, e-commerce enablement for industries that have not typically gone online and cybersecurity, the latter being the most mainstream of the areas SaaS Ventures covers.

The company’s first fund, which launched in 2017, was worth $20 million, but SaaS Ventures launched a second fund of equal amount earlier this month. It tends to stick to small-dollar-amount investments, while partnering with larger firms when it contributes funds to a deal.

We talked to Collin Gutman, founder and managing partner at SaaS Ventures, to learn about his investment philosophy, and why he decided to take the road less traveled for his investment thesis.

A different investment approach

Gutman’s journey to find enterprise startups in out of the way places began in 2012 when he worked at an early enterprise startup accelerator called Acceleprise. “We were really the first ones who said enterprise tech companies are wired differently, and need a different set of early-stage resources,” Gutman told TechCrunch.

Through that experience, he decided to launch SaaS Ventures in 2017, with several key ideas underpinning the firm’s investment thesis: after his experience at Acceleprise, he decided to concentrate on the enterprise from a slightly different angle than most early-stage VC establishments.

Collin Gutman, founder and managing partner at SaaS Ventures (Image Credits: SaaS Ventures)

The second part of his thesis was to concentrate on secondary markets, which meant looking beyond the popular startup ecosystem centers and investing in areas that didn’t typically get much attention. To date, SaaS Ventures has made investments in 23 states and Toronto, seeking startups that others might have overlooked.

“We have really phenomenal coverage in terms of not just geography, but in terms of what’s happening with the underlying businesses, as well as their customers,” Gutman said. He believes that broad second-tier market data gives his firm an upper hand when selecting startups to invest in. More on that later.

Categories: Business News

And the winner of Startup Battlefield at Disrupt 2020 is… Canix

2020, September 19 - 5:02am

We started this competition with 20 impressive startups. After five days of fierce pitching in a wholly new virtual Startup Battlefield arena, we have a winner.

The startups taking part in the Startup Battlefield have all been hand-picked to participate in our highly competitive startup competition. It was an unprecedented year as we moved all of the nail-biting excitement of our physical contest to a virtual stage. They all presented in front of multiple groups of VCs and tech leaders serving as judges for a chance to win $100,000 and the coveted Disrupt Cup.

After hours of deliberations, TechCrunch editors pored over the judges’ notes and narrowed the list down to five finalists: Canix, Firehawk AerospaceHacWare, Jefa and Matidor.

These startups made their way to the finale to demo in front of our final panel of judges, which included: Caryn Marooney (Coatue Management), Ilya Fushman (Kleiner Perkins), Michael Seibel (Y Combinator), Sonali De Rycker (Accel), Troy Carter (Q&A) and Matthew Panzarino (TechCrunch).

We’re now ready to announce that the winner of TechCrunch Battlefield 2020 is…

Winner: Canix

Canix has built a robust enterprise resource planning platform designed to reduce the time it takes cannabis growers to input data. It integrates nicely with common bookkeeping software, as well as Metrc, an industry-wide regulatory platform. The founders say their platform can help growers increase margins through improved labor costs.

You can read more about Canix here.

Runner-up: Matidor

Matidor is building a project platform for consultants and engineers to keep track of projects and geospatial data in a single dashboard. It offers an all-in-one data visualization suite for customers in the energy and environmental services fields.

You can read more about Matidor here.

Watch the announcement below:

Categories: Business News

Are high churn rates depressing earnings for app developers?

2020, September 19 - 4:16am
Jacob Eiting Contributor Share on Twitter Jacob Eiting is CEO of RevenueCat, a platform for managing cross-platform in-app purchases, products and subscribers and analyzing in-app-purchase data.

Ever since Apple opened up subscription monetization to more apps in 2016 — and enticed developers with an 85/15 split on revenue from customers that remain subscribed for more than a year — subscription monetization and retention has felt like the Holy Grail for app developers. So much so that Google quickly followed suit in what appeared to be an example of healthy competition for developers in the mobile OS duopoly.

But how does that split actually work out for most apps? Turns out, the 85/15 split — which Apple is keen to mention anytime developers complain about the App Store rev share — doesn’t have a meaningful impact for most developers. Because churn.

No matter how great an app is, subscribers are going to churn. Sometimes it’s because of a credit card expiring or some other billing issue. And sometimes it’s more of a pause, and the user comes back after a few months. But the majority of churn comes from subscribers who, for whatever reason, decide that the app just isn’t worth paying for anymore. If a subscriber churns before the one-year mark, the developer never sees that 85% split. And even if the user resubscribes, Apple and Google reset the clock if a subscription has lapsed for more than 60 days. Rather convenient… for Apple and Google.

Top mobile apps like Netflix and Spotify report churn rates in the low single digits, but they are the outliers. According to our data, the median churn rate for subscription apps is around 13% for monthly subscriptions and around 50% for annual. Monthly subscription churn is generally a bit higher in the first few months, then it tapers off. But an average churn of 13% leaves just 20% of subscribers crossing that magical 85/15 threshold.

In practice, what this means is that, for all the hype around the 85/15 split, very few developers are going to see a meaningful increase in revenue:

Image Credits: RevenueCat (opens in a new window)

Categories: Business News

Amid layoffs and allegations of fraud, the FBI has arrested NS8’s CEO following its $100+ million summer financing

2020, September 19 - 2:29am

The tagline from today’s announcement from the United States Attorney’s office for the Southern District of New York says it all: “Adam Rogas Allegedly Raised $123 Million from Investors Using Financial Statements that Showed Tens of Millions of Dollars of Revenue and Assets that Did Not Exist.”

Rogas, the co-founder and former chief executive and chief financial officer and board member of the Las Vegas-based fraud prevention company, NS8, was arrested by the Federal Bureau of Investigation and in Manhattan court earlier today charged with securities fraud, fraud in the offer of sale of securities and wire fraud.

Last week, the company laid off hundreds of staff as reports of an investigation by the Securities and Exchange Commission surfaced, according to a report in Forbes.

“This is a rapidly evolving situation,” Lightspeed Ventures told Forbes in a statement. “We are shocked by the news and have taken steps to inform our LPs. It would be premature to comment further at this time.” Lightspeed Ventures helped lead NS8’s $123 million Series A this June. Other investors include Edison Partners, Lytical Ventures, Sorenson Ventures, Arbor Ventures, Hillcrest Venture Partners, Blu Venture Investors and Bloomberg Beta, per Crunchbase data.

The allegations are, indeed, shocking.

“As alleged, Adam Rogas was the proverbial fox guarding the henhouse,” said Audrey Strauss, the acting U.S. Attorney for the Southern District of New York, in a statement. “While raising over $100 million from investors for his fraud prevention company, Rogas himself allegedly was engaging in a brazen fraud.  Today’s arrest of Rogas ensures that he will be held accountable for his alleged scheme.”

Allegedly, while Rogas was in control of the bank accounts and spreadsheets that detailed its transactions with customers, he cooked the books to show millions in transactions that did not exist.

From January 2019 through February 2020, the FBI alleges that somewhere between 40% and 95% of the purported total assets on NS8’s balance sheet were fictitious, according to the statement. Over the same period Rogas altered bank statements to reflect $40 million in revenue that simply was not there, according to the Justice Department’s allegations.

On the back of that fake financial data, NS8 was able to raise more than $120 million from some top-tier investment firms, including Lightspeed Venture Partners and AXA Ventures. 

NS8 raises $123M led by Lightspeed for its suite of online fraud prevention tools

Rogas managed to hoodwink not just the investment firms, but the auditors who were conducting due diligence on their behalf. After the round was completed, NS8 did a secondary offering, which let Rogas cash out of $17.5 million through personal sales and through a company he controlled, according to the statement from the DOJ.

“It seems ironic that the co-founder of a company designed to prevent online fraud would engage in fraudulent activity himself, but today that’s exactly what we allege Adam Rogas did. Rogas allegedly raised millions of dollars from investors based on fictitious financial affirmations, and in the end, walked away with nearly $17.5 million worth of that money,” said FBI Assistant Director William F. Sweeney Jr. “Within our complex financial crimes branch, securities fraud cases remain among our top priorities. We’ve seen far too many examples of unscrupulous actors engaging in this type of criminal activity, and we continue to work diligently to weed out this behavior whenever and wherever we find it.”

Categories: Business News

The stages of traditional fundraising

2020, September 19 - 2:29am
John Biggs Contributor Share on Twitter John Biggs is a former TechCrunch editor and is currently the editor-in-chief of Gizmodo. He's started and run a number of startups. More posts by this contributor Eric Villines Contributor Eric Villines is a communications and fundraising professional. He's currently head of PR at Anker.

Funding comes in stages.

Understanding these will help you know when and where to go for funding at each stage of your business. Further, it will help you communicate with funders more precisely. What you think when you hear “seed funding” and “A rounds” might be different from what investors think. You both need to be on the same page as you move forward.

Early money stage

The first stage is early money, when cash is invested in exchange for large amounts of equity. This cash, which ranges between $1,000 and $500,000, typically, comes from the three Fs: friends, family and (we don’t like this nomenclature) fools. The last-named folks are essentially “giving” you cash, and these investors are well-aware that you will most likely fail — hence, “fools.”

Your earliest investors should reap the biggest rewards because they are taking the most risk. The assumption is that, ultimately, you’ll make good or improve their investment. The reality, they understand, is that you probably won’t.

Your first money may come from bootstrapping or F&F, and your first big checks may come from an accelerator that pays you about $50,000 for a fairly large stake in your company. Accelerators are essentially greenhouses — or incubators — for startups. You apply to them. If accepted, you get assistance and a small amount of funding.

Why do investors give early money? Because they trust you, they understand your industry and they believe you can succeed. Some are curious about what you are doing and want to be close to the action. Others want to lock you up in case you are successful. In fact, many accelerators have this in mind when they connect with new startups. At its core, the funding landscape is surprisingly narrow. When you begin fundraising, you’ll hear a lot of terminology including descriptions of various funding categories and investors. Let’s talk about them one by one.

Bootstrapping

As the old saying goes, if you need a helping hand, you’ll find it at the end of your arm. With that adage in mind, let’s begin with bootstrapping.

Bootstrapping comes from the concept of “pulling yourself up by your own bootstraps,” a comical image that computer scientists adapted to describe how a computer starts from a powered-down state. In the case of an entrepreneur, bootstrapping is synonymous with sweat equity — your own work and money that you put into your business without outside help.

Bootstrapping is often the only way to begin a business as an entrepreneur. By bootstrapping, you will find out very quickly how invested you are, personally, in your idea.

Bootstrapping requires you to spend money or resources on yourself. This means you either spend your own cash to build an early version of your product, or you build the product yourself, using your own skills and experience. In the case of service businesses — IT shops, design houses and so on — it requires you to quit your day job and invest, full time, in your own business.

Bootstrapping should be a finite action. For example, you should plan to bootstrap for a year or less and plan to spend a certain amount of money bootstrapping. If you blow past your time or money budget with little to show for your efforts, you should probably scrap the idea.

Some ideas take very little cash to bootstrap. These businesses require sweat equity — that is, your own work on a project that leads to at least a minimum viable product (MVP).

Consider an entrepreneur who wants to build a new app-based business in which users pay (or will pay) for access to a service. Very basic Apple iOS and Google Android applications cost about $25,000 to build, and they can take up to six months to design and implement. You could also create a simpler, web-based version of the application as a bootstrapping effort, which often takes far less cash — about $5,000 at $50 an hour.

You can also teach yourself to code and build your MVP yourself. This is often how tech businesses begin, and it says plenty about the need for founders to code or at least be proficient in the technical aspects of their business.

You can’t bootstrap forever. One entrepreneur we encountered was building a dating app. She had dedicated her life to this dating app, spending all of her money, quitting her job to continue to build it. She slept on couches and told everyone she knew about the app, networking to within an inch of her life. Years later it is a dead app in an app store containing millions of dead apps. While this behavior might get results one in a thousand times, few entrepreneurs can survive for a year of app-induced penury, let alone multiple years.

Another entrepreneur we knew was focused on nanotubes. He spent years rushing here and there, wasting cash on flights and taking meetings with people who wanted to sell him services. Many smart investors told him that he should go and work internally at a nanotube business and then branch out when he was ready. Instead, he attacked all angles for years, eventually leading to exhaustion. He’s still at it, however, which is a testament to his intensity.

Categories: Business News

Chime adds $485M at a $14.5B valuation, claims EBITDA profitability

2020, September 19 - 1:42am

In the midst of IPO week we have to add another name to our future debuts list, namely Chime, which announced a huge new round of capital today. The $485 million Series F values the consumer fintech giant at $14.5 billion, a huge figure given that Chime was most recently worth $5.8 billion after raising $700 million last December.

Even more stark is the company’s $1.5 billion valuation set in early 2019. From $1.5 billion to $14.5 billion in less than two years is quite a run for any startup. Powering the latest round there were a host of familiar names, including Tiger, ICONIQ and General Atlantic, along with Dragoneer and DST Global. Names I’m less familiar with like Whale Rock Capital and Access Technology Ventures also took part.

Tucked inside a CNBC article that broke the story was news that Chime is now EBITDA profitable and could be “IPO-ready” in its CEO’s eyes in around a year’s time.

TechCrunch reached out to Chime for clarification on the EBITDA point, asking if the figure is adjusted or not, as many EBTIDA metrics remove the cost of share-based compensation given to their employees. According to Chime, the metric is “true EBITDA,” to which we award an extra five points. In response to a growth question, Chime said that its “transaction and top-line” has tripled compared to the year-ago period.

US mobile bank Chime raises $200 million, valuing its business at $1.5 billion

The Chime round and news of its nascent, non-GAAP profitability comes on the heels of a grip of reports on the financial health of a number of European neobanks, or challenger banks as they are often called. The numbers showed huge growth, and steep losses. If Chime’s numbers hold up when we get its eventual S-1 — start your countdowns — it will be among the healthiest of the startups in its cohort in financial terms, we reckon.

Finally, the company is trying to paint itself as something of a software company, and not a fintech company. This is a move to attract better revenue multiples when it comes time to defend its new $14.5 billion valuation. Software companies have flat-out bonkers multiples these days, as evinced by the blockbuster Snowflake debut.

Here’s how Chime thinks of itself, via CNBC:

“We’re more like a consumer software company than a bank,” Britt said. “It’s more a transaction-based, processing-based business model that is highly predictable, highly recurring and highly profitable.”

The key phrases there are “software company” and “highly predictable, highly recurring and highly profitable.” In effect Chime will argue that interchange revenues should fit under the SaaS umbrella given their regularity. Investors will decide how to view that pitch. If it works, maybe fintechs are more valuable than expected. And those fintechs with obvious SaaS components, like Acorns, could be sitting pretty when it comes to making the fintech versus SaaS argument.

Regardless, it’s another huge round for Chime, which makes it a good day for the highly-valued fintech sector.

The tale of 2 challenger bank models

Categories: Business News

It’s game on as Unity begins trading

2020, September 19 - 1:10am

Unity Software, which sells a game development toolkit primarily for mobile phone app developers, raised $1.3 billion in its initial public offering.

The company, which will begin trading today with the ticker symbol “U,” priced its shares at the top end of its expected range, selling 25 million shares at $52 per share.

The company’s final IPO price came in far ahead of what Unity initially anticipated. The company initially expected to price its public offering between $34 and $42 per share, later raising its offering to $44 and $48 per share.

The public offering values the company at around $13.7 billion, a good step up from its final private valuation of around $6 billion.

For Unity, the journey to the public markets has been long. The company was founded as a business that creates software for developers to make and manage their games. In that sense, the company is more like an Adobe or an Autodesk than a game studio like Activision Blizzard or King.com.

As TechCrunch explained in an earlier story profiling Unity and its public offering:

Users import digital assets (often from Autodesk’s Maya) and add logic to guide each asset’s behavior, character interactions, physics, lighting and countless other factors that create fully interactive games. Creators then export the final product to one or more of the 20 platforms Unity supports, such as Apple iOS and Google Android, Xbox and PlayStation, Oculus Quest and Microsoft HoloLens, etc.

The company organizes its business into two areas: tools for content creation and tools for managing and monetizing content. In actuality, the revenue from the managing and monetizing content actually outstrips the revenue the company makes from content creation.

Unity IPO aims to fuel growth across gaming and beyond

The Unity public offering will be the first big test of investor appetite for this new approach to game development and the business-to-business tools that enable the new wave of gaming.

And it’s important to note (as we do here) that Unity doesn’t generate a lot of revenue off of its position as arguably the most popular game development platform. In fact, Unity has been pretty bad at monetizing the game development engine. It’s the ancillary services for in-game advertising, player matchmaking and other features that have made Unity the bulk of its money.

Bear and bull cases for Unity’s IPO

And there’s still the company’s biggest competitor, Epic Games, waiting in the wings. Here again, the analysis from TechCrunch’s previous reporting is helpful:

[Unity] also will want to benefit from comparisons to Epic Games, given [Epic] was just valued at $17 billion and has much greater public name recognition and hype.

To accomplish this, Unity seems to be underplaying the significance of its advertising business (adtech companies trade at much lower revenue multiples). In the past, Unity referred to its operations in three divisions: Create, Operate and Monetize. At the start of August, the SVP and VP leading the Monetize business switched titles to SVP and VP of Operate Solutions, respectively, and then Unity reported the monetization business as a subset of its Operate division in the S-1.

Consolidating Operate and Monetize into one reporting segment obscures specifics about how much revenue the ads business and the live services portfolio each contribute. As noted above, this segment appears to be dominated by ad revenue which means anywhere from 30% to 50% of Unity’s overall revenue is from ads. That should reduce the revenue multiple public investors are willing to value Unity at relative to recent and upcoming SaaS IPOs.

There isn’t a publicly-traded game engine company to directly benchmark Unity against, nor a roster of equity research analysts at big banks who have expertise in gaming infrastructure. Adobe and Autodesk appear to be relevant businesses to benchmark Unity against with regard to the nature of the non-advertising components of the business and Unity’s stated vision. Compared to Unity, those companies have lower growth rates and generate operating profits though; more recent public listings of SaaS companies like Zscaler and Cloudflare are likely to be valuation comps by investors to the extent they focus on its subscription and usage-based revenue streams since their revenue growth and margins are closer to Unity’s.

Both Epic and Unity are moving to meet each other, Epic by moving downstream, and Unity by moving to higher-end applications. And both companies are looking beyond core gaming at other applications as well.

As companies like Facebook, Microsoft, Niantic and others evolve their augmented and virtual reality ecosystems, Epic and Unity may find new worlds to conquer. If public markets can find the cash.

Categories: Business News

Outschool, newly profitable, raises a $45M Series B for virtual small group classes

2020, September 19 - 1:00am

Outschool, which started in 2015 as a platform for homeschooled students to bolster their extracurricular activities, has dramatically widened its customer base since the coronavirus pandemic began.The platform saw its total addressable market increase dramatically as students went home or campus to abide by COVID regulations instituted by the CDC.

Suddenly, live, small-group online learning classes became a necessity for students. Outschool’s services, which range from engineering lessons through Lego challenges to Spanish teaching by Taylor Swift songs, are now high in demand.

“When the CDC warned that school closures may be required, they talked about ‘internet-based tele-schooling,’” co-founder Amir Nathoo said. “We realized they meant classes over video chat, which is exactly what we offer.”

From August 2019 to August 2020, the online educational class service saw a more than 2,000% increase in bookings. But the surge isn’t just a crop of free users piling atop the platform. Outschool’s sales this year are around $54 million, compared to $6.5 million the year prior. It turned its first profit as a result of the COVID-19 crisis, and is making more than $100 million in annual run rate.

While the profitability and growth could be a signal of the COVID-19 era, today Outschool got a vote of confidence that it isn’t just a pandemic-era boom. Today, Jennifer Carolan of Reach Capital announced at TechCrunch Disrupt that Outschool has raised a $45 million Series B round, bringing its total known capital to $55 million.

The round was led by Lightspeed Venture Partners, with participation from Reach Capital, Union Square Ventures, SV Angel, FundersClub, Y Combinator and others.

The cash gives Outschool the chance to grow its 60-person staff, which started at 25 people this year.

Founder Amir Nathoo was programming computer games from the age of five. So when it came to starting his own company, creating a platform that helped other kids do the same felt right.

In 2015, Nathoo grabbed Mikhail Seregine, who helped build Amazon Mechanical Turk and Google Consumer Surveys, and Nick Grandy, a product manager at Clever, another edtech company and YC alum. The trio drummed up a way to help students access experiences they don’t get in school.

To gauge interest, the company tried in-person classes in the SF Bay area, online content and tested across hundreds of families. Finally, they started working with homeschoolers as an early adopter audience, all to see if people would pay for non-traditional educational experiences.

“Homeschooling was interesting to us because we believed that if some new approach is going to change our education system radically for the better, it was likely that it would start outside the existing system,” Nathoo said.

He added that he observed that the homeschooling community had more flexibility around self-directed extracurricular activities. Plus, those families had a bigger stake in finding live, small-group instruction, to embed in days. The idea landed them a spot in Y Combinator in 2016, and, upon graduation, a $1.4 million seed round led by Collab+Sesame.

“We’d all been on group video calls with work, but we hadn’t seen this format of learning in K12 before,” he said. Outschool began rolling out live, interactive classes in small groups. It took off quickly. Sales grew from $500,000 in 2017 to over $6 million in 2019.

The strategy gave Outschool an opportunity to raise a Series A from Reach Capital, an edtech-focused venture capital fund, in May 2019. They began thinking outwards, past homeschooling families: what if a family with a kid in school wants extra activities, snuck in afterschool, on weekends or on holidays?

Today feels remarkably different for the startup, and edtech more broadly. Nathoo says that 87% of parents who purchase classes on Outschool have kids in school. The growth of Outschool’s total addressable market comes with a new set of challenges and goals.

When the pandemic started, Outschool had 1,000 teachers on its platform. Now, its marketplace hosts 10,000 teachers, all of whom have to get screened.

“That has been a big challenge,” he said. “We aren’t an open marketplace, so we had to rapidly scale our supply and quality team within our organization.” While that back-end work is time-consuming and challenging, the NPS score from students has remained high, Nathoo noted.

Outschool has a number of competitors in the live learning space. Juni Learning, for example, sells live small-group classes on coding and science. The company raised $7.5 million, led by Forerunner Ventures, and has around $10 million in ARR. Note earlier that Outschool is at $100 million in ARR.

“We provide a much broader range of learning options than Juni, which is focused just on coding classes,” Nathoo said. Outschool currently lists more than 50,000 classes on its website.

Varsity Tutors is another Outschool competitor, which is more similar to Outschool. Varsity Tutors sells online tutoring and large-group classes in core subjects such as Math and English. Nathoo says that Outschool’s differentiation remains in its focus of small-group teaching and a variety of topics.

As for what’s ahead for Outschool, Nathoo flirts with the idea of contradiction: what if the platform goes in schools?

“When I think about our strategy going forward, I think of new types of classes, international embedding and embedding ourselves back into school,” he said.

Outschool might use its growing consumer business as an engine to get into school districts, which are notoriously difficult to land deals with due to small budgets. But, to Nathoo, it’s important to get into schools to increase access to learning.

“Our vision is to build a global education community that supplements local school,” he said.

Edtech startups find demand from an unlikely customer: Public schools

Categories: Business News

What makes Checkout.com different from Stripe

2020, September 18 - 11:19pm

While Checkout.com has kept a low profile for many years, the company raised $380 million within a year and reached an impressive valuation of $5.5 billion. It wants to build a one-stop shop for all things related to payments, such as accepting transactions, processing them and detecting fraud.

You might think that it sounds a bit like Stripe. In an interview at TechCrunch Disrupt, I asked founder and CEO Guillaume Pousaz what makes Checkout.com different from Stripe, Adyen and other companies in the payment space. It comes down to a very different philosophy when it comes to product and market approach.

“We only do enterprise. We really only work with the big merchants. There are a few exceptions here and there but it’s mostly enterprise-only and it’s purely online,” Pousaz said.

“I once met [Stripe CEO] Patrick Collison and I joked with him. I said ‘you might have a million merchants, I have 1,200 merchants but I know every single one by name and they all process tens of millions every year.’ So I think it’s just a different business,” he added later in the interview.

Checkout.com now has a ton of money sitting in its bank account, but it has been a long and slow journey to reach that level. The company has been around for many years and reached profitability in 2012. It has been spending very meticulously over the years.

When talking about the early days of the company, Pousaz said the team grew really slowly. “We can hire one employee this month. Now we can hire two employees this month,” he said.

Today, the company still tries to remain as lean as possible. “It’s really a matter of discipline. All these companies, they raise a lot of money, they spend a lot of money and I don’t challenge that model. For us, embedding that discipline and frugality in the company in how we run it is something that was important to us,” Pousaz said.

“There’s no problem with spending. Just make sure that when you’re spending, you’re wise about it. You just don’t spray and pray. You see this unfortunately too much with tech companies.”

That’s why Checkout.com mostly invests in its own product. Nearly two-thirds of the company is working in product, IT and engineering. Only 13% of the company is working in sales, which is much less than some of its competitors.

But why did Checkout.com raise hundreds of millions of dollars then? “At some point, you need validation. And the validation was really important for us. When you have Insight, DST, Coatue, GIC, Blossom it changes your dimension,” Pousaz said.

When talking about regulators, Checkout.com has licenses in Brazil, the U.K. and France (for contingency), Hong Kong, Singapore, etc. It’s a never-ending process as the company is still working on licenses in other key markets, such as Japan.

“These regulators are super thorough. You don’t pass because you’re a nice guy, you pass because you have the right processes,” Pousaz said.

I challenged that notion and mentioned the Wirecard collapse. He obviously thinks that Wirecard and Checkout.com are in a different position right now.

“All my money is sitting with JP Morgan, it’s pretty simple. There’s no bank account in the Philippines and funny stuff,” Pousaz said. “The Wirecard story is so big that the real question is — go and ask the question to the auditors. Because the auditors that I have, which for the record is PwC, ask me to show them the bank statements and everything. And they are super thorough, it’s a super long process.”

“How did the Wirecard story happen? I don’t know,” he added.

Categories: Business News

3 VCs discuss the state of SaaS investing in 2020

2020, September 18 - 10:59pm

Yesterday during Disrupt 2020 I sat down with three investors who know the SaaS startup market very well, hoping to get my head around how hot things are today. Coming on the heels of the epic Snowflake IPO (more to come on that in this weekend’s newsletter), it was a great time for a chat.

The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.

I’ve boiled our 40-minute discussion down to my favorite parts, getting you the goods in quick fashion.

What follows are notes on:

  • how fast the SaaS investing market is today
  • why Snowflake priced where it did and what that tells us about today’s market
  • how SaaS companies are seeing different growth results based on their sales motion
  • why some private-market SaaS multiples can get so high
  • which software sectors are accelerating
  • and what I learned about international SaaS.

There are more things to pull out later, like the investors’ thoughts regarding diversity in their part of the venture world and SaaS startups, but I want to give that topic its own space.

So, into today’s SaaS market with an eye on the future, guided by commentary from Canaan’s Maha Ibrahim, Andreessen Horowitz’s David Ulevitch and Bessemer’s Mary D’Onofrio.

Inside SaaS

To help us get through a good bit of the written word without slowing down, I’ll introduce an idea, share a quote and provide a little commentary. This should be good fun.

Categories: Business News

Ride-hailing was hit hard by COVID-19. Grab’s Russell Cohen on how the company adapted.

2020, September 18 - 3:43pm

A contactless Grab delivery

Ride-hailing services around the world have been hit hard by the COVID-19 pandemic, and Grab was no exception. The company is one of the most highly-valued tech startups in Southeast Asia, where it operates in eight countries. Its transport business suffered a sharp decline in March and April, as movement restriction orders were implemented.

But the company had the advantage of already operating several on-demand logistics services. During Disrupt, Russell Cohen, Grab’s group managing director of operations, talked about how the company adapted its technology for an unprecedented crisis (the video is embedded below).

“We sat down as a leadership group at the start of the crisis and we could see, particularly in Southeast Asia, that the scale of the challenge was so immense,” said Cohen.

Grab’s driver app already allowed them to toggle between ride-hailing and on-demand delivery requests. As a result of COVID-19, over 149,000 drivers began performing on-demand deliveries for the first time, with Singapore, Malaysia and Thailand seeing the most conversions. That number included tens of thousands of new drivers who joined the platform to make up for lost earnings during the pandemic.

The challenge was scaling up its delivery services to meet the dramatic increase in demand by consumers, and also merchants who needed a new way to reach customers. In March and April, Cohen said just under 80,000 small businesses joined its platform. Many had never sold online before, so Grab expedited the release of a self-service feature, making it easier for merchants to on-board themselves.

“This is a massive sector of the Southeast Asian economy that effectively digitized within a matter of weeks,” said Cohen.

A lot of the new merchants had previously taken only cash payments, so Grab had to set them up for digital payments, a process made simpler because the company’s financial unit, Grab Financial, already offers services like Grab Pay for cashless payments, mobile wallets and remittance services.

Grab also released a new package of tools called Grab Merchant, which enabled merchants to set-up online businesses by submitting licenses and certification online, and includes features like data analytics.

Modeling for uncertainty in the “new normal”

Part of Grab’s COVID-19 strategy involved collaborating with local municipalities and governments in different countries to make deliveries more efficient. For example, it worked with the Singaporean government to expand a pilot program, called GrabExpress Car, originally launched in September, that enabled more of Grab’s ride-hailing vehicles to be used for food and grocery deliveries. Previously, many of those deliveries were handled only by motorbikes.

The situation in each of Grab’s markets–Singapore, Cambodia, Indonesia, Malaysia, Myanmar, Philippines, Thailand and Vietnam—is still evolving. Some markets have lifted lockdown orders, while others continue to cope with new outbreaks.

Cohen said ride-hailing is gradually recovering in many of Grab’s markets. But the company is preparing for an uncertain future by modeling different scenarios, taking into account potential re-closings, and long-lasting changes in both consumer and merchant behavior.

“Unpredictability is something we think a lot about,” Cohen said. Its models include ones where deliveries are a significantly larger part of its business, because even in countries where movement restrictions have been lifted, customers still prefer to shop online.

COVID-19 has also accelerated the adoption of digital payments in several of Grab’s markets. For example, Grab launched its GrabPay Card in the Philippines three months ago, because more people are beginning to use contactless payments in response to COVID-19 concerns.

In terms of on-demand deliveries, the company is expanding GrabExpress, its same-day courier service, and adapting technology originally created for ride-pooling to help drivers plan pickups and deliveries more efficiently. This will help decrease the cost of delivery services as consumers remain price-conscious because of the pandemic’s economic impact.

“Purchasing behaviors have changed, so for us, when we think about the supply side, the drivers’ side, that means we’ve got to make sure our fleet is flexible,” he said.

Categories: Business News

Benchmark’s Peter Fenton: ’10 to 20 years of innovation just got pulled forward’

2020, September 18 - 8:17am

Earlier today at TechCrunch Disrupt, venture capitalist Peter Fenton joined us to talk about a variety of issues. Among them, we discussed how he’s putting his stamp on Benchmark now that, 15 years after joining the storied firm, he’s its most senior member.

Fenton said that he’s mostly focused on ensuring that the firm doesn’t change. It wants to remain small, with no more than six general partners at a time. It wants to keep investing funds that are half a billion dollars or less because its small team can only work closely with so many founders. He also made a point of noting that Benchmark’s partners still divide their investment profits equally, unlike at other, more hierarchical venture firms, where senior investors reap the biggest financial benefits.

We also talked about diversity because (hint hint) Benchmark — which is currently run by Fenton, Sarah Tavel, Eric Vishria and Chetan Puttagunta — is hiring one to two more general partners.

We talked about why Benchmark, a Series A investor in both Uber and WeWork, seemingly took so long to address cultural issues within both companies.

And we talked about the opportunities that has Benchmark, and Fenton specifically, most excited right now. Read on for more, or check out our full conversation below.

On whether Benchmark, which historically had all white male partners and now counts Fenton as its only white male partner, might hire a Black partner on his watch, given the dearth of Black investors in the industry (along with the changing demographics of the U.S.):

“That’s a personal issue for me, which is going to be measured in the outcomes, just like we have companies that take on initiatives that matter and then measure them and hold themselves accountable. I won’t feel good about our failure if we don’t continue to tilt towards diversity. It’s not enough that I’m the only white male partner. The industry is so systematically skewed in the wrong direction, and we’ve gotten so good at rationalizing how it ended up here, that I don’t think we can tolerate it anymore.”

Benchmark is looking to reinvent itself through “three interfaces,” he continued. “It’s who are we talking with and spending time with in terms of [who we might invest in] — that has to change; who are the people making investment decisions, [meaning] the partnership; and then what’s the composition of the companies we’ve invested in, meaning the executives and the boards.

“Before I’m done with the venture business, I want to be able to point to empirical outcomes . . .”

As for why Benchmark waited for the public to rally against its portfolio companies Uber and WeWork before taking action to address cultural issues (in Uber’s case, in reaction to former engineer Susan Fowler’s famous blog post and, in the case if WeWork, in reaction to its S-1 filing):

“I can’t give you a crisp answer because ultimately, what happens in the public eye isn’t the whole story of what was going on between Benchmark and those CEOs.” It’s “far more complicated, far more nuanced, far more engaged.”

Said Fenton: “What you start with in any partnership is this idea that we’re all flawed and providing what feels like unconditional support to a founder to nurture them and help them to understand in ways they might be able to from their direct reports where they are going to get in trouble, where they’re going to fall short, and then buttress them.

“I can say, having watched both [Benchmark investors] Bruce [Dunlevie] and Bill [Gurley] in those roles that they give their heart and soul to enable the full potential of those entrepreneurs, and in each case, it wasn’t enough.

“I don’t know what to say other than, I don’t envision another individual in that [board] role being able to do a better job because what they gave was everything, and those companies built enormous organizations, great success, delight and joy for customers, and they had, in each of their cases, pathologies in their culture. A number of companies that I’m involved with have pathologies in their culture. Every organization can build them. What motivated both Bill and Bruce was the constituencies that go beyond the CEO, the employees, the customers, and in the case of Uber, the drivers . . .

“You could say Susan Fowler was the reason it all happened; I can assure you that the work that was being done far preceded [the publication of her blog post]. Could we have done more, more quickly? You always look back and say, ‘Yeah.’ I think you learn as an organization. We’re not perfect.”

As for the trends that Fenton is watching most closely right now, he suggested a world of opportunities have opened up in the last six months, and he thinks they’ll only gain momentum from here:

“What I’m most excited about is, we’re not going back to normal. What’s so amazing is this shock to the system is really a big opportunity for entrepreneurs to come and say, ‘What do we need to build to recreate and unlock all these things we lost when we stopped going into workplaces?’

“So I think this opportunity to build the tools for a world that’s ‘post place’ has just opened up and is as exciting as anything I’ve seen in my venture career. You walk around right now and you see these ghosts towns, with gyms, classes you might take [and so forth] and now maybe you go online and do Peloton, or that class you maybe do online. So I think a whole field of opportunities will move into this post-place delivery mechanism that are really exciting. [It] could be 10 to 20 years of innovation that just got pulled forward into today.”

Categories: Business News

Meet the five startup Battlefield finalists at Disrupt 2020

2020, September 18 - 8:00am

TechCrunch hosted an unusual Startup Battlefield this week — the founders, judges, audience and moderator (me) were all in different locations, doing our best to interact over WebEx.

But the 20 startups still demonstrated their products and explained their visions, then were grilled by expert judges. And those judges helped the TechCrunch team select our five finalists.

Those finalists will be presenting tomorrow at 10:40 a.m. Pacific for a whole new set of judges, and you can watch the live stream by logging into TechCrunch. (Also: It’s not too late to sign up for the full Disrupt experience.) Those judges will choose a runner-up and a winner, and the winner will take home $100,000, equity-free.

Here are the finalists:

Canix

Canix has built a robust enterprise resource planning platform designed to reduce the time it takes cannabis growers to input data. It integrates nicely with common bookkeeping software, as well as Metrc, an industry-wide regulatory platform. You can read more about Canix here.

Firehawk Aerospace

Hybrid rockets aren’t new, but they have always faced significant limitations in terms of their performance metrics and maximum thrust power. Firehawk Aerospace is building a stable, cost-effective hybrid rocket fuel engine that employs industrial-scale 3D printing to overcome the hurdles and limitations of previous designs. You can read more about Firehawk Aerospace here.

HacWare

Tiffany Ricks founded HacWare in Dallas, Texas, in 2017 to help bring better email security awareness to small businesses. The technology sits on a company’s email server and uses machine learning to categorize and analyze each message for risk. You can read more about HacWare here.

Jefa

Jefa is building a challenger bank specifically designed for women in Latin America. It focuses on solving the problems that women face when opening a bank account and managing it. You can read more about Jefa here.

Matidor

Matidor is building a project platform for consultants and engineers to keep track of projects and geospatial data in a single dashboard. It offers an all-in-one data visualization suite for customers in the energy and environmental services fields. You can read more about Matidor here.

Announcing the Startup Battlefield companies at TechCrunch Disrupt 2020

Categories: Business News

Schools are closing their doors, but Opendoor isn’t

2020, September 18 - 7:51am

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

This week Natasha Mascarenhas, Danny Crichton and myself hosted a live taping at Disrupt for a digital reception. It was good fun, though of course we’re looking forward to bringing the live show back to the conference next year, vaccine allowing.

Thankfully we had Chris Gates behind the scenes tweaking the dials, Alexandra Ames fitting us into the program and some folks to watch live.

What did we talk about? All of this (and some very, very bad jokes):

And then we tried to play a game that may or may not make it into the final cut. Either way, it was great to have Equity back at Disrupt. More to come. Hugs from us!

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

Categories: Business News

Ron Howard and Brian Grazer say that their accelerator can help diversify Hollywood

2020, September 18 - 7:05am

Impact Creative Systems (formerly Imagine Impact) is bringing a startup accelerator-style approach to finding fresh creative talent, and it announced this morning that, with funding from venture capital firm Benchmark,  it’s spinning out from Imagine Entertainment — the production company founded by director Ron Howard and producer Brian Grazer.

Right after the news broke, the accelerator’s founders — Howard, Grazer and CEO Tyler Mitchell — joined us at TechCrunch’s Disrupt conference to discuss their vision. Grazer (whose films with Howard include “Apollo 13,” “A Beautiful Mind” and the upcoming “Hillbilly Elegy” for Netflix) recalled the Hollywood of 25 years ago, which he described as an “opaque” system where original writers often struggled to break in, and he felt that Impact could “democratize access to Hollywood.”

“How can we create opportunity to have access to the epicenter of employment in the media business, which is Hollywood?” he said.

For starters, Mitchell described what he claimed is a scalable system for evaluating 2,000 script submissions every week.

“We were able to build a system that leverages both technology as well as expert systems evaluating not just the writers, but the readers — almost like financial analysts — and try to come up with metrics in a world where there aren’t stats,” he said.

Mitchell also noted that in Impact’s first cohort of 87 writers, 39% were BIPOC, 10% were LGBTQ and it was split 50-50 between men and women, with 11 different countries represented.

“If you try to find the most talented writers in the world, they’re going to look like the world,” he said.

Howard made a similar point, saying that this diversity results from an interest in “fresh new voices” with “no statistical goals or agendas in mind — it’s just happening in a really honest way.” (At the same time, interviewer Ingrid Lunden couldn’t help but observe that this was a panel of three white men discussing diversity.)

Impact, a YC-style accelerator for the entertainment industry, spins out from Imagine Entertainment with backing from Benchmark

Asked whether they’re interested in finding new talent from social media, Howard pointed to Grazer as the one who’s always encouraging him to “know what’s going on up north” (a.k.a. in Silicon Valley).

“Right now we’re in a creative renaissance with podcasts and Instagrams … finding their way into the center of the narrative,” Howard said.

Grazer said he often looks at YouTube, in particular. At the same time, he cautioned that creating content for these online platforms requires a different skill set than writing movies or TV.

“It doesn’t reduce the likelihood of their success necessarily, but it’s a different art form,” he said. “Because writing a teleplay or a screenplay, even the greatest playwrights can’t do that particular thing — you have to be trained.”

Still, Imagine found at least one idea in an Instagram Story, developing a comedic show around an actor (Grazer didn’t want to say who it is, but it’s probably Arnold Schwarzenegger) with a donkey named Lulu and a miniature horse named Whiskey. Apparently the show has attracted multiple bidders, and as for where it will end up, Grazer said, “It sort of seems like Amazon. I’ll let you know tomorrow.”

Categories: Business News

Fabletics’ Adam Goldenberg and Kevin Hart on what’s next for the activewear empire

2020, September 18 - 5:43am

Like plenty of other modern direct-to-consumer companies, influencer marketing has been an essential part of Fabletics’ journey. Actress Kate Hudson co-founded the company and co-CEO Adam Goldenberg believes that its network of spokespeople has been key to the company’s growth.

We were joined on our virtual TechCrunch Disrupt 2020 stage by Goldenberg and comedian Kevin Hart, who has been working as a brand partner for Fabletics.

“You can have the best product, which we believe we have, but if you can’t get it out there then you’re not going to be the leader that you want to be,” Goldenberg told us. “By having a very broad and diverse ambassador and influencer network, it allows us to become a very inclusive brand.”

Hart joined the company as an official brand partner earlier this year just as the pandemic took hold stateside and the company launched a menswear line. For Hart, the partnership is one of many relationships with brands and startups, but fits into his own lifestyle and thus made a lot of sense for him to work with, he says. 

“[A company I invest in] has to coincide with myself and my lifestyle. If I’m going to talk about it, I have to be true to it,” Hart told TechCrunch. “There’s a plethora of things that I’m involved with that people would be shocked to know I was a part of, but it’s because I have the eyesight for it and a love for it.”

The Fabletics menswear line that Hart has advertised, and served as a brand spokesman for, has seen major growth amid a broader spike in athleisure wear sales. Goldenberg is bullish on just how much growth Fabletics will see from its men’s line so early in its life cycle.

“It’s a big goal, but I think we could do $75-100 million in sales next year with Fabletics Men, which is our first full year with this line, which would be very, very fast growth,” Goldenberg says.

As the company firms up its offering in activewear, they’re also keeping an eye on what trends will help them grow. Fabletics has already been building out technology trying to connect online and offline user habits in its stores. On the heels of Lululemon’s major acquisition of Mirror, which it announced in late June, moderator Jordan Crook inquired whether Fabletics had its own interests in expanding its footprint beyond activewear.

“We really believe in the importance of living an active lifestyle, so we’re not ready to share it yet, but we’re going to be doing something very large incorporating fitness into Fabletics,” Goldenberg said.

Check out the interview with Hart and Goldenberg below.

Categories: Business News

Here are the 19 companies presenting at Alchemist Accelerator Demo Day XXV today

2020, September 18 - 5:09am

When Alchemist Accelerator shifted its Demo Day to virtual earlier this year, Alchemist director and founder Ravi Belani told me it was a move he expected the team to stick with for some time. Nearly half a year later it’s time for another Demo Day — and sure enough, with the pandemic still ongoing, it’s another virtual one.

As an enterprise accelerator, Alchemist focuses primarily on seed-stage companies that make their money from other companies rather than those that sell to consumers. This latest cohort (the accelerator’s 25th) saw nearly 20 companies go through the program, with focuses ranging from physical therapy devices to an AI “coach” for sales reps to productivity tools for software developers.

This afternoon the accelerator is also announcing that Volvo (via the Volvo Cars Tech Fund) has joined Alchemist as an investor. While the two companies did not specify how much Volvo was investing, previous similar partnerships saw companies like GE and Juniper Networks invest around $2 million-$3 million.

Care to see the companies make their debut to the world? Alchemist will be streaming its Demo Day on YouTube, with programming set to begin at 2 p.m. pacific.

Don’t have time to watch the whole thing? Here’s an alphabetized list of all the companies scheduled to present, along with some notes about what each is working on:

Image Credits: Anda Technologies

Anda Technologies: A simplified smartwatch with built-in GPS, calling and a quick symbol-based messaging system, meant to help parents and caretakers stay in touch in situations where a full smartphone might be too much. They initially focused on Latin America, and are now expanding support to U.S. and Europe.

Botco.ai: A “conversational marketing platform” — in other words, marketing chatbots meant to increase sales and conversions. Potential customers can chat with these bots over SMS or messaging apps, and their AI will use its growing understanding of what it knows about your business to respond.

BreachRX: A platform meant to help streamline your company’s response when a security breach happens. They provide response playbooks, help assign tasks to the correct team members and help capture records of how and when your company took action.

ClearQuote: Computer vision-based vehicle inspections. The company says it can scan an entire vehicle for damage using a smartphone camera in around 60 seconds, calculating cost of repair on the fly. Focusing on end-of-lease inspections, used car inspections and rental car return inspections first.

Copilot: An AI-powered “coach” for sales reps. As reps make phone/video calls, Copilot analyzes the conversation and generates “cue cards” with relevant information.

Evolution Devices: A wearable electrical stimulation device meant to help in the rehabilitation process for those with lower limb weaknesses (including stroke survivors or individuals with multiple sclerosis). The device adapts to each user’s own walking pattern, and helps with remote care by reporting data (such as step counts) back to the patient’s therapist.

Faucetworks: An “artificial neurologist,” meant to help more quickly identify neurological emergencies while a patient is in an ambulance en route to a hospital, or at hospitals where no neurologist is on site. Their hardware system asks patients a series of questions, then walks them through a physical exam.

HR Messenger: An HR/onboarding chatbot built to work over WhatsApp/Facebook Messenger, helping to automate things like pre-screening questions, interview scheduling and referral requests. The company says it’s working with clients including KFC and H&M.

Hopthru: Data analysis platform for public transit agencies. Hooks into the data these agencies already collect, cleans it up, then pipes it into a dashboard to help these transit agencies find ways to improve their routes and ridership.

Image Credits: Hubly Surgical

Hubly Surgical: Building a smarter drill for neurosurgeons performing “skull puncture” operations. The company says that many surgeons still use basic, standard (hand-cranked!) drills, which can lead to high complication rates. Hubly’s drill helps to precisely angle the drill and is built to prevent the surgeon from drilling too deep. Expects to see FDA clearance in 2021, and launch in U.S. hospitals in 2022.

HyPoint: Working on high-power, high-density hydrogen fuel cell systems for aviation, meant to dramatically reduce CO2 emissions from air transportation.

Mobiz: A platform for sending personalized marketing messages to your established customer base via SMS, building “personalized micro-sites” for each user based on the brand’s existing data. The company says it’s already working with companies like Burger King and Woolworth, and is currently seeing $6 million in ARR.

Nano Diamond Battery: NDB is aiming to build a self-charging, sustainable battery. This one is perhaps a bit too complex to capture in a sentence or two, so see our previous coverage of NDB here.

Node App: A marketplace for connecting brands with influencers. Node helps to verify each influencer’s audience, then connects brands with these influencers with pre-negotiated deal terms.

Rectify: A tool meant to automatically detect and redact sensitive information when sharing documents outside of an organization. Focusing on the insurance market at first. Founder Melissa Unsell-Smith says the Rectify founding team previously worked together for 15 years in AT&T’s corporate legal department.

RubiLabs Inc: A platform focusing on making on-demand deliveries of medical products (vaccines, medications, etc.) to hospitals and pharmacies in Africa via drones, motorcycles and other dedicated vehicles. The company estimates that it has already saved 7,000+ lives.

Seventh.ai: Pitching itself as “Carta for intellectual property,” Seventh.ai helps founders identify which parts of their business can/should be patented, to better understand what the competition has patented, and to work through the patenting process. The company says it’s currently seeing around $250,000 in ARR. Founder Alex Polyansky says he spent 10 years as a patent examiner at the USPTO.

Tocca: A platform meant to help B2B companies throw branded virtual sales events, providing things like virtual lobbies, stages, breakout rooms and person-to-person networking tools. Integrates into tools like HubSpot and Salesforce to make post-event followups more efficient.

Image Credits: Veamly

Veamly: A “unified inbox” feed for developers that brings threads and messages from Slack, GitHub and Jira into one view, as well as a unified search that can dig in across these tools. Founder Emna Ghariani says the company’s “proprietary prioritization engine” helps to sort tasks and tickets by importance, and to analyze the time they’re spending in each tool throughout the week.

Categories: Business News

Why hasn’t digital learning lived up to its promise?

2020, September 18 - 4:15am
Tom Adams Contributor Share on Twitter Tom Adams is the president of Quantic School of Business & Technology.

The fall semester is off to a rocky start. When schools were forced to close in the spring, students (and parents) struggled. As the new school year begins, affluent families are building pandemic pods and inequities abound, while surveys suggest that college students want tuition discounts for online classes.

To avoid a catastrophic loss in revenue, colleges are bringing students back to campus. At UNC-Chapel Hill, those plans were quickly reversed when 130 students tested positive for the virus just a week into the new semester. As cases skyrocket, UNC will not be the only educational institution or school district to move online again.

What is it about digital learning that has schools so keen on reopening despite the health and reputational risks? Why hasn’t digital learning lived up to its promise?

If I were asked 20 years ago, as the founding CEO of Rosetta Stone, what digital learning would look like today, I would have imagined a very different future. Online learning was exploding. Teachers and faculty were experimenting with now commonplace consumer technologies like speech recognition and virtual reality to create immersive learning experiences.

Sadly, most of these innovations never took hold in our schools and colleges, and remote learners today are left with edtech that feels like it is still trapped in the 90s.

Ironically, the business of edtech and digital learning has been booming. Billions of dollars have been invested in tools and platforms that promise to improve the learning outcomes and lives of students. But for all the investments, headlines and flashy IPOs, edtech has little to show in terms of transformative outcomes.

The United States continues to lag behind many other advanced industrialized nations in math, science and reading literacy. Schools at all levels grapple with pervasive equity gaps. And research shows that heavily investing in education technology has, so far, yielded virtually no appreciable improvement in student achievement in these core subjects.

The challenge stems from the fact that rather than making learning better, the education technology field has, for the most part, focused on reaching more students. In our rush to scale, we have largely ignored tremendous pedagogical innovation that has occurred over the last twenty years.

No matter how high-tech a digital learning solution might be, it means nothing if it doesn’t also reflect recent and emerging changes in pedagogy. In 2010, a study at the University of North Texas compared how students retain information literacy skills in a face-to-face class, an online class and a blended class. The researchers found that there was no difference in outcomes between the three kinds of classes. This is because all three used the same materials and pedagogical approach.

But in a digital environment, far more is possible. We can now create video-game quality simulations to evaluate complex skills like creativity or problem-solving. Shy students can take the form of learning avatars in online laboratories — or explore career paths first-hand, through virtual reality. We know more than ever about attention span and engagement, or the connection between socio-emotional development and academic outcomes.

Researchers have, likewise, gained a deeper understanding of the ways students’ minds work. We know more than ever about how students reason, process information and solve problems. We know what kinds of scaffolding is required to develop and master these skills. Learning is best when it is built around doing, and when the context is practical, allowing students to try their hand at solving problems even as they’re still learning. It’s best when it is individualized, with progress based on a student’s personal aptitude and proficiency as they move toward mastering the material. And it’s best when it is enriched with peer-based discussion, practice and collaboration.

Astonishingly, few mass-market digital learning tools are built or adopted with these pedagogical advancements in mind. While Zoom is a fine tool for live conversations in small groups, it has few tools to facilitate the kind of engagement necessary for real learning. Coursera has raised millions for simply replicating the old-fashioned experience of a teacher lecturing at the front of a classroom. Quizlet is but a virtual collection of flashcards; it can assess the learning of certain facts, but it is hardly useful for the acquisition of skills. These types of common digital learning tools are increasingly great at making educators’ jobs easier. They are great at expanding access, allowing teachers and schools to reach more students than ever before. But scale, ease and access are not sufficient to help students learn and build skills.

The frustrations of educators and learners alike reflect the fact that education technology functions as a digital proxy for our oldest methods of teaching. Simply listening to a lecture is not effective in the real world, and yet that largely remains the default mode of education online. The impact of COVID-19 has only exacerbated these long-standing shortcomings. To create the digital learning experience students deserve — to finally fulfill the untapped promise and potential of educational technology — we must create tools that reflect not only advancements in technology, but in what we now understand about how the mind works and how students learn.

Categories: Business News

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