Month: September 2021

Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s inspired by what the weekday Exchange column digs into, but free, and made for your weekend reading. Want it in your inbox every Saturday? Sign up here.

Hey team! Alex here. I am off next week. Anna, my regular co-pilot on the weekday column, will be handling next week’s newsletter. It will be beyond good. Enjoy!

A few weeks back we took a look at some startup results, with a focus on growth. Today we’re narrowing our focus to a single company from the collection of startups that wrote in: Water Cooler Trivia.

Many startups begin life as a solution to a problem. A developer finds a flaw in their workflow, codes up a solution for it and later builds that hack into a product that scales. That sort of thing.

Collin Waldoch did something different, turning a hobby of his into a business.

Coming from a family of six kids in what he called a competitive family, Waldoch hosted bar trivia during college, and later sent around weekly trivia questions at his workplace after he completed his schooling. He kept the habit up during his early career, which included a stint at Lyft.

It was during his corporate life that Waldoch realized that companies were willing to spend heavily on team activities. Like a soccer team that he joined during one job that his employer spent a few grand on, but which struggled to find enough regular players. If companies would drop that much money on a group sport that few of its denizens wanted, he thought, perhaps there was some budget he could attack with a trivia product.

So Waldoch started Water Cooler Trivia, building it as a corporate product that he and some friends scaled to around $20,000 in ARR as a side project. The founder described its level of success at the time as pretty good beer money. Helping the project bring in revenue was a super-low churn rate, something that helped Waldoch decide to quit his day job at Lyft and take his side project full time.

Today Water Cooler Trivia has reached $300,000 worth of ARR and sports a collection of workers around the globe that help it run. Companies can select difficulty levels for their weekly trivia questions and track employee scores with longitudinal leaderboards.

Part of the idea’s success in Waldoch’s view is that it is built for the end user — employees — instead of HR. Which means that it’s actually fun. Today the company has experienced some churn, but still sports net retention rates of just under 100%. That’s great for a product that doesn’t feature enterprise-SaaS level upsells.

And the service is cheap. Probably too cheap frankly. At $100 per month for 100 seats, Water Cooler could likely boost what it charges and push its revenues higher in short order. Waldoch said that his company might start raising its rates in Q4 of this year. But even without that, Water Cooler thinks that it has a huge amount of growth open to it from its core product.

I dig it. Long live software making life a bit more fun.

Drift, Xometry, Carrot

It was a busy week with infinite IPO filings and eight billion YC startups pitching, but other things did happen that we need to talk about:

I’m curious about Drift’s sale to private equity: Boston’s Drift sold the majority of its shares to Vista Equity Partners, it announced this week. I’ve been to the Drift offices, as the company once lent us a room to record a podcast in. The folks there were nice. But with the company reporting 70% ARR growth in 2020, I am dead curious why Drift didn’t just raise more capital and keep growing. The company was able to raise lots of private money in the past, including, say, a $60 million round back in 2018. Exiting the bulk of the company early feels a little weird, similar to how the Gainsight sale to PE was a bit of a head scratcher. For Boston, the exit is good news as it may help mint new angel investors. But it still feels like an exit for which we’re missing a key detail.

Xometry: This one has been in the notes folder for too long, and since I’m off next week we’re including it here. I spoke with Xometry CEO Randy Altschuler after his company reported earnings a few weeks back. Recall that Xometry went public earlier this year. Altschuler reported generally bullish views on the process of going public during the COVID-19 era, calling his company’s Zoom roadshow efficient in a manner that allowed his company to chat to more folks while also saving on travel-related exhaustion.

Xometry, continued: But past the standard post-IPO chit chat, Altschuler had a few notes that stood out in my memory. The first being that inflation can impact technology businesses. Rising costs are impacting companies like Root, who have to deal with used car prices impacting claims costs. Inflation also crops up in Xometry’s business connecting manufacturing demand with manufacturing supply. It’s a good reminder that macro market conditions really do matter in the technology world, just not in ways that we can always easily see.

Xometry, even more: Altschuler also said that he thinks that a carbon tax at some point is inevitable. This came up in our discussion of onshoring manufacturing in the United States over time. Shipping stuff is expensive today and would prove even more costly if we added in the price of carbon emissions via a tax. That could make local manufacturing more competitive, notably. Perhaps that will prove a boon to folks in favor of more industrial production in post-industrial societies. For tech companies that deal with physical-world goods, it’s something to keep in mind.

And, finally, Carrot: Another entry from the notes archive, let’s talk about Carrot. The startup raised a $75 million round a few weeks back, so I asked the company about its growth history and a few other things. Carrot sells a product to employers so that they can offer their workers fertility benefits. Given falling human fertility rates, coverage of this sort is, in my view, likely to become more popular over time.

Other factors are at work, of course, but the last 18 months have proved accelerative for Carrot’s business. Per the company, it has seen “nearly 5x overall growth” in the last six quarters. The startup expects to reach 450 customers by the end of 2021, which will add up to around one million covered folks.

Carrot declined to share a valuation differential from its Series B to its Series C. Happily PitchBook has data on the matter, so we can report that per its dataset, Carrot’s valuation rose from around $66 million (post-money) following its $21 million Series B to around $260 million after its Series C. That’s a good markup for the company’s employees and founders.

My general bullishness around rising needs for fertility support matches the company’s ethos, which it described in an email by saying that it thinks fertility and “family-forming care could and should be the fourth pillar of employee benefits and health care more broadly, much like medical or dental or vision.” A hard yes to that one.

OK, that’s all from me for a few weeks. Stay safe, get vaccinated, and let’s be kind to one another. — Alex

Source: Tech Crunch

Seksom Suriyapa was seemingly destined to land at a venture firm. A Stanford Law graduate, he worked at two blue-chip investment banks before joining the cybersecurity company McAfee as a senior corp dev employee, later logging six years at the human resources software company SuccessFactors and, in 2018, landing at Twitter, where he headed up its 12-person corporate development team until June.

The bigger surprise is that Suriyapa — who just joined the L.A.-based venture firm Upfront Ventures — didn’t make the leap sooner. “The catalyst was finding a firm that felt like the exact right fit for me,” says Suriyapa.

We talked earlier today with Suriyapa — who lives and will remain in the Bay Area — about his new role at Upfront, where he will be leading its expanding growth-stage practice with firm founder Yves Sisteron.

He also shed light on how Twitter — which has been on a bit of buying spree — thinks about acquisitions these days. Our chat has been edited lightly for length.

TC: How did you wind up joining Upfront?

SS: [Longtime partner] Mark Suster and I were introduced through a mutual business acquaintance in the venture world, and I got to know him over a period of time and really came to find him to be a remarkable individual. He’s thoughtful about the business itself, he’s an incredible brand builder. I think you could argue that [Upfront] put L.A. on the venture map.

TC: It was also, for a long time, an early-stage firm, but now it has a ‘barbell’ strategy. Is your new job to make sure it can maintain its stake in its portfolio companies as they grow? Can you shop outside of that portfolio?

SS: The mission for me will be supporting the best of Upfront’s hundred-plus existing portfolio companies that are poised to scale, and also to invest in companies not currency on the platform, and I anticipate [the latter] will happen more and more over time.

TC: Twitter was a lot more active on the corp dev front during the years when you were there. Why?

SS: When i joined in 2018, Jack Dorsey had been CEO for about three years, and really his focus was on the core mission of driving the public conversation, and in doing that, Twitter shrunk itself out of a lot of businesses and [shrunk] people wise as well.

TC: I remember it laid people off in 2016.

SS: And one of the offshoots of that was way less in the way of newer products, so there were no new acquisitions in the three years prior to me joining, and that muscle atrophies if you don’t exercise it. So [ahead of me] Jack had transformed the management team, which had been, relatively speaking, a revolving door of executives until that point, and I was brought in with a specific mandate of reviving a corporate development practice that had been quiet for a few years. I’d known [CFO] Ned Segal when he was a banker at Goldman Sachs and [while] I was at SuccessFactors, so when I heard about the role through the grapevine, I reached out.

TC: So Twitter starts shopping, buying up the news reader service Scroll, the newsletter platform Revue. Were these decisions coming down from the top or vice versa?

SS: The best way to describe it would be that it was product-need driven. The company had a few different objectives. One was to diversify Twitter from its dependency on being an ad-driven business. Something like 80% of revenue comes from ads.

Second, there’s an incredible need to ramp up its machine learning and artificial intelligence as a company. If you’re looking for toxicity in conversation, it’s not scalable to hire tens of thousands of people to do that. You need machine learning to find it. Twitter done well is also able to show you the conversations that are most interesting to you, and to do that, it has to take signals from what you follow and spend time reading and what you interact with, and that, at its core, is ML AI.  [Relatedly] Jack has a vision that anybody who tweets in whatever their native tongue is should be able to talk with someone else in their native tongue as part of a global conversation, and to do that, you need [natural language processing] techniques galore.

TC: There’s also this focus on consumer applications.

SS: That’s the third objective. What are the tools that followers and creators can use in conversation with each other? So [Twitter] added audio [via its Clubhouse rival Spaces]. We bought Revue, which is a competitor to Substack. So there’s a lot of innovation happening around the type of content that someone should expect to see or create on Twitter.

TC: Would you describe these acquisitions as proactive or reactive?

SS: From the outside it would seem reactive, but the reality is we’d been thinking a lot about something like Spaces even before Clubhouse took off. I think what’s noticeable to me is [Spaces] is one of the first times you’ve seen a company like Twitter build up a capability and a new product area that’s going head-to-head going against a company that’s focused only on that realm, and it’s competitive from day one. Twitter beat Clubhouse in [offering an] Android version because it poured resources into it, and I’d argue that a lot of the mechanics of Twitter and the fact that creators are on Twitter puts it in an awesome spot to win this segment.

Twitter also just has a huge amount of expertise in finding toxicity and things you want to be wary of when you’re a social media play, and a company of Clubhouse’s size, at least in its initial days, will have a hard time getting there.

TC: Twitter has so many interests, including around cryptocurrencies and decentralization. 

SS: In terms of priorities at Twitter,  a lot is under wraps in terms of the technologies that we expect [will rise up over] the next five  to 10 years, but [a lot of thought is being given to] the impact of cryptocurrency and the underlying protocols around it and how Twitter participates in a trustless, permissionless [world] where there’s a decentralized internet that can protect people’s privacy and allow people not to worry where their content is stored. People think of Twitter as a consumer app but there’s amazing and considerable diversity under the hood.

TC: Do you think because of the current regulatory environment that it has a better shot at working with companies and projects that might have gotten snapped up by Facebook and Google?

In terms of the regulatory environment, the reality is that even if you take the Facebooks and Googles out of the equation, there are acquirers that are competitive that would step up and buy things, so it’s a little short-sighted to think of just those two. But even when they were active, we were winning [deals]. A lot of the companies we acquired self-selected to be at Twitter because they like what it stands for, they like the way that Jack Dorsey leads the organization, and they believe in the stands that he takes and the positions that he and his leadership espouse.

TC: You’re now representing a very different brand. How will your work at Twitter help you compete for deals on behalf of Upfront?

SS: I have this network of incredible entrepreneurs around the world because of companies across my career that I’ve helped acquire or tried to acquire or who are running businesses; I also [have relationships with] VCs at different stages who actively spot businesses around the world [and introduce them to corp dev teams]. You might also know that Twitter has a diversity and inclusion program where they intend to have 25% of leadership be diverse over the next several years, so my team was often involved in finding the best ways to find diverse targets to buy. I also led a series of LP investments into newly emerging funds, some LatinX-founded, some women-founded, some Black-founded, some that were diverse from a geographic standpoint that are scouting companies in far flung places . . .

TC: Does Twitter also make direct investments?

SS: We did direct investments but [backing fund managers] is a more leveraged approach. Most of them are seed funds and they’ll in turn invest in 30 to 60 companies each. But yes, I scouted companies in far flung places, including [India’s] ShareChat where I served on the board for two years. [Editor’s note: TechCrunch reported earlier this year that Twitter explored buying ShareChat at an earlier point; the company has since raised numerous rounds of funding and was most recently valued by its investors at nearly $3 billion.]

TC: You have a lot of relationships, but it would still seem really hard to compete for growth-stage deals when so many other outfits are now investing there, too. How do you plan to compete?

SS: I will clearly be drawing on those networks to find deals. I’ll be investing in sectors where Upfront has already invested in, but initially I’ll be double-clicking [in areas[ I have strong interest in, including around the creator economy ecosystem, because I did so much of that at Twitter, and “Web 3.0,” this permissionless [evolution that Twitter is also focused on]. But I won’t kid myself. You compete by learning what your value proposition is. At Twitter, my strategy was winning on speed, knowing people earlier, and [underscoring] Twitter’s value proposition [to close deals]. I can’t talk about my [VC] strategy without having implemented yet; I’ll have to figure out what’s most interesting to entrepreneurs that the megafunds don’t offer.

Source: Tech Crunch

Kalepa, an insurance underwriting platform based out of New York, has raised a $14 million Series A funding round led by Inspired Capital, with participation from previous investor IA Ventures. Also participating was Gokul Rajaram of Doordash, Coinbase, and formerly of Google, Jackie Reses, formerly of Square, and Henry Ward of Carta.

Founded by Paul Monasterio and Daniel Hillman, the startup was launched in 2018 aimed at commercial insurance underwriters.

Co-Founder and CEO, Paul Monasterio said: “InsureTech has seen a massive evolution over the past decade, but commercial insurance—which supports hard-working business owners and protects their most important assets—has been left behind. We leverage billions of data points and unlock crucial insights in order to bring businesses and insurers a single version of the truth.”

Kalepa says its Copilot software automatically learns what the best underwriters are doing, allowing an underwriter to take a more accurate underwriting decision as quickly as possible vs. simply aggregating a lot of data for them. It competes with the legacy MGAs (e.g., RT Specialty, AmWins) as well as new entrants such as Pathpoint in the E&S market.

Penny Pritzker, co-founder at Inspired Capital and former U.S. Secretary of Commerce said: “Commercial insurance represents a $1T industry globally and helps 30 million U.S. businesses. Kalepa has brought some of the sharpest minds in understanding risk to this segment of the insurance market.”

Veteran insurance player Mario Vitale is also joining Kalepa’s Board.

Source: Tech Crunch

Back in July, YASA (formerly Yokeless And Segmented Armature), a British electric motor startup with a revolutionary ‘axial-flux’ motor, was acquired by Mercedes-Benz. The acquisition didn’t exactly garner enormous press attention, as scant other details were announced. But YASA is likely to be an entity worth watching.

Founded in 2009 after being spun out of Oxford University, YASA will now develop ultra-high-performance electric motors for Mercedes-Benz’s AMG.EA electric-only platform. It will stay in the UK as a fully owned subsidiary, serving both Mercedes-Benz and existing customers like Ferrari. The company will retain its own brand, team, facilities, and location in Oxford.

YASA’s axial-flux electric motors generated EV industry interest because of their efficiency, high power density, small size, and low weight.

By contrast, the ‘radial’ electric motor design is more common in today’s EV market. Even Tesla relies on radial electric motors, a legacy technology more than 40 years old with very little left to give in terms of innovation.

But YASA’s axial-flux design, which has very thin segments, means they can be combined into powerful single drive units. This makes them one-third the weight of other electric motors, more efficient, and with 3x higher power densities than Tesla.

Tim Woolmer, YASA’s Founder and CTO, invented this very new approach to electric motor design. I caught up with him to find out what’s next.

TC: What’s the journey so far:

TW: We started just over 12 years ago with really one remit: let’s accelerate electric cars, let’s do anything we can to make electric cars happen faster. We’re now 10 years into a 20-year revolution, every new car that gets sold in 10 years will be electric, no question. There’s nothing more exciting for an engineer than a period of revolution because the speed of innovation is what’s important. What is so exciting for us is we get to innovate fast, and that’s where the partnership with Mercedes is really interesting.

TC: What was different about the engine you came up with?

TW: We started with a blank sheet of paper at the beginning of my PhD. And the idea was to say, what could be created for the electric car industry in 10 or 15 years from now that they would need, that we could meet. Something that was lighter, more efficient, mass-producible in volume. In the 2000s, axial flux motors were not very common, but by combining axial flux technology and making a couple of little tweaks using some new materials, I basically stumbled into this new design which we call YASA: Yokeless And Segmented Armature. It takes what is a light topology in axial flux and makes it even lighter, about half as much again. There’s a benefit because the rotors are rotating at a bigger diameter. So, essentially torque is force times diameter, so for the same force, you get more torque. So if you double your diameter, you get double the torque for the same amount of materials. So that’s the benefit of axial flux.

TC: You’ve done this with deal with Mercedes – what’s next?

TW: We are basically a fully owned subsidiary. We’re going to utilize Mercedes’ industrialization powerhouse. But the key thing is, if you watch how technologies filter down in automotive, they start in the luxury sector, like the Ferraris of this world, and then filter down into mainstream sector and then go into higher volumes after that. That’s a space where Mercedes are world-class in terms of their industrialization, so that’s the kind of the idea behind the partnership.

TC: What else can you do from here?

TW: We will have a very high, high power, low density and lightweight engine so we can explore sport performance coupled with high levels of industrialization. That puts us in a really unique position for all sorts of things.

Although coy about his future plans, Woolmer is certainly one to watch in the EV and electric motor space. Post the acquisition YASA released this video:

Source: Tech Crunch

Instagram made headlines (including this one) when product head Adam Mosseri said in June that the app is “no longer just a square photo-sharing app,” since it’s pivoting its focus to shopping and video. But where does that leave photographers who want a social photo-sharing experience?

According to Tom Watson, a former product designer at Facebook and Pinterest, photographers have lacked a social network for a while. That’s why, with co-founder Stefan Borsje, Watson built Glass, a subscription-based iOS app designed to be a home for photographers.

“I’ve always loved photography, and when Flickr got bought by Yahoo, it was a sad moment for me. I love that kind of nerdy photography community,” Watson told TechCrunch. “Then you started to see it pick up with Instagram to take the torch into the mobile space. But I was at Facebook when Facebook purchased Instagram, and you could kind of see that it would inevitably be where it is today.”

For those of us accustomed to free, ad-supported social media, it might feel unfamiliar to pay a monthly fee for an app. Glass costs $4.99 a month (or $29.99 a year) to use, but you can try it without charge for 14 days. Still, the app takes your App Store payment info right away, so it could be a barrier to entry for people who worry they won’t remember to delete Glass before the trial period ends, should they not want to continue with it. But this model is intentional. Watson and Borsje are specifically trying to build their app — which only has five team members — without any venture funding or ad revenue. They only want to have to answer to their community of photographers.

“I wanted to do something different and start with a social subscription model and to bootstrap without venture capital,” said Watson. “We’ve seen in the past what happens when you take on venture capital and go for the moon. You keep pivoting away from your photographer community in order to become more broad.”

Image Credits: Glass

From the moment you open the Glass app, it’s clear that the emphasis is on the photography itself. When you follow photographers, their posts will appear in a feed of images designed to minimize distractions. The photos take up the entire screen, and you can only see who posted them if you drag them to the right. When you click on an image, you can see its caption and other information about how the photograph was shot. You can engage socially through comments, but there aren’t likes on photos — this is an intentional design choice, though Watson says some users are asking for a like button, even if it just helps them bookmark images for later browsing. In the coming weeks, Glass will launch discovery features, like categories for photographs. Glass also has a feedback board, which allows users to request features and upvote or downvote other users’ ideas. If Glass chooses to develop a suggestion, it is noted as “in progress” on the board.

Though it’s only in its beginning stages, Glass already sets itself apart from Instagram or VSCO by offering EXIF data, which is like candy for the “photography nerds” that Glass hopes to attract. EXIF data shows what camera a photographer used, as well as the photo’s ISO, aperture, shutter speed, and focal length. This data and sense of community was what drew people to Flickr in its early days, but when Yahoo gave free users up to one terrabyte of data, it became more of a personal archive than a community. Then, when SmugMug bought Flickr from Yahoo in 2018, it tried to backpedal by only allowing free users to have 1000 photos, warning that they could delete free users’ photos if they didn’t upgrade to a paid plan.

Glass also appeals to photographers by allowing for a wider variety of image sizes on the app — the maximum aspect ratio is 16 x 9, which accommodates the size of standard camera photos. But on Instagram, even after the platform moved away from its square image motif, it’s not possible to post vertical photographs from most cameras without cropping them. Like VSCO, Glass doesn’t show how many followers each user has, though you can see comments. While you can’t see how many followers someone else has, you can see who is following your own account.

“We thought that was important for safety. If someone follows you, you need to know who that is, and to be able to block them,” Watson said. “We really wanted to build blocking and reporting features from day one.”

Watson declined to share how many users have downloaded the app so far, but Watson said he’s “extremely happy with the response” to Glass. It launched with a waitlist in August, and Wednesday the app opened up to all iOS users. The goal of the waitlist wasn’t to generate hype, but rather, to make sure that the user experience remained smooth, and that the app wouldn’t get overloaded. At the time of the app’s waitlist launch in August, Watson told TechCrunch that Glass was sending hundreds of invites out every day. 

“I’ve been on the internet a long time, and I used to feel like there was a cozier, safer space,” Watson said. “I hope that by having this subscription model, these spaces can feel that way a little bit more again.”

Source: Tech Crunch

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

Natasha and Alex and Grace and Chris gathered to dig through the week’s biggest happenings, including some news of our own. As a note, Equity’s Monday episode will be landing next Tuesday, thanks to a national holiday here in the United States. And we have something special planned for Wednesday, so stay tuned.

Ok! Here’s the rundown from the show:

• Apollo completed its takeover of Verizon Media Group Yahoo: Yep, we have new bosses, and we have feelings about it. But mostly the TechCrunch news was a useful segue to Drift’s majority exit to Vista Equity Partners at a price that made the Boston-based startup a unicorn. Terms were not disclosed, sadly, but Drift’s revenues looked strong going into the transaction. That left us with questions.
• Then we chatted about Databricks, which raised a small country’s GDP in a single funding round this week, valuing the data-and-ML company at a staggering $38 billion valuation. Why isn’t Databricks going public? Because it doesn’t have to, mostly.
• Hum Capital believes the future of startup fundraising requires a return to old school Wall Street. The startup helps founders and investors navigate the overly fragmented market these days, and just raised millions to scale this service.
• Form there we dug into two IPOs, including the very interesting story of Toast, another Boston-based company, and AllBirds. The AllBirds offering was less exciting from a numerical perspective, though Natasha and Alex both like their shoes from the company.
• And to close out, we discussed how Compound Foods wants to save the planet by making coffee sans beans. Which we are willing to try as soon as we can.

That’s a wrap from us for the week! Keep your head atop your shoulders and have a great weekend!

Source: Tech Crunch

Remember that story we posted earlier today about Virgin Galactic’s first commercial flight scheduled to launch in September?

We may have spoken too soon. This afternoon, the Federal Aviation Administration said it was grounding all Virgin Galactic flights until further notice, pending the results of the investigation into the company’s July 11 crewed flight.

“Virgin Galactic may not return the SpaceShipTwo vehicle to flight until the FAA approves the final mishap investigation report or determines the issues related to the mishap do not affect public safety.”

While the July 11 mission was completed with no injuries to staff or crew, including the company’s billionaire founder Richard Branson, it was recently uncovered that the spaceplane deviated its trajectory outside of cleared airspace. During flight, a red warning light came on the spaceplane’s dashboard, indicating that it went off its planned trajectory. The spaceplane flew off-course for a total of 1 minute and 41 seconds, the FAA said. The deviation was first reported by The New Yorker.

The regulator went on to add: “The FAA is responsible for protecting the public during commercial space transportation launch and reentry operations. The FAA is overseeing the Virgin Galactic investigation of its July 11 SpaceShipTwo mishap that occurred over Spaceport America, New Mexico. SpaceShipTwo deviated from its Air Traffic Control clearance as it returned to Spaceport America.”

Depending on whether the investigation is complete – and what it finds – that first commercial flight in September may stay stuck on the ground. That flight is supposed to send members of the Italian Air Force and the National Research Council to the edges of space, in order to study the effects on transitioning to microgravity on the human body. But until then, Richard Branson’s supersonic company has to stay grounded.

Source: Tech Crunch