Month: August 2021

Sequoia is one of the most prestigious and successful venture firms to ever exist. The firm’s portfolio includes Airbnb, 23andMe, Docker, Dropbox, Figma and GitHub — and that barely covers the first half of the alphabet. (The Sequoia website lists portfolio companies in alphabetical order.)

So it should go without saying that we are absolutely thrilled to have Sequoia partner Stephanie Zhan and Rec Room founder Nick Fajt join us on Extra Crunch Live in the coming weeks.

Rec Room is a Seattle-based startup that allows users to not only play games, but to build them collaboratively with their friends. The gaming world has seen a huge boost in the wake of the pandemic, and Rec Room is thinking way out in the future about what gaming looks like not only as a user, but as a creator.

The company has raised nearly $150 million, and Sequoia led Rec Room’s seed and Series A financing rounds.

Stephanie Zhan has been with Sequoia as part of the early-stage and seed investment team, with a portfolio that includes Sunday (outdoor home subscription service), Linear (issues tracking tool for modern developers) and Middesk (background checks for businesses). She has also helped lead investments in Graphcore (microprocessors for machine intelligence), Evervault (dev tools for data privacy) and Doppler (secrets management for developers).

Before joining Sequoia, Zhan held product roles at Google and Nest.

We’ll hear from this founder/investor duo about how they met, what made them choose each other and how they’ve worked together and tackled obstacles moving forward. REGISTER HERE FOR FREE!

Extra Crunch Live also features the ECL Pitch-off, where founders in the audience will have the opportunity to virtually raise their hand and pitch on our stage to our guests, who will give live feedback.

Anyone can attend Extra Crunch Live, but accessing the content on-demand is reserved exclusively for Extra Crunch members. And damn, the Extra Crunch library is quite a resource. If you’re not yet a member, what are you waiting for? Sign up here.

This episode of Extra Crunch Live, which goes down on August 18 at 3 pm ET/noon PT, is a can’t miss. See you there!

Source: Tech Crunch

Nearly three in 10 employees (29%) would quit their job if they were told they were no longer allowed to work remotely, according to a recent survey. In addition, a recent Harvard Business Study found that “companies that let their workers decide where and when to do their jobs — whether in another city or in the middle of the night — increase employee productivity, reduce turnover and lower organizational costs.”

Over the past 18 months, while instituting a remote work model, our turnover rate at Insightly was the lowest in company history and an internal survey found happiness levels to be twice as high from the previous year. This in the midst of a major pandemic, social movement, forest fires and a disruptive election — all happening at the same time.

On a larger, global scale, employers from companies around the world are coming to the same realization: You don’t need an office to be productive and employees are happier working from home.

The next logical step is, at the same time, a majorly disruptive one and a 180-degree shift toward how companies have operated for over 100 years — the transition from in-person headquarters to a remote, work-from-anywhere model. In line with this shift, we’ve foregone our 40,000-square-foot Soma office space and employees are able to work from anywhere in the United States while keeping the same salary.

There will no doubt be challenges, and there already have been. But with these challenges also arises immense opportunity. Here are a few battle-tested tips on how to maintain productivity while delivering flexibility with this new work model:

Reallocate overhead savings

Let employees choose where they live. Allowing this option will better their lives and make for happy, engaged employees. Overhead costs, especially in large cities such as San Francisco, are the largest operating expense for most companies. Take this large sum of money and invest in employee happiness. You don’t need thousands of square feet in office space to be successful.

That massive overhead cost you just got rid of? Use this toward more meaningful employee experiences that will enhance their lives.

Source: Tech Crunch

When Salesforce announced its new business video streaming service called Salesforce+ this week, everyone had a reaction. While not all of it was positive, some company watchers also wondered if there was more to this announcement than meets the eye.

If you look closely, the new initiative suggests that Salesforce wants to take a bite out of LinkedIn and other SaaS content platforms and publishers. The video streaming service could be a launch point for a broader content platform, where its partners are producing their own content and using Salesforce+ infrastructure to help them advertise to and cultivate their own customers.

The company has, after all, done exactly this sort of thing with its online marketplaces and industry events to great success. Salesforce generated almost $6 billion in its most recent quarterly earnings report. That mostly comes from selling its sales, marketing and service software, not any kind of content production, but it has lots of experience putting on Dreamforce, its massive annual customer event, as well as smaller events throughout the year around the world.

On its face, Salesforce+ is a giant, ambitious and quite expensive content marketing play. The company reportedly has hired a large professional staff to produce and manage the content, and built a broadcasting and production studio designed to produce quality shows in-house. It believes that by launching with content from Dreamforce, its highly successful customer conference, attended by tens of thousands people every year pre-pandemic, it can prime the viewing pump and build audience momentum that way, perhaps even using celebrities as it often does at its events to drive audience. It is less clear about the long-term business goals.

Source: Tech Crunch

Medal.tv, a short-form video clipping service and social network for gamers, is entering the live streaming market with the acquisition of Rawa.tv, a Twitch rival based in Dubai, which had raised around $1 million to date. The seven-figure, all cash deal will see two of Rawa’s founders, Raya Dadah and Phil Jammal, now joining Medal and further integrations between the two platforms going forward.

The Middle East and North African region (MENA) is one of the fastest-growing markets in gaming and still one that’s mostly un-catered to, explained Medal.tv CEO Pim de Witte, as to his company’s interest in Rawa.

“Most companies that target that market don’t really understand the nuances and try to replicate existing Western or Far-Eastern models that are doomed to fail,” he said. “Absorbing a local team will increase Medal’s chances of success here. Overall, we believe that MENA is an underserved market without a clear leader in the livestreaming space, and Rawa brings to Medal the local market expertise that we need to capitalize on this opportunity,” de Witte added.

Medal.tv’s community had been asking for the ability to do livestreaming for some time, the exec also noted, but the technology would have been too expensive for the startup to build using off-the-shelf services at its scale, de Witte said.

“People increasingly connect around live and real-time experiences, and this is something our platform has lacked to date,” he noted.

But Rawa, as the first livestreaming platform dedicated to Arab gaming, had built out its own proprietary live and network streaming technology that’s now used in all its products. That technology is now coming to Medal.tv.

Image Credits: Medal.tv

The two companies were already connected before today, as Rawa users have been able to upload their gaming clips to Medal.tv, and some Rawa partners had joined Medal’s skilled player program. Going forward, Rawa will continue to operate as a separate platform, but it will become more tightly integrated with Medal, the company says. Currently, Rawa sees around 100,000 active users on its service.

The remaining Rawa team will continue to operate the livestreaming platform under co-founder Jammal’s leadership following the deal’s close, and the Rawa HQ will remain based in Dubai. However, Rawa’s employees have been working remotely since the start of the pandemic, and it’s unclear if that will change in the future, given the uncertainty of Covid-19’s spread.

Medal.tv detailed its further plans for Rawa on its site, where the company explained it doesn’t aim to build a “general-purpose” livestreaming platform where the majority of viewers don’t pay — a call-out that clearly seems aimed at Twitch. Instead, it says it will focus on matching content with viewers who would be interested in subscribing to the creators. This addresses on of the challenges that has faced larger platforms like Twitch in the past, where it’s been difficult for smaller streamers to get off the ground.

The company also said it will remain narrowly focused on serving the gaming community as opposed to venturing into non-gaming content, as others have done. Again, this differentiates itself from Twitch which, over the years, expanded into vlogs and even streaming old TV shows. And it’s much different from YouTube or Facebook Watch, where gaming is only a subcategory of a broader video network.

The acquisition follows Medal.tv’s $9 million Series A led by Horizons Ventures in 2019, after the startup had grown to 5 million registered users and “hundreds of thousands” of daily active users. Today, the company says over 200,000 people create content every day on Medal, and 3 million users are actively viewing that content every month.

Source: Tech Crunch

The unprecedented liquidity that has entered the venture market in the past year has spurred several trends that require VCs to adapt to a more competitive environment where startup founders have far more leverage than they did in the past.

Structurally, there are only so many startups looking to raise capital, and even though some founders may be opportunistically pursuing deals they wouldn’t have previously, the supply of capital into venture funds has nonetheless outpaced the demand for those dollars.

This means VCs are in an unusual environment of increasing competition to get in on deals with startups, and as they jockey to win spots on cap tables they’re moving faster than ever to close deals.

What’s more, newcomers in the VC market like Tiger Global as well as a number of non-VC investment funds like PE firms with much larger pools of capital than the market has seen are aggressively pursuing enormous deals in an effort to drive faster exits and returns on their investments.

With so many investors vying for their attention, many founders are taking the opportunity to raise bigger rounds and coming back for additional funding faster than ever, which is apparent in the constant drumbeat of funding news as well as the 250 unicorns and the record $288 billion invested in startups in the first half of this year.

How can VCs adapt and be competitive?

For some, the answer may be moving faster to get in on deals. Strategies like doing more due diligence in advance of ever meeting startups and leveraging technologies like AI to supplement investors’ ability to evaluate companies can help with this. For others, it may be making larger investments and accepting smaller ownership stakes in startups than they’re accustomed to.

Source: Tech Crunch

Lowercarbon Capital, a climate-tech focused fund founded by longtime investor Chris Sacca and his wife Crystal Sacca, has closed on $800 million in capital, Sacca announced today in a post on the firm’s site.

According to Sacca, the commitments came exceedingly fast — in “just a few days.” Writes Sacca: “It turns out that raising for a climate fund in the context of an unprecedented heatwave and from behind the thick clouds of fire smoke probably didn’t hurt. In fact, all that pollution may have lent a warm, beautifying haze to our Zoom calls. Like an Incendiary Doom Glow Insta filter.”

The interest is far from surprising given the mounting and rather stark evidence that life as humans know it is in peril, owing to rising temperatures. On the heels of a deadly floods in Western Germany and China, wildfires in Greece and California, and in advance of yet another heat wave for which people in the Pacific Northwest are currently bracing, a new report released Monday by the United Nations’ climate science research group was clear about the current state of affairs, declaring a “code red for humanity.”

Certainly, some of Lowercarbon’s backers are interested in tech that’s working to reverse some of these trends, but as Sacca notes, if they’re purely focused on the financial rewards that climate-focused tech can reap, that’s fine, too.

“We are thrilled to see how many investors understand the urgency of the climate crisis and are already dedicating their time, as well as their capital, to real solutions,” he says in his post. “However, to be frank, we were also heartened by those investors who actually don’t care that much about the planet and instead are just chasing financial returns.”

Lowercarbon’s very thesis is that “massive change will happen because these types of investments will pay off for sheer business reasons alone,” he adds.

In addition to the Saccas, Lowercarbon is being run by Clay Dumas, a Brooklyn, N.Y.-based partner who is described in his team bio as the firm’s most active investor. Though the Harvard grad hasn’t been in the venture world long — first joining up with Sacca in 2017 to join his earlier firm Lowercase Capital as a partner — he understands the world of politics in a way that few, more “traditional” VCs, might.

After opening a field office for the campaign to elect Barack Obama in 2008, he went on to serve as an aide in the White House to the-then Deputy Chief of Staff and later worked (again in the White House) for the  Office of Digital Strategy.

Lowercarbon’s many dozens of bets to date include Heart Aerospace, a three-year-old, Göteborg, Sweden-based startup at work on an electric regional airliner to which the firm wrote a seed check (and more recently wrote a follow-on check); Holy Grail, a two-year-old, Mountain View, Ca.-based startup that’s prototyping a direct air carbon capture device that is modular and small (it announced seed funding in June); and Cervest, a six-year-old, London-based climate risk platform that says it provides commercial and government entities access to current, historic, and predictive views about how combined weather risks can impact the assets they own. The last raised $30 million in May.

Sacca, who became well-known for his early and outsize bets on both Twitter and Uber, was somewhat famously a judge on the popular TV show “Shark Tank” for several seasons before quitting the show — and venture capital — in 2017, saying he had always intended to retire at age 40. (At the time, he was 42.)

Sacca’s growing concern regarding climate change — and his lack of faith that politicians can make a dent in reversing it — prompted him to rethink that decision. As he told Forbes in March: “We think that markets might actually hold the key to unf***ing the planet.”

According to an Axios report from June of last year, Lowercarbon was originally structured as a family office with tens of millions of dollars to deploy. As of the middle of last year, the only outside money it had accepted was for a “few special-purpose vehicles with institutional investors from Sacca’s prior funds,” the outlet reported.

Now, with a fresh $800 million to invest, Sacca & Co. appear to be fully back to work. In fact, we’ll be talking with Sacca next month at TechCrunch Disrupt; to hear what’s top of mind for him right now, you won’t want to miss that conversation.

Source: Tech Crunch

With two giants calling the shots and collecting whatever tolls they see fit, mobile software makers have long complained that app stores take an unfair cut of the cash that should be flowing directly to developers. Hearing those concerns, a group of senators introduced a new bill this week that, if passed, would greatly diminish Apple and Google’s ability to control app purchases in their operating systems and completely shake up the way that mobile software gets distributed.

The new bill, called the Open App Markets Act, would enshrine quite a few rights that could benefit app developers tired of handing 30% of their earnings to Apple and Google. The bill, embedded in full below, would require companies that control operating systems to allow third-party apps and app stores.

It would also prevent those companies from blocking developers from telling users about lower prices for their software that they might find outside of official app stores. Apple and Google would also be barred from leveraging “non-public” information collecting through their platforms to create competing apps.

“This legislation will tear down coercive anticompetitive walls in the app economy, giving consumers more choices and smaller startup tech companies a fighting chance,” said Senator Richard Blumenthal (D-CT), who introduced the bipartisan bill with Sen. Marsha Blackburn (R-TN), and Sen. Amy Klobuchar (D-MN). Klobuchar chairs the Senate’s antitrust subcommittee and Blackburn and Blumenthal are both subcommittee members.

Senator Blackburn called Apple and Google’s app store practices a “direct affront to a free and fair marketplace” and Sen. Klobuchar noted that their behavior raises “serious competition concerns.”

The bill draws on information collected earlier this year from that subcommittee’s hearing on app stores and competition. In the hearing, lawmakers heard from Apple and Google as well as Spotify, Tile and Match Group, three companies that argued their businesses have been negatively impacted by anti-competitive app store policies.

“… We urge Congress to swiftly pass the Open App Markets Act,” Spotify Chief Legal Officer Horacio Gutierrez said of the new bill. “Absent action, we can expect Apple and others to continue changing the rules in favor of their own services, and causing further harm to consumers, developers and the digital economy.”

The Coalition for App Fairness, a developer advocacy group, praised the bill for its potential to spur innovation in digital markets. “The bipartisan Open App Markets Act is a step towards holding big tech companies accountable for practices that stifle competition for developers in the U.S. and around the world,” CAF executive director Meghan DiMuzio said.

Hoping to head off future regulatory headaches, Apple dropped its own fees for companies that generate less than $1 million in App Store revenue from 30% to 15% last year. Google followed suit with its own gesture, dropping fees to 15% for the first $1 million in revenue a developer earns through the Play Store in a year. Some developers critical of the companies’ practices saw those changes as little more than a publicity stunt.

Developers have long complained about the high tolls they pay to distribute their software through the world’s two major mobile operating systems. That fight escalated over the last year when Epic Games circumvented Apple’s payments rules by allowing Fortnite players to pay Epic directly, setting off a legal fight that has huge implications for the mobile software world. Following a May trial, the verdict is expected later this year.

Unlike Apple, Google does allow apps to be “sideloaded,” installed onto devices outside of the Google Play Store. But documents unsealed in Epic’s parallel case against Google revealed that the Play Store’s creator knows the sideloading process is a terrible experience for users — something the company brings up when pressuring developers to stick with its official app marketplace.

The counterargument here is that official app stores make apps safer and smoother for consumers. While Apple and Google extract heavy fees for selling mobile software through the App Store and the Google Play Store, the companies both argue that streamlining apps through those official channels protects people from malware and allows for prompt software updates to patch security concerns that could jeopardize user privacy.

Adam Kovacevich, a former Google policy executive who leads the new tech-backed industry group Chamber of Progress, called the new bill “a finger in the eye” for Android and iPhone owners.

“I don’t see any consumers marching in Washington demanding that Congress make their smartphones dumber,” Kovacevich said. “And Congress has better things to do than intervene in a multi-million-dollar dispute between businesses.”

At least in Google’s case, the counterargument has its own counterargument. Android has long been notorious for malware, but apparently most of that malicious software isn’t making its way onto devices through sideloading — it’s walking through the Google Play Store’s front door.

Source: Tech Crunch

Box has been in an ongoing dispute with activist investors Starboard Value over control of the board, an argument that is expected to come to a head on September 9th at the annual shareholder meeting. In an effort to show shareholders that the numbers are continuing to improve under the current leadership, Box took the unusual move of releasing its earning report this morning, two weeks ahead of the expected August 25th report date.

Companies don’t normally report ahead of schedule, but perhaps Box sees the opportunity to do some lobbying, or conversely, to counter any negative lobbying that Starboard may be doing with its fellow investors ahead of the vote.

It’s also worth noting that in spite of the meeting being on September 9th, like a lot of voting these days, people will be sending in votes throughout this month, ahead of that day. Box wants to get its latest financial information out there sooner rather than later to catch those early voters before they cast their ballots.

Fortunately for Box and CEO Aaron Levie, the numbers look decent.

Earnings

It’s not hard to see why Box released its earnings early, as the numbers provide an argument for keeping the company’s current leadership in place.

In the three-month period ending July 31, 2021 — the second quarter of Box’s fiscal 2022 — the company generated $214 million in revenue, up 11% on a year-over-year basis. And, as Box is quick to point out, its second consecutive quarter of “accelerating revenue growth.” The company bested its own guidance of $211 to $212 million in revenue for the period.

It matters that Box is showing an ability to accelerate its revenue growth. First, because doing so puts wind in the sales of its stock; quickly growing companies are worth more per dollar of revenue than more slowly growing concerns, and accelerating revenue growth over time is investor catnip.

The accelerating pace of growth over the last half year also provides footing for Box’s leadership to argue that their product choices have been sound, directly supporting their positions that they should remain in charge of the company. If they made good product decisions quarters ago, and those choices are leading to accelerating revenue growth, why swap out the CEO?

Box had more quarterly good news apart from its revenue numbers to disclose. It also reported improved GAAP and non-GAAP operating margins — a key measure of profitability — better billings results than it had previously anticipated for the period. Box’s net retention rate also expanded to 106% from 103% in the sequentially preceding period.

And the company boosted its guidance for its fiscal year from “$845 million to $853 million” to “$856 million to $860 million.”

The counter arguments are somewhat easy to generate, however. Yes, Box’s revenue growth is accelerating, but from an admittedly reduced base; it’s not as hard to accelerate revenue expansion from low numbers as it is from higher base levels. And the company’s net retention is lower than what any business-focused SaaS company would want to report.

Will the good news be enough? Shares of Box are up around 1.5% in today’s regular trading, despite a somewhat mixed overall market. Investors now have to vote with more than just their dollars.

Boardroom context

Starboard bought approximately 7.5% of the company in 2019, and actually stayed fairly quiet for the first year, but at the end of 2020 it started making itself heard with rumors of pressure to sell the company. In what appeared to be a defensive move, Box took a $500 million investment from private equity firm KKR and gave the investor a board seat in April.

The activist investor did not take kindly to that move, writing in a letter to investors in early May, “The only viable explanation for this financing is a shameless and utterly transparent attempt to “buy the vote” and shows complete disregard for proper corporate governance and fiscal discipline.” In that same letter, Starboard made it official that it wanted to take over several board seats, outlining a litany of complaints it had about the way the company was being run. It also made clear that it wanted co-founder and CEO Aaron Levie gone or the company sold.

Box pushed back that the letter and another on May 10th did not accurately reflect the progress that the company had made. In July, Box took the battle public in an SEC filing detailing the back and forth dance that had been going between Box and Starboard since it bought its stake in the company

So far, the cloud content management company has staved off all attempts to force its hand and sell the company or fire Levie, but this is all going to culminate with the shareholder’s vote. It’s truly a battle for the soul of the company.

If Starboard convinces shareholders to give it several seats on the Box board, it would probably be able to push out Levie, take control of the company and likely sell it to the highest bidder. The early financial report released today, while not exactly stellar, shows a pattern of increasingly good quarters, and that’s what Box is hoping voters will focus on when they fill out their ballots.

Source: Tech Crunch

Archer Aviation is seeking $1 billion in damages from Wisk Aero, according to court filings Tuesday, significantly escalating the ongoing legal battle between the two air taxi rivals.

Wisk “deployed a knowingly false extra-judicial smear campaign that projected stand-alone defamatory statements about Archer to the world,” the filing says. On this basis, Archer claims that this “smear campaign” has negatively impacted its ability to access capital and has impaired business relationships, resulting in damages “likely to exceed $1 billion.”

The two companies have been locked in a heated legal battle for much of this year. The dispute started in April, when Wisk filed a suit with the U.S. District Court for the Northern District of California claiming that Archer had misappropriated its trade secrets related to Wisk’s debut eVTOL aircraft, Cora. Wisk further alleged that a former employee, Jing Xue, downloaded thousands of proprietary files from his work computer prior to joining Archer.

This is not the first time that Archer has hit back against the accusations in court. First it filed a motion to dismiss the suit in early June, and later that month alleged in a separate court document that Archer’s design was well-established prior to Wisk’s having filed any patents with the U.S. Patent and Trademark Office.

Archer unveiled a prototype of its Maker aircraft in February, the same month that it announced (to much fanfare) it was going public via a merger with blank-check firm Atlas Crest Investment Corp. for a pro-forma enterprise value of $2.7 billion. Late last month Archer slashed its valuation by $1 billion in a “strategic reset” of the transaction terms with the SPAC. While this is the same amount Archer is seeking in damages, a company spokesperson told TechCrunch that is just coincidental.

In addition, the spokesperson added that the planned merger remains on track. Speaking to the suit, they said, “We have no plans to drop our counter-claim regardless of any moves Wisk may make.”

A Wisk spokesperson said “Archer’s counterclaim is ludicrous and its troubles are purely self-inflicted,” and characterized the filing as “full of distortions and distractions from the serious patent and trade secret misappropriation claims it faces.” The spokesperson added that Wisk intends to continue its case against Archer.

Source: Tech Crunch