Month: February 2021

It may be tough to remember, but there was a time long ago when Justworks wasn’t a household name. Though its monthly revenue growth charts were up and to the right, it had not even broken the $100,000 mark. Even then, Bain Capital Venture’s Matt Harris felt confident in betting on the startup.

Harris says that, with any investment (particularly at the early stage of a company), the decision really comes down to the team and more importantly, the founder.

“Isaac is a long-term mercenary, but short- and medium-term missionary,” said Harris. “The word that really comes to mind is ‘structured.’ If you ask him to think about something and respond, he’ll think about it and come back with an answer that has four pillars underneath it. He’ll create a framework that not only answers your specific question, but can prove to be a model that will answer future questions of the same type. He’s a systems thinker.”

In 2015, Justworks closed its $13 million Series B, led by Bain Capital Ventures. Harris took a seat on the board. Since, the duo have been working closely together as Justworks has grown into the behemoth it is today.

But these relationships work both ways. Oates said that one of the main things he looks for in an investor is how they’ll react when the chips are down.

“Different people behave different ways under stress,” said Oates. “And people show their values and integrity in those types of situations. That’s when these things are tested. The simple way I think about this is, will this person pick me up from the airport in a pinch?”

Though he’s never asked, he believes Harris absolutely would.

On Extra Crunch Live, Harris and Justworks CEO Isaac Oates sat down to talk through how they resolve disagreements, why Oates never changed what must be one of the most simple pitch decks I’ve ever seen in my life, and how founders should think about pricing their products.

They also gave live feedback on pitch decks submitted by the audience in the Pitch Deck Teardown. (If you’d like to see your deck featured on a future episode, send it to us using this form.)

We record Extra Crunch Live every Wednesday at 12 p.m. PST/3 p.m. EST/8 p.m. GMT. You can see our past episodes here and check out the March slate right here.

Episode breakdown

• Working through disagreements — 11:30
• The Justworks Series B Deck — 15:00
• Pricing the product — 25:00
• Pitch deck teardown — 33:00

Working through disagreements

Despite their glowing praise of one another at the top of the episode, the founder/investor duo haven’t always seen eye to eye. But they did provide an excellent framework around how founders and VCs should wade through disagreements around the business.

Oates gave an example from 2017. He was considering putting in a dual-class stock, which would give a kind of high-vote, low-vote structure to the company. He said that it interested him because he’d seen other companies out there who were vulnerable after going public, whether it be activist shareholders or other outside forces, and that that might prevent a CEO from thinking about the long term.

Harris disagreed and gave a long list of reasons why that neither shared on the episode. However, Oates said that one of the great things to come out of that disagreement was seeing how Harris went about this decision.

Harris introduced Oates to every expert on this particular subject that he knew, asking them to have meetings and discuss it further.

In the end, Oates ultimately stuck to his guns and decided to go forward with the dual-class stock, but armed with all the information he needed to feel confident in the decision.

“I learned a lot about how Matt thinks and how he approaches decisions,” said Oates. “The process of making decisions is just as important as the content. As I’ve gotten to know him more, it means that when we find something where we don’t necessarily agree, we’re able to step back and make sure we have an intellectually rigorous way to process it.”

The story reminded me of a similar conversation with Ironclad CEO Jason Boehmig and Accel’s Steve Loughlin. They explained how much time and energy they spent early on in their investor/founder relationship talking about the “why” behind opinions and strategies and decisions, plotting out the short-, medium- and long-term plan for the company.

“I want to know what you want the company to look like so that I can push you and we can have constructive conversations around the plan,” said Loughlin. “That way, I’m not getting a phone call about whether or not they should hire a head of customer success without any context or a true north in mind.”

Source: Tech Crunch

Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. Want it in your inbox every Saturday morning? Sign up here.

Ready? Let’s talk money, startups and spicy IPO rumors.

Kicking off with a tiny bit of housekeeping: Equity is now doing more stuff. And TechCrunch has its Justice and Early-Stage events coming up. I am interviewing the CRO of Zoom for the latter. And The Exchange itself has some long-overdue stuff coming next week, including $50M and $100M ARR updates (Druva, etc.), a peek at consumption based pricing vs. traditional SaaS models (featuring Fastly, Appian, BigCommerce CEOs, etc.), and more. Woo! 

This week both DoorDash and Airbnb reported earnings for the first time as public companies, marking their real graduation into the ranks of the exited unicorns. We’re keeping our usual eye on the earnings cycle, quietly, but today we have some learnings for the startup world.

Some basics will help us get started. DoorDash beat growth expectations in Q4, reporting revenue of $970 million versus an expected $938 million. The gap between the two likely comes partially from how new the DoorDash stock is, and the pandemic making it difficult to forecast. Despite the outsized growth, DoorDash shares initially fell sharply after the report, though they largely recovered on Friday.

Why the initial dip? I reckon the company’s net loss was larger than investors hoped — though a large GAAP deficit is standard for first quarters post-debut. That concern might have been tempered by the company’s earnings call, which included a note from the company’s CFO that it is “seeing acceleration in January relative to our order growth in December as well as in Q4.” That’s encouraging. On the flip side, the company’s CFO did say “starting from Q2 onwards, we’re going to see a reversion toward pre-COVID behavior within the customer base.”

Takeaway: Big companies are anticipating a return to pre-COVID behavior, just not quite yet. Firms that benefited from COVID-19 are being heavily scrutinized. And they expect tailwinds to fade as the year progresses.

And then there’s Airbnb, which is up around 16% today. Why? It beat revenue expectations, while also losing lots of money. Airbnb’s net loss in Q4 2020 was more than 10x DoorDash’s own. So why did Airbnb get a bump while DoorDash got dinged? Its large revenue beat ($859 million, instead of an expected $748 million), and potential for future growth; investors are expecting that Airbnb’s current besting of expectations will lead to even more growth down the road.

Takeaway: Provided that you have a good story to tell regarding future growth, investors are still willing to accept sharp losses; the growth trade is alive, then, even as companies that may have already received a boost endure increased scrutiny.

For startups, valuation pressure or lift could come down to which side of the pandemic they are on; are they on the tail end of their tailwind (remote-work focused SaaS, perhaps?), or on the ascent (restaurant tech, maybe?). Something to chew on before you raise.

Market Notes

It was one blistering week for funding rounds. Crunchbase News, my former journalistic home, has a great piece out on just how many massive rounds we’re seeing so far this year. But even one or two steps down in scale, funding activity was super busy.

A few rounds that I could not get to this week that caught my eye included a $90 million round for Terminus (ABM-focused GTM juicer, I suppose), Anchorage’s $80 million Series C (cryptostorage for big money), and Foxtrot Market’s $42 million Series B (rapid delivery of yuppie and zoomer essentials).

Sitting here now, finally writing a tidbit about each, I am reminded at the sheer breadth of the tech market. Termius helps other companies sell, Anchorage wants to keep your ETH safe, while Foxtrot wants to help you replenish your breakfast rosé stock before you have to endure a dry morning. What a mix. And each must be generating venture-acceptable growth, as they have not merely raised more capital but raised rather large rounds for their purported maturity (measured by their listed Series stage, though the moniker can be more canard than guide.)

I jokingly call this little section of the newsletter Market Notes, a jest as how can you possibly note the whole market that we care about? These companies and their recent capital infusions underscore the point.

Various and Sundry

Finally, two notes from earnings calls. The first from Root, which is a head scratcher, and the second from Booking Holdings’ results.

I chatted with Alex Timm, Root Insurance’s CEO this week moments after it dropped numbers. As such I didn’t have much context in the way of investor response to its results. My read was that Root was super capitalized, and has pretty big expansion plans. Timm was upbeat about his company’s improving economics (on a loss ratio and loss-adjusted expenses basis, for the insurtech fans out there), and growth during the pandemic.

But then today its shares are off 16%. Parsing the analyst call, there’s movement in Root’s economic profile (regarding premium-ceding variance over the coming quarters) that make it hard to fully grok its full-year growth from where I sit. But it appears that Root’s business is still molting to a degree that is almost refreshing; the company could have gone public in 2022 with some of its current evolution behind it, but instead it raised a zillion dollars last year and is public now.

Sticking our neck out a bit, despite fellow neo-insurnace player Lemonade’s continued, and impressive valuation run, MetroMile’s stock is also softening, while Root’s has lost more than half its value from its IPO date. If the current repricing of some neo-insurance players continues, we could see some private investment into the space slow. (Fewer things like this?) It’s a possible trend we’ll have eyes on this year.

Next, Booking Holdings, the company that owns Priceline and other travel properties. Given that Booking might have notes regarding the future of business travel — which we care about for clues regarding what could come for remote work and office culture, things that impact everything from startup hub locations to software sales — The Exchange snagged a call slot and dialed the company up.

Booking Holdings’ CEO Glenn Fogel didn’t have a comment as to how his company is trading at all-time highs despite suffering from sharp year-over-year revenue declines. He did note that the pandemic has shaken up expectations for conversations, which could limit short-term business travel in the future for meetings that may now be conducted on video calls. He was bullish on future conference travel (good news for TechCrunch, I suppose), and future travel more generally.

So concerning the jetting perspective, we don’t know anything yet. Booking Holdings is not saying much, perhaps because it just doesn’t know when things will turn around. Fair enough. Perhaps after another three months of vaccine rollout will give us a better window into what a partial return to an old normal could look like.

And to cap off, you can read Apex Holdings’ SPAC presentation here, and Markforged’s here. Also I wrote about the buy-now-pay-later space here, riffed on the Digital Ocean IPO with Ron Miller here, and doodled on Toast’s valuation and the Olo debut here.

Hugs, and have a lovely weekend!

Alex

Source: Tech Crunch

Storm Ventures, a venture firm that focuses on early stage B2B enterprise startups, announced this week that it has promoted Pascale Diaine and Frederik Groce to partners at the firm.

The two new partners have worked their way up over the last several years. Groce joined Storm in 2016 and has invested in enterprise SaaS startups like Workato, Splashtop, NextRequest and Camino. Diaine joined a year later and has invested in firms like Sendoso, German Bionic, InEvent and Talkdesk.

Groce, who is also a founder at BLCK VC and helped organize the Black Venture Institute to create a network of Black investors, says that these promotions show that venture needs to be more diverse, and Storm recognizes this.  “If you think about the way our team works, that’s the way I think venture teams will need to work to be able to be successful in the next 40 years. And so the hope is that over time everyone does this and we’re just early to it,” Groce told me.

Unfortunately, right now that’s not the case, not even close. According to research by Crunchbase, just 12% of venture capitalists are women and two-thirds of firms don’t have any female investors. Meanwhile, only about 4% of ventures investors are Black.

Those numbers have an impact on the number of Black and female founders because as Groce points out the lack of founders in underrepresented groups is in part a networking problem. “In a business that’s predicated on networks if you don’t have diversity in the network, or the teams that are driving those networks, you just can’t make sure you’re seeing great talent across all ecosystems,” he said.

Diaine, who is French and started her career by founding Orange Fab, the corporate accelerator of the European Telco Orange, has brought her international business background to Storm where they helped her tune that experience to an investor focus and supported her as she learned the nuances of the investment side of the business.

“I don’t come from the VC world. I come from the innovative corporate world. So they had to train me and spend time getting me up to date. And they did spend so much time making sure I understood everything to make sure I got to this level,” she said.

Both partners bring their own unique views looking beyond Silicon Valley for investment opportunities. Diaine’s investment include a German, Brazilian and Portuguese company, while Groce’s investments include companies in Chicago, Atlanta and Seattle.

The two partners have also developed an algorithm to help find investments based on a number of online signals, something that has become more important during the pandemic when they couldn’t network in person.

“Frederik and I have been working on [an algorithm to find] what are the signals that you can identify online that will tell you this company’s doing well, this company growing.You have to have a nice set of startup search tracking [signals], but what do you track if you can’t just get the revenue in real time, which is impossible. So we’ve developed an algorithm that helps us identify some of these signals and create alerts on which startups we should pay attention to,” Diaine explained.

She says this data-driven approach should be helpful and augment their in-person efforts even after the pandemic is over and increase their overall efficiency in finding and tracking companies in their portfolios.

Source: Tech Crunch

While Denmark and Copenhagen don’t often come up as a destination for European startups, it has a thriving local tech scene that’s home to some of the better startup conferences. After all, who doesn’t want to visit Copenhagen?

A highly educated population, great universities, excellent healthcare and great transport links to Europe make the city as good a place as any to start up a company.

Amongst our investors, we found the trends they were most interested in included sustainable supply chain logistics, esports and gaming, enterprise SaaS, climate tech, deep tech hardware, agritech and edtech. And many said they are interested in the future of work and the transition to different ways of working.

Companies they are excited by included: Afresh Technologies, Seaborg Technologies (nuclear reactors), Labster (virtual science labs), Normative.io (social and environmental impact measurement) and DEMI (connecting with chefs).

In general, investors said they are focused on their home ground but are also spreading their wings to the “New Nordics” (Nordic and Baltic) region. Some are also investing in large European and North American hub cities.

The “green shoots” of recovery they see are appearing in anything digital that comes with a community, as well as among startups that are able to leverage the pandemic to generate new business models that are faster than incumbents.

Use discount code EXTRAKNASE to save 25% off a 1-year Extra Crunch membership.
This offer is only available to readers in Europe and expires on April 30, 2021.

We surveyed:

• Sara Rywe, associate, byFounders
• Mads Hørlyck, associate, Maersk Growth
• Henrik Møller Kristensen, associate, Bumble Ventures
• Benjamin Ratz, partner, Nordic Makers
• Mark Emil Hermansen, associate, Astanor
• Eric Lagier, managing partner, byFounders

Sara Rywe, associate, byFounders

What trends are you most excited about investing in, generally?
Software and tech (I’m personally extra excited about the “future of work,” fintech, and “future of food”).

What’s your latest, most exciting investment?
Digitail (a veterinary software provider solving the gap between the ever-growing expectations of millennial pet parents and the experience offered by veterinarians with their current tools).

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
I would like to see more founders with global ambitions in the “uniquely transformative” software category (the same way Airbnb transformed the hotel industry and Uber transformed the taxi industry). Many startups we see today are building a feature instead of a full solution and their vision is about making industries incrementally better. So, here’s a callout to all of you Nordic or Baltic visionary founders out there: Write me!

What are you looking for in your next investment, in general?
We always look for competent, visionary and passionate founders building products that people love. As an industry-agnostic VC, we keep our eyes open for a range of different opportunities.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Some of the current trends that I see include:
Fintech: salary advances, factoring, sustainability reporting and measurements.
Food tech: alternative protein, pet food, food waste.
Future of work: virtual offices, collaboration, productivity tools.
If you decide to enter any of the above-mentioned industries, I therefore encourage you to really be thoughtful in how you differentiate yourself and/or how your team is better suited to execute on the mission.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
<50%. We invest across the Nordics and Baltics and I’m covering Sweden, Norway and Denmark.

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Denmark is very well positioned to succeed in sustainability and energy (many good talents coming from e.g., Vestas and DTU), consumer goods (there’s a large history in the country around building brands such as Lego, Carlsberg, etc.), and biotech (Novo Nordisk among others playing a big part). Moreover, software scaleups such as Peakon, Pleo, and Templafy are really leading the way for a new generation of tech startups to thrive in Denmark. When looking at Danish founder particularly, I’m very excited to see companies such as Qvin revolutionizing healthcare for women by using period blood as an opportunity for a noninvasive blood test.

How should investors in other cities think about the overall investment climate and opportunities in your city?
They should be very excited! Just look at what we’ve seen in 2021 so far:
Exits: Peakon $700 million exit and Humio $400 million exit.
Large rounds: Public.com raising $220 million, Vivino raising $115 million and Labster raising $60 million led by Andreessen Horowitz

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
Somewhat. We already see a lot of innovation outside of Copenhagen in cities such as Aarhus and Odense.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
One industry that has been hit hard by COVID-19 is of course travel and hospitality. The flipside of this is that we see a lot of innovation due to that. Examples from our own portfolio include:
AeroGuest — a platform that allows for a “touch-free” travel experience (skipping lines and reception desks, direct online room booking, etc.).
BobW — a new type of sustainable travel accommodation bringing the best of both worlds: “home meets hotel.”

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
COVID-19 has not impacted our investment strategy massively and we have the same focus as before (investing in software and tech). With that said, we are happy to see some industries getting an uplift in these difficult times, such as sustainability and impact.
The biggest worries of our portfolio company founders have been around volatility and uncertainty. Since the first lockdown our advice has been simple: You can’t control the outcome. We’ve therefore worked together to ensure that they have some proper scenario planning in place and that we think creatively of how to mitigate eventual negative effects on their business.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Tame — one of our portfolio companies — expanded their event platform to also include virtual events, which made it really take off in COVID times.
Corti — another portfolio company of ours — could in less than four weeks build a product for helping fight COVID-19 with artificial intelligence.
Both of these companies are good examples of how “adapting their products” due to the pandemic led to great results.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
The sudden rise of awareness around impact and ESG among VCs! Several great conversations have been held on how to improve our ways of working.

Who are key startup people you see creating success locally, whether investors, founders or even other types of startup ecosystems roles like lawyers, designers, growth experts, etc. We’re trying to highlight the movers and shakers who outsiders might not know.
Some of the extraordinary founders that I look up to from Denmark include:
Jakob Jønck (Simple Feast), Andreas Cleve and Lars Maaløe (Corti), Sara Naseri and Søren Therkelsen (Qvin), Niels Martin Brochner, Jarek Owczarek and Viktor Heide (Contractbook), Jacob Hansen, Esben Friis-Jensen, Jakob Storm and Christian Hansen (Cobalt) among others.
There’s also a range of great investors in Denmark including Helle Uth, Christel Piron, Alexander Viterbo-Horten and Anders Kjær amongst others at PreSeed Ventures and Daniel Nyvang Mariussen with his team at Bumble Ventures. Also, the Danish tech ecosystem would not be what it is without all the work that Vækstfonden does.

Mads Hørlyck, associate, Maersk Growth

What trends are you most excited about investing in, generally?
Supply chain/logistics including sustainable supply chains.

What’s your latest, most exciting investment?
Afresh Technologies.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
In general there are still plenty of opportunities across various parts of the supply chain. We have no particular specific preferences as such at the moment.

What are you looking for in your next investment, in general?
Digital solution to drive efficiencies across one or more subparts of the supply chain, both upstream and downstream focus.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Freight forwarding has been maturing in Europe and North America with several large startups in both regions. However, the market is still large but it requires a strong new model as it’s also low margins.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Less/little focus on Denmark. Main priority in large European/North American hubs.

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Startups with the medical and supporting functions tech are doing well. We are excited about Onomondo in the Danish scene — also a portfolio company of ours.

How should investors in other cities think about the overall investment climate and opportunities in your city?
As an upcoming opportunity. Several tech hubs have been created and there is a general good environment including state-backed loans/pre-seed investments and fairly many angels to get going.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
We don’t expect any significant changes to the founder-environment in Denmark (too little country).

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
We see an increased focus on our investment area: Supply chain/logistics as people throughout the pandemic have been much more exposed to and dependent on flexible and reliable supply chains. All the way from supply resilience, supply chain visibility, fulfillment and to last-mile delivery. Consumers have the power to drive changes in supply chains.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Sales conversion rates decreasing/pipelines drying out. Advice is, like everyone else, to minimize cost and extend runway by getting as close to profitability as model allows. Based on this funding needs can be discussed.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Yes, we have seen some startups being able to leverage the pandemic over incumbents due to their more flexible and digital structure.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
We have yet to see a default wave both globally within our investment area but also in general in Denmark.

Henrik Møller Kristensen, associate, Bumble Ventures

What trends are you most excited about investing in, generally?
Some of the trends we’re excited about are (1) the growing market of digital media and entertainment, in particular esports and gaming, (2) enterprise SaaS, e.g., related to the future of work, (3) climate change solutions, e.g., deep tech hardware and software, and (4) e-commerce businesses, in particular digital native vertical brands and direct-to-consumer cases.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
Products and services to satisfy the needs of the aging population. The number of elderly people will be growing significantly over the next decades, establishing a growing market for products and services to satisfy the needs from this demographic change and reduce the pressure on societies.

What are you looking for in your next investment, in general?
We highly value team and traction. We are looking for exceptional founders with strong competencies in engineering, product and commercial, preferably with years of experience from the industry they are entering with a new solution. We prefer some indication of product-market fit. We like methodical revenue growth driven by paying customers, rich cohort grids and controllable funnels that proves a robust core business. We don’t like products that are still 2-3 years away from monetization. This means that we will miss the next Facebook, but we are okay with that.

Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Traditional social media and apps that require millions of users before being able to turn on the business model. SaaS marketing tools also seem crowded.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
Next week we will announce our first investment outside Denmark. This is our first step toward being present not only in Denmark, but in the Nordics.

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Well-positioned industries in Denmark are medtech, fintech, gaming and clean tech. We’re excited about GamerzClass, Pie Systems, LeadFamly, Omnigame, Organic Basics, Cap desk, Roccamore, Too Good To Go, Pleo, Tradeshift, SYBO, Unity and more. Exceptional founders are Victor Folmann from GamerzClass, Sunny Long from Pie Systems, Frederikke Antonie Schmidt from Roccamore and Christian Gabriel from Capdesk.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Historically, there has been a need for more capital and talent to keep successful growth-stage startups in Denmark and not have to move to foreign countries to attract talent and capital. However, the investment climate is getting better. Greater access to capital and talent go hand in hand, and what is really changing the investment climate for the better is founders of successful Danish startups turning back to Denmark and reinvesting in the startup community.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
I think we’ll see more attraction to remote work in the future. However, I believe it is important for startups to be close to other great like-minded startups, founders, advisors and investors, not only virtually but in real life. Establishing a great network and personal relationships are very important factors to succeed and remote is not suited very well for that in my opinion.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
The travel and hospitality industry look weaker and we’ll see a shift toward lower demand due to remote work and sustainability issues. On the other side, gaming, e-commerce and digital products and services are growing as you will have more people online behind the screens.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
We are still happy to invest despite COVID-19. Gaming has, for example, been positively affected by COVID-19, however, many startups are also struggling due to COVID-19. The best a startup can do is to manage the runway, have close dialogue with their investors, cut costs and try to pivot to the changes. Look for opportunities, not boundaries.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Not yet. Only a few of our portfolio companies are negatively affected by COVID-19.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
Investors are willing to make new investments and help out struggling portfolio companies. Founders are keeping their heads high and making the best out of the new circumstances. In some cases it actually stimulates new innovations.

Benjamin Ratz, partner, Nordic Makers

What trends are you most excited about investing in, generally?
Energy and the transition to a fossil fuel society, data as governance and the changing role of education.

What’s your latest, most exciting investment?
Seaborg — building modular, small and safe nuclear reactors.
Labster — virtual science labs that help students all over the world immerse in science and STEM.

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

What are you looking for in your next investment, in general?
Views on how and if the world has permanently changed in behavior due to the pandemic.

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

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
100%.

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

How should investors in other cities think about the overall investment climate and opportunities in your city?
A lot of founders leaving success stories of the region.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come?
No but we expect the cities to produce more.

Mark Emil Hermansen, associate, Astanor

What trends are you most excited about investing in, generally?
Food and agrotech.

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

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
I’d love to see more food tech companies that “get food” — the human element of it that is. Too many startups focus only on the technology, less on the fact that it should be deeply human centered. This is so prevalent that I instinctively stay away from startups dubbing themselves as “food tech” — food is not tech and tech is not food and therein lies the challenge and the prize. Here’s a read that kind of sums it up.

What are you looking for in your next investment, in general?
Anything that reminds me of these first lines from “On The Road”: “They danced down the streets like dingledodies, and I shambled after as I’ve been doing all my life after people who interest me, because the only people for me are the mad ones, the ones who are mad to live, mad to talk, mad to be saved, desirous of everything at the same time, the ones that never yawn or say a commonplace thing, but burn, burn, burn …”.

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

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
25% local (DK is still immature from a startup standout — yet the opportunity is that the VC footprint is small and relatively unsophisticated).

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Companies: Online communities such as DEMI.
Founder: Erez Galonska of Infarm.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Tons of opportunity if you have access to the right deal flow/pedigree.

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

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Worries: Uncertainty and recruitment strategy.
Advice: Survive and prepare.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Anything physical that has retail footprint. Anything digital that has a community footprint.

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
That everyone’s pumped for what’s about to come (post-COVID) and the realization (or hope?) that nothing will be as before.

Who are key startup people you see creating success locally?
Kasper Ottesen, Highbridge (legal).
Kasper Hulthin (entrepreneur and investor).
Christian Tang-Jespersen (investor).

Eric Lagier, managing partner, byFounders

What trends are you most excited about investing in, generally?
Future of work, productivity improvement platforms.

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

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

What are you looking for in your next investment, in general?
Passionate founders, solving big problems to build a better tomorrow.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
We are focused on the New Nordics (Nordic and Baltic) region having shown the biggest growth potential in Europe.

Which industries in your city and region seem well positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Climate tech, health tech, fintech. Normative, Corti, Lucinity.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Copenhagen is booming and there is now a strong foundation of experienced founders building really transformative companies.

Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
No — but I expect to see much more diverse teams with a priority on remote first.

Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
An acceleration of online, remote, e-commerce and general faster pace of transactions.

How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
COvid-19 is a giant accelerator of future trends. Those founders that have adapted best will be the winners of tomorrow.

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

What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
How founders persevere in these times of massive change.

Who are key startup people you see creating success locally?
Jakob Jønck, founder, SimpleFeast; Kristian Rönn, founder, Normative; Andreas Cleve and Lars Maaløe, founders, Corti.

Source: Tech Crunch

Non-fungible tokens have been around for two years, but these NFTs, one-of-one digital items on the Ethereum and other blockchains, are suddenly becoming a more popular way to collect visual art primarily, whether it’s an animated cat or an NBA clip or virtual furniture.

“Suddenly” is hardly an overstatement. According to the outlet Cointelegraph, during the second half of last year, $9 million worth of NFT goods sold to buyers; during one 24-hour window earlier this week, $60 million worth of digital goods were sold.

What’s going on? A thorough New York Times piece on the trend earlier this week likely fueled new interest, along with a separate piece in Esquire about the artist Beeple, a Wisconsin dad whose digital drawings, which he has created every single day for the last 13 years, began selling like hotcakes in December. If you need further evidence of a tipping point (and it is ample right now), consider that the work of Beeple, whose real name is Mike Winkelmann, was just made available through Christie’s. It’s the venerable auction house’s first sale of exclusively digital work.

To better understand the market and why it’s blowing up in real time, we talked this week with David Pakman, a former internet entrepreneur who joined the venture firm Venrock a dozen years ago and began tracking Bitcoin soon after, even mining the cryptocurrency at his Bay Area home beginning in 2015. (“People would come over and see racks of computers, and it was like, ‘It’s sort of hard to explain.’”)

Perhaps it’s no surprise that he also became convinced early on of the promise of NFTs, persuading Venrock to lead the $15 million Series A round for a young startup, Dapper Labs, when its primary offering was CryptoKitties, limited-edition digital cats that can be bought and bred with cryptocurrency.

While the concept baffled some at the time, Pakman has long seen the day when Dapper’s offerings will be far more extensive, and indeed, a recent Dapper deal with the NBA to sell collectible highlight clips has already attracted so much interest that Dapper is reportedly right now raising $250 million in new funding at a post-money valuation of $2 billion. While Pakman declined to confirm or correct that figure, he did answer our other questions in a chat that’s been edited here for length and clarity.

TC: David, dumb things down for us. Why is the world so gung-ho about NFTs right now?

DP: One of the biggest problems with crypto — the reason it scares so many people — is it uses all these really esoteric terms to explain very basic concepts, so let’s just keep it really simple. About 40% of humans collect things — baseball cards, shoes, artwork, wine. And there’s a whole bunch of psychological reasons why. Some people have a need to complete a set. Some people do it for investment reasons. Some people want an heirloom to pass down. But we could only collect things in the real world because digital collectibles were too easy to copy.

Then the blockchain came around and [it allowed us to] make digital collectibles immutable, with a record of who owns what that you can’t really copy. You can screenshot it, but you don’t really own the digital collectible, and you won’t be able to do anything with that screenshot. You won’t be able to to sell it or trade it. The proof is in the blockchain. So I was a believer that crypto-based collectibles could be really big and actually could be the thing that takes crypto mainstream and gets the normals into participating in crypto — and that’s exactly what’s happening now.

TC: You mentioned a lot of reasons that people collect items, but one you didn’t mention is status. Assuming that’s one’s motivation, how do you show off what you’ve amassed online? 

DP: You’re right that one of the other reasons why we collect is to show it off status, but I would actually argue it’s much easier to show off our collections in the digital world. If I’m a car collector, the only way you’re going to see my cars is to come over to the garage. Only a certain number of people can do that. But online, we can display our digital collections. NBA Top Shop, for example, makes it very easy for you to show off your moments. Everyone has a page and there’s an app that’s coming and you can just show it off to anyone in your app, and you can post it to your social networks. And it’s actually really easy to show off how big or exciting your collection is.

TC: It was back in October that Dapper rolled out these video moments, which you buy almost like a Pokemon set in that you’re buying a pack and know you’ll get something “good” but don’t know what. Yet almost half its sales have come in through the last week. Why?

DP: There’s only about maybe 30,000 or 40,000 people playing right now. It’s growing 50% or 100% a day. But the growth has been completely organic. The game is actually still in beta, so we haven’t been doing any marketing other than posting some stuff on Twitter. There hasn’t been attempt to market this and get a lot of players [talking about it] because we’re still working the bugs out, and there are a lot of bugs still to be worked out.

But a couple NBA players have seen this and gotten excited about their own moments [on social media]. And there’s maybe a little bit of machismo going on where, ‘Hey, I want my moment to trade for a higher price.’ But I also think it’s the normals who are playing this. All you need to play is a credit card, and something like 65% of the people playing have never owned or traded in crypto before. So I think the thesis that crypto collectibles could be the thing that brings mainstream users into crypto is playing out before our eyes.

TC: How does Dapper get paid?

DP: We get 5% of secondary sales and 100% minus the cost of the transaction on primary sales. Of course, we have a relationship with the NBA, which collects some of that, too. But that’s the basic economics of how the system works.

TC: Does the NBA have a minimum that it has to be paid every year, and then above and beyond that it receives a cut of the action?

DP: I don’t think the company has gone public with the exact economic terms of their relationships with the NBA and the Players Association. But obviously the NBA is the IP owner, and the teams and the players have economic participation in this, which is good, because they’re the ones that are creating the intellectual property here.

But a lot of the appreciation of these moments — if you get one in a pack and you sell it for a higher price — 95% of that appreciation goes to the owner. So it’s very similar to baseball cards, but now IP owners can participate through the life of the product in the downstream economic activity of their intellectual property, which I think is super appealing whether you’re the NBA or someone like Disney, who’s been in the IP licensing business for decades.

And it’s not just major IP where this NFT space is happening. It’s individual creators, musicians, digital artists who could create a piece of digital art, make only five copies of it, and auction it off. They too can collect a little bit each time their works sell in the future.

TC: Regarding NBA Top Shot specifically, prices range massively in terms of what people are paying for the same limited-edition clip. Why?

DP: There are two reasons. One is that like scarce items, lower numbers are worth more than higher numbers, so if there’s a very particular LeBron moment, and they made 500 [copies] of them, and I own number one, and you own number 399, the marketplace is ascribing a higher value to the lower numbers, which is very typical of limited-edition collector pieces. It’s sort of a funny concept. But it is a very human concept.

The other thing is that over time there has been more and more demand to get into this game, so people are willing to pay higher and higher prices. That’s why there’s been a lot of price appreciation for these moments over time.

TC: You mentioned that some of the esoteric language around crypto scares people, but so does the fact that 20% of the world’s bitcoin is permanently inaccessible to its owners, including because of forgotten passwords. Is that a risk with these digital items, which you are essentially storing in a digital locker or wallet?

DP: It’s a complex topic,  but I will say that Dapper has tried to build this in a way where that won’t happen, where there’s effectively some type of password recovery process for people who are storing their moments in Dapper’s wallet.

You will be able to take your moments away from Dapper’s account and put it into other accounts, where you may be on your own in terms of password recovery.

TC: Why is it a complex topic?

DP: There are people who believe that even though centralized account storage is convenient for users, it somehow can be distrustful — that the company could de-platform you or turn your account off. And in the crypto world, there’s almost a religious ferocity about making sure that no one can de-platform you, that the things that you buy — your cryptocurrencies or your NFTs — are your own. Long term, Dapper supports that. You’ll be able to take your moments anywhere you want. But today, our customers don’t have to worry about that I-lost-my-password-and-I’ll-never-get-my-moments-again problem.

For more, including why Dapper Labs built its own blockchain and what Pakman thinks of the U.S. establishing a digital USD, you can listen to our full conversation here. 

Source: Tech Crunch

Facebook’s internal R&D group, NPE Team, is today launching its next experimental app, called BARS. The app makes it possible for rappers to create and share their raps using professionally created beats, and is the NPE Team’s second launch in the music space following its recent public debut of music video app Collab.

While Collab focuses on making music with others online, BARS is instead aimed at would-be rappers looking to create and share their own videos. In the app, users will select from any of the hundreds of professionally created beats, then write their own lyrics and record a video. BARS can also automatically suggest rhymes as you’re writing out lyrics, and offers different audio and visual filters to accompany videos as well as an autotune feature.

There’s also a “Challenge mode” available, where you can freestyle with auto-suggested word cues, which has more of a game-like element to it. The experience is designed to be accommodating to people who just want to have fun with rap, similar to something like Smule’s AutoRap, perhaps, which also offers beats for users’ own recordings.

Image Credits: Facebook

The videos themselves can be up to 60 seconds in length and can then be saved to your Camera Roll or shared out on other social media platforms.

Like NPE’s Collab, the pandemic played a role in BARS’ creation. The pandemic shut down access to live music and places where rappers could experiment, explains NPE Team member DJ Iyler, who also ghostwrites hip-hop songs under the alias “D-Lucks.”

“I know access to high-priced recording studios and production equipment can be limited for aspiring rappers. On top of that, the global pandemic shut down live performances where we often create and share our work,” he says.

BARS was built with a team of aspiring rappers, and today launched into a closed beta.

Image Credits: Facebook

Despite the focus on music, and rap in particular, the new app in a way can be seen as yet another attempt by Facebook to develop a TikTok competitor — at least in this content category.

TikTok has already become a launchpad for up-and-coming musicians, including rappers; it has helped rappers test their verses, is favored by many beatmakers and is even influencing what sort of music is being made. Diss tracks have also become a hugely popular format on TikTok, mainly as a way for influencers to stir up drama and chase views. In other words, there’s already a large social community around rap on TikTok, and Facebook wants to shift some of that attention back its way.

The app also resembles TikTok in terms of its user interface. It’s a two-tabbed vertical video interface — in its case, it has  “Featured” and “New” feeds instead of TikTok’s “Following” and “For You.” And BARS places the engagement buttons on the lower-right corner of the screen with the creator name on the lower-left, just like TikTok.

However, in place of hearts for favoriting videos, your taps on a video give it “Fire” — a fire emoji keeps track. You can tap “Fire” as many times as you want, too. But because there’s (annoyingly) no tap-to-pause feature, you may accidentally “fire” a video when you were looking for a way to stop its playback. To advance in BARS, you swipe vertically, but the interface is lacking an obvious “Follow” button to track your favorite creators. It’s hidden under the top-right three-dot menu.

The app is seeded with content from NPE Team members, which includes other aspiring rappers, former music producers and publishers.

Currently, the BARS beta is live on the iOS App Store in the U.S., and is opening its waitlist. Facebook says it will open access to BARS invites in batches, starting in the U.S. Updates and news about invites, meanwhile, will be announced on Instagram.

Facebook’s recent launches from its experimental apps division include Collab and collage maker E.gg, among others. Not all apps stick around. If they fail to gain traction, Facebook shuts them down — as it did last year with the Pinterest-like video app Hobbi.

Source: Tech Crunch

The freemium marketing approach has become commonplace among B2C and B2B software providers alike. Considering that most see fewer than 5% of free users move to paid plans, even a slight improvement in conversion can translate to significant revenue gains. The (multi) million-dollar question is, how do they do it?

The answer lies in product analytics, which offer teams the ability to ask and answer any number of questions about the customer journey on an ad-hoc basis. Combined with a commitment to testing, measurement and iteration, this puts data in the driver’s seat and helps teams make better decisions about what’s in the free tier and what’s behind the paywall. Successful enterprises make this evaluation an ongoing exercise.

Sweat the small stuff

A freemium business model is simply a set of interconnected funnels. From leads all the way through to engagement, conversion and retention, understanding each step and making even small optimizations at any stage will have down-funnel implications. Start by using product analytics to understand the nuances of what’s working and what isn’t, and then double down on the former.

For example, identify specific personas that perform well and perform poorly. While your overall conversion average may be 5%, there can be segments converting at 10% or 1%. Understanding the difference can shine a light on where to focus. That’s where the right analytics can lead to significant results. But if you don’t understand what, why and how to improve, you’re left with guesswork. And that’s not a modern way of operating.

There’s a misconception that volume of data equals value of data. Let’s say you want to jump-start your funnel by buying pay-per-click traffic. You see a high volume of activity, with numbers going up at the beginning of your funnel and a sales team busy with calls. However, you come to learn the increased traffic, which looked so promising at the outset, results in very few users converting to paid plans.

Now, this is a story as old as PPC, but in the small percentage that do convert, there’s a lot to learn about where to focus your efforts — which product features keep users hooked and which ones go unused. Often, the truth of product analytics is that actionable insights come from just a fraction of the data and it can take time to understand what’s happening. Getting users on board the free plan is just the first step in conversion. The testing and iteration continue from there.

The dropped and the languished

Within the free tier, users may languish — satisfied with whatever features they can access. If your funnel is full of languishing users, you’ve at least solved the adoption problem, so why are they stuck? Without a testing and tracking approach, you’ll struggle to understand your users and how they respond, by segment, to changes.

Source: Tech Crunch