Ideaforge

The relationship between Spotify and Apple has been…understandably contentious at times. After all, Apple runs the streaming service’s biggest competitor. At the end of the day though, the Apple Watch and Spotify maintain the No. 1 spot in their respective categories by a wide margin. And playing nice ultimately benefits a wide swath of users in that overlapping Venn diagram.

Today Spotify announced that it’s finally bringing to the smartwatch what’s no doubt been one of its most requested features. Starting today, Premium subscribers can download music and podcasts to the wearable for offline listening. That means users will be able to leave their phone at home when they go for a jog.

The new feature works more or less like standard downloading and sharing. Users click the three ellipses next to an album, playlist or podcast and click “Download to Apple Watch.” Once downloaded, green arrows will populate next to the title. With headphones paired, you’ll be able to stream directly from the watch.

Samsung has already offered the feature on some of the competition, including Samsung’s Galaxy Watch line. The service is also coming to Google Wear OS watches soon, per an announcement at I/O. Apple Music, of course, has offered offline listening on the Watch for a while, as has Pandora. Deezer also beat Spotify to the popular wearable by a matter of days.

Source: Tech Crunch

Watching construction tech software company Procore go public today after pricing above its range makes the IPO slowdown look like the deceleration that wasn’t.

Investors quickly bid up the company’s value in trading, giving Procore a higher valuation than it might have anticipated, along with a boost of confidence for the IPO market in general.

Procore initially set an IPO range of $60 to $65 per share before pricing at $67 per share last night. Its debut was worth gross proceeds north of $600 million and a fully diluted valuation of $9.6 billion. As of early afternoon today, shares were trading at a solid $85.25.

In light of Procore’s debut, TechCrunch is digging quickly into the company’s new valuation and its resulting revenue multiples.

Following, we have notes from a chat we had with CEO Tooey Courtemanche regarding his company’s debut, what it intends to do with its new capital and how it expects its partner platform to evolve and mature.

First, the numbers.

Procore’s new price

Starting with Procore’s $9.6 billion, fully diluted valuation that it set in its IPO pricing, the company is richly valued. It generated revenues of $113.9 million in Q1 2021, putting it on a run-rate of $455.8 million. As you can calculate, that valued the company at around 20x its run rate; more precisely, at 21.2x.

But if we do some modest extrapolation of the company’s current value in light of its trading appreciation, Procore is now worth around $12.3 billion on a fully diluted basis. That gives it a run-rate multiple of around 27x.

Source: Tech Crunch

It doesn’t feel like a week goes by at the moment that another startup doesn’t emerge armed with a huge wallet of cash to pursue a strategy of consolidating and then scaling promising brands that have built a business selling on marketplaces like Amazon’s. In the latest development, a startup called Factory14 is coming out of stealth mode in Europe with $200 million in funding to snap up smaller businesses and help them grow through better economies of scale.

Along with this, Factory14 is also announcing its latest acquisition to underscore its acquisition strategy: it’s acquired Pro Bike Tool, a popular D2C seller of its own-brand bike accessories and tools, for an undisclosed sum. The company, which is now fully owned by Factory14, has kept the original founders on to lead the smaller company.

This is Factory14’s fourth acquisition since launching earlier this year, and the company said that its focus on acquiring marketplace sellers that are already seeing success and some scale means that it is already profitable.

The startup — based in Luxembourg and has offices in Madrid, London, Shanghai and Taipei — is describing this funding injection as a seed round, but in fact the majority of it is coming in the form of debt to acquire companies. Dmg Ventures (the VC arm of the Daily Mail Group) and DN Capital co-led the equity-based seed funding, with VentureFriends and unnamed individuals in the tech world also participating. Victory Park Capital, meanwhile, provided the credit facility and also participated in the equity consortium.

CEO Guilherme Steinbruch, an alum of Global Founders Capital (the investment firm co-founded by the Samwer brothers of Rocket Internet fame, among others), co-founded Factory14 with Marcos Ramírez (COO) and Gianluca Cocco (CBO) — who have respectively worked at e-commerce giants like Amazon and Delivery Hero.

Steinbruch himself also has an interesting background. He hails from Brazil and is a member of the powerful industrial family that controls a major steel producer, a leading textile producer and a bank (Steinbruch said that Factory14 has no connection to these, and is not an investor in the startup).

He said that the idea for founding Factory14 in Europe came out his interest in e-commerce and specifically the traction that Thrasio, one of the U.S. based the pioneers of the roll-up space, was seeing for the model.

The Marketplace on Amazon is a massive business. One estimate puts the number of third-party sellers at 5 million, with more than 1 million sellers joining the platform in 2020 alone. Thrasio, meanwhile, has in the past estimated to me that there are probably 50,000 businesses selling on Amazon via FBA making $1 million or more per year in revenues.

It’s the latter category that is the target for Factory14, Steinbruch told me. Its belief is that focusing on more successful businesses will mean a better hit rate on finding companies that have already built more solid supply chains, branding and overall quality. Being willing to pay a little more for these sellers, he said, will help it compete against what has become a very crowded field.

“There are many players, there is no denying it,” he said, adding that their research has (so far) found more than 50 roll-up players going for the same general opportunities that it is.

But in the process of planning out how Factory14 might differentiate itself in that mix, Steinbruch said it found some distinct differences.

“Some are looking for volume, and are willing to buy up many companies as cheaply as possible. But we took the decision to focus only on high-quality assets,” he said. “We knew we would have to pay higher multiples for a brand growing 200% a year, but when we started targeting these we were surprised to find there was less competition for these assets rather than for the smaller ones. That was a good surprise. It means that, yes, we have competition but we’ve managed to be pretty successful anyway.”

Even among the bigger retailers selling on Amazon using the e-commerce giant’s distribution and fulfillment platform, there are reasons for why the consolidators have started to circle beyond just wanting to jump on a good thing. The system has within it a lot of work is repeatable across many different companies, specifically in areas like analytics, supply chain management, marketing and more: building a framework that could handle those processes for many at once makes sense. There is also the fact that in many cases, marketplace sellers may have found themselves sitting on successful businesses but unable to source the investment (or the will) to scale them to the next step.

All the same, the mix of competitors hoping to scoop them up is a pretty formidable one, and the point of differentiation between them all may not in itself may not be as distinct as Factory14 (or any of them) hopes.

Just today, another ambitious player in this space, Heyday out of San Francisco, today announced a further $70 million in equity funding led by General Catalyst. It, too, is raising large amounts of debt and eyeing up more innovative ways of accommodating the most interesting companies selling on Amazon a bid for more quality and success.

“The top 1.5% of marketplace sellers are doing $1 million in revenues, and we believe there may be some that cross the $1 billion threshold eventually,” Heyday CEO and co-founder Sebastian Rymarz told me last week. To woo the best of them in the current market, as part of its ambition to become the “P&G” of the 21st century, it too is taking a very open-ended approach, he said.

“We have some come to Heyday, or we bring in our own brand managers. Sometimes it’s a matter of some ongoing participation and interest, growth equity where we buy some now and will buy more of your business over time. We are still defining that and that is fine, we are comfortable with that,” he said. “It’s about unique partnerships that we’re forming to accelerate their businesses.”

Closer to home in more ways than one, Berlin’s Razor Group — funded by Steinbruch’s former colleagues from GFC, and founded by ex-Rocket Internet people — earlier this month raised $400 million. Thrasio itself has raised very large rounds in rapid succession totaling hundreds of millions of dollars in the last year, and is also profitable. Others in the same area that have also raised huge warchests include Branded; Heroes; SellerX; Perch; Berlin Brands Group (X2); Benitago; Latin America’s Valoreo (with its backers including Razor’s CEO), and an emerging group out of Asia including Rainforest and Una Brands.

Even with all of this, there will be opportunities, these entrepreneurs believe, to bring together more disparate smaller e-commerce retailers to help them better leverage marketing, supply chains, analytics and wider business expertise to grow for the longer term, leveraging the marketplace model that has come to dominate how many shop online today.

Factory14 said it expects to have $20 million in “trailing twelve months” Ebitda by the end of 2021 and expects to double its team to 80 by that point too.

For as long as Amazon and its marketplace model remain, it seems investors will come with their checkbooks, too.

“E-commerce is undergoing structural changes which are enabling thousands of exciting new brands to be born every day,” said Manuel Lopo de Carvalho, CEO at dmg ventures, in a statement. “Factory14 can provide these brands with the tools, capital and expertise that enable them to play in the big leagues.”

Ian Marsh, principal at DN Capital, said that the VC did its homework before backing the startup, too. “We had discussions with most aggregators and were immediately impressed by factory14’s differentiated vision focused on strong consumer brands and the world-class team they have put together with top tier private equity investors combined with seasoned e-commerce executive and former Amazonians. We are excited to work with Guilherme, Marcos, Gianluca and the rest of the factory14 team to create brands that inspire consumers around the world.”

Source: Tech Crunch

The global tech sector is booming, and as technologies like cloud and AI accelerate their growth, the demand for tech talent outpaces supply globally. Specifically, the U.S. tech sector has seen unprecedented growth in recent years, with four tech firms reaching a $1 trillion market cap by the beginning of 2020 — all of which have seen double-digit growth since achieving a 13-digit valuation pre-pandemic.

One of the major factors in the growth and adoption of tech in the U.S. is the increasing focus on software as a service and broader digital transformations across industry sectors, which have accelerated due to the COVID-19 pandemic. As such, there is an insatiable appetite for quality tech talent in the U.S., with projections showing an 11% increase by 2029 from 2019 numbers, which amounts to over half a million new jobs.

Given that the U.S. produces only about 65,000 computer science graduates, there is a vast deficit in the tech talent market, which materialized as over 900,000 unfilled IT and related positions in 2019 alone. The problem is so vast that more than 80% of U.S. employers stated that recruiting for tech talent is a top business challenge, according to a survey by top HR consulting firm Robert Half.

Demand increasing for Mexican tech talent

Mexico’s tech talent can help to fill the gaps left in a hypercompetitive U.S. market for tech workers. Unlike the U.S., 20% of Mexican college graduates have relevant engineering degrees, amounting to over 110,000 per year, far surpassing the U.S. in technical talent. Investors and tech firms have noticed and are increasing operations in Mexico.

Some have referred to the cities of Monterrey and Guadalajara as the “Silicon Valley of Latin America,” and while their tech sectors are also seeing tremendous growth, the pace falls short of Mexico’s talent production, leading to a surplus of highly trained and capable individuals in the tech sector. The cost of higher education in Mexico is far less than in the U.S., so we’re likely to see that talent surplus grow in the coming years.

Under current conditions, the U.S. has an incredible opportunity to capitalize on the surplus of tech talent in Mexico. Because tech jobs are more scarce than in the U.S., the cost of talent in Mexico is considerably less than in the U.S. or in Canada. In general, talent in Mexico can be two to three times cheaper than in the U.S. while still delivering outstanding quality and specialized experience.

More so than other Latin American countries, Mexico has the experience and economy to support a robust tech talent export ecosystem. In fact, Mexico City’s concentrated market is larger than the sum total of every other Spanish-speaking country in Latin America. Specifically, Mexico’s IT outsourcing industry has been growing at an annual rate of 10%-15% and is now considered the third-largest exporter of IT services.

What’s more, the U.S./Mexico relationship is seeing a refresh after several tumultuous years. With Mexico ranked No. 1 among U.S. trade partners, the political and economic mechanisms for investments and partnerships are in place. Technology leaders such as Cisco and Intel have already set up shop in Mexico, demonstrating confidence in the country’s ability to support tech and economic growth.

The benefits of proximity

Mexico provides a number of benefits that make drawing from its talent surplus easier and more efficient. For one, Mexico’s time zones align with those in the U.S., enabling real-time collaboration at times that work best for both parties. Compare this to the time difference in India, which is over 12 hours ahead of California’s Silicon Valley.

Beyond the time difference, there are also many cultural similarities that make working with Mexico the clear choice for IT outsourcing. For example, the U.S. is home to more than 41 million native Spanish speakers, and plus over 12 million bilingual Spanish speakers, making the U.S. the second-largest Spanish-speaking country after Mexico. While difficult to quantify, the number of consumer and cultural exports from Mexico to the U.S. also helps to build familiarity and solidarity between the two countries, which can only improve an already healthy relationship.

New geopolitical considerations favor U.S.-Mexico ties

The steady progression of America’s tech sector is now seen as a strategic priority at the federal level. Meanwhile, public and private sector decision-makers are more interested than ever in conducting business under favorable trade treaty terms with friendly governments amid a new climate of geopolitical uncertainty.

As the U.S. tech sector continues its explosive growth, technology companies in the U.S. will need to seek alternative means to supplement its in-demand tech workforce. Rather than turning to countries undergoing increased regulatory scrutiny, or distant talent bases requiring significant business travel, business leaders are looking to geographically close, diplomatically friendly nations. U.S. companies are finding Mexico’s status as a key business partner and strategic ally to be a massive value driver.

By 2030, the middle-class population in Mexico is expected to reach 95 million, placing it in the top 10 countries with the highest share of global middle-class consumption. As the middle class rises, so will companies to meet their consumer needs, and, as such, Mexico’s own tech sector will grow and require significantly more tech talent, reducing or potentially eliminating Mexico’s talent surplus.

This is evidenced by the uptick in Mexico-based technology companies, such as Mexican used-car startup Kavak, which recently hit a $4 billion valuation. Amid an exciting backdrop of skyrocketing tech valuations and potential, the U.S. tech sector should look to Mexico as a key growth market and technology partner. The time is now for the U.S. to tap into the surplus of quality tech talent in Mexico.

Source: Tech Crunch

Apple last month unveiled its plans for paid podcast subscriptions in a newly redesigned Apple Podcasts app. Now, it’s introducing a new program that will help podcast creators grow their subscriber base: affiliate marketing. The company’s “Apple Services Performance Partner Program,” which already exists to help market other Apple services like Apple TV, Apple News, and Apple Books, is today expanding to include paid podcasts.

The new program — “Apple Services Performance Partner Program for Apple Podcasts” (whew!) — will be open to anyone, though the company believes it will make the most sense for publishers and creators who already have an audience and a number of marketing channels where they can share these new affiliate links. When users convert by clicking through one of the links and subscribe to a premium podcast, the partner will receive a one-time commission at 50% of the podcast subscription price, after the subscriber accumulates their first month of paid service.

So, for example, if a paid podcast was charging subscribers $5 per month, the commission would be $2.50. This commission would apply for every new subscriber that signed up through the affiliate channel, and there’s no cap.

Podcast creators can also use the affiliate links to promote their own paid programs, which would allow them to generate incremental revenue.

While anyone can apply to join the affiliate program, there is an approval process involved. This is mainly about keeping spammers out of the program, and ensuring that those signing up do have at least some marketing channels where they can distribute the links. The sign-up form asks for specific criteria — like how many channels are available and how the partner intends to use them to promote the affiliate links, among other things.

The program will be made available to anyone in the 170 countries and regions where paid podcasts subscriptions are being made available.

Once approved and signed in, affiliate partners will gain access to an online dashboard where they can create links (i.e. shortened URLs) much like any other affiliate program. They can also create multiple URLs for an individual podcast to make it easier to track how well different channels are performing. The URLs can be posted on their own, tied to a “Listen on Apple Podcasts” badge, or can be made available as a QR code. The latter may make more sense when live events return, as it could be printed on signage or in flyers that were distributed during a live taping, for example. It could also be used in other sorts of advertising, including both print and digital.

Though premium podcasts already existed, until more recently that often involved paying a podcaster directly to access a private RSS feed. Smaller services like Stitcher also used subscriptions to provide paying customers with a series of perks, like ad-free listening and exclusive content. The new efforts by both Apple and Spotify are focused on wooing creators to their platforms, where they’ll take a cut of the subscription revenues. Spotify is waiving its 5% fee for the first two years, while Apple is employing its usual model of 30% in year 1 that drops to 15% in year two.

While people can begin to enroll in the new affiliate program starting today, paid podcasts aren’t actually launching until later this month, per Apple. When they do, those enrolled in the affilate program will be able to create links and begin earning commissions on subscriptions.

Source: Tech Crunch

Bain Capital Ventures (BCV), the venture arm of the 37-year-old private equity firm Bain Capital, announced this morning that it has $1.3 billion more smackers to invest across two funds, a $950 million fund for seed and Series A deals and a $350 million fund for growth-stage opportunities. That amount is up slightly from late 2018, when the outfit announced $1 billion across two funds.

While the outfit is backed by all the usual suspects, including endowments and pension funds, it’s worth noting that around $130 million of that capital comes from investors and other employees inside of Bain, whose contributions typically make up 10% of a fund. (Investors at other firms like Sequoia are big investors in their funds, too.)

More important, of course, is where the capital will be spent. According to partners Sarah Smith and Aaref Hilaly, the focus remains very much on enterprise startups, where the team likes to jump in early and build up a big position. (Some of its biggest bets in terms of dollars invested right now include the text message marketing company Attentive, currently valued at $2.2 billion, and the in-memory database company Redis Labs, valued at $2 billion.)

Interestingly, BCV is also investing directly in a lot of emerging managers, 50 of whom BCV has already backed in order improve the diversity of ideas and startups that it gets to see at the earliest stages.

It’s all part of the firm’s continuing evolution, says the outfit, which got its start in 2001 on the East Coast and was designed initially to fund Series B and older companies but has evolved to fund mostly West Coast- and, to a smaller degree, New York-based startups that are just getting off the ground.

To underscore the shift, says Hilaly, BCV wrote checks to 42 companies last year and 37 of them were either seed-stage or Series A-stage startups and the “vast majority were pre-revenue.”

Asked if competition at the later-stage drove the firm to seek out more nascent deals, Hilaly notes that competition at every stage is intense right now and argues that BCV’s current team composition — Hilaly spent seven years at Sequoia and earlier founded a company himself; Smith spent a collective seven years at Quora and Facebook; partner Enrique Salem was a former president and CEO of Symantec, for example — makes it most impactful at the company formation stage, when founders are still getting the fundamentals down.

As for why the organization needs such a massive fund to back such young companies, it’s a reflection of the changing market, both partners suggest. Not only do firms need to be able to provide the capital that entrepreneurs need to grow at a faster clip than ever before, but it’s becoming increasingly important for venture outfits to support the ecosystem — including as a competitive edge.

For some firms, that support comes in the form of scout programs that empower operators and founders to write checks to friends who are starting companies.

For BCV, it means committing an undisclosed but “material” amount of capital to emerging seed-fund managers. So far among the managers it has backed is Bobby Goodlatte of Form Capital of Miami, who we talked with recently (see below); Maren Bannon of London-based January Ventures; Ryan Hoover of Weekend Fund; Scribble Ventures, run in part by husband-and-wife duo Elizabeth and Kevin Weil; and Noemis Ventures in New York.

Smith says that BCV is “really excited about this program because it’s great for founders, who have more choice than ever as they’re getting started. It’s also helping on-ramp a broader group of investors into the venture ecosystem, which is something I’m personally passion about as I care about diversity of thought.”

Those newer funds — 17% of which are run by Black general partners and 21% of which are run by women —  also help BCV to stay atop the latest enterprise trends, she adds, saying that in addition to checks, BCV helps make limited partner introductions for managers to help get them off the ground. (BCV does not ask for any information rights beyond what the firms’ other limited partners receive.)

As for where BCV will be funneling the rest of its new capital, Smith says that BCV has always been — and remains — thesis driven, and that much of what interests the firm right now is application software infrastructure, health tech investing, e-commerce-enabled enterprise tech, and fintech, including crypto, which has become a growing area of intrigue.

Some of the firm’s related deals include the crypto lending startup BlockFi and Digital Currency Group, the parent company behind the popular Grayscale Bitcoin Trust.

BCV has also invested in “a few tokens,” says Hilaly, “but that’s not the major focus,” he adds.

In the meantime, BCV — which is writing checks as small as several hundred thousand dollars to upwards of $100 million in companies — is also keeping an eye on the trends that continue to reshape the venture industry, including, right now, bigger and faster deals.

“It’s unprecedented,” observes Hilaly of what’s happening in the market, even while he’s not surprised by it. “My general feeling is that venture is not so unlike startups, and every firm has to just reinvent itself every five or 10 years because the ecosystem around it is changing so much.

“You can complain about competition,” he continues, “but the reality is competition just forces you to be better.” Certainly, he says, “You have to you have to be on your game to a greater extent than ever before or there’s just no way a sensible founder would pick you.”

Source: Tech Crunch

Approaching institutions to raise capital for your venture capital or private equity fund is relatively transparent, but what if you’re targeting family offices and high-net-worth individuals? I see five innovative new methods for raising capital that emerging managers such as Versatile VC are using, which I’ve ranked in roughly descending order of popularity:

1. Join online communities and virtual conferences where investors participate.
2. Use a platform that helps other investors access your fund.
3. Generally solicit under the 506(c) designation.
4. Launch a rolling fund.
5. Crowdfund from retail investors into your general partnership.

Will Stringer, CEO of Chisos, feels most family offices won’t respond to cold outreach. “You need to build a true relationship with family office investors or other general partners that can make warm intros to family office decision-makers,” he says. “Family offices, more than any other allocator, rely on trust. [It’s] not always the case (and always changing), but today it’s still the majority.”

The obvious solution therefore is to get in touch with your friends who have earlier raised or pitched to the family offices. You may also find professional intermediaries who are willing to make an introduction to family offices.

That said, the five methods I outline below may be faster and more efficient.

Join online communities and virtual conferences where investors participate

To meet other VCs (some of which may become LPs), among your options are Confluence, Gen Z Mafia, InnovatorsRoom (European focus) and TechAviv (Israeli focus). To find others, see: How to find the right online communities. I maintain a proprietary database of the communities I’ve found most valuable, which I share with other members of the Versatile team.

These venues allow you to efficiently get in front of many pre-qualified investors and follow up with those who seem like a tight fit. Unsurprisingly, the best online communities are limited strictly to LPs. Ideally, you’d partner with an anchor/friendly LP who can pass the word on your fund to other potential investors.

In general, at virtual conferences, I recommend first fill out your online profile with all possible keywords and your photo. Side-channeling is powerful and is the equivalent of going into a corner at a conference and talking privately. Look up the profiles of all the people attending a conference or in an online community and send the relevant folks a customized message introducing yourself.

This is one of the primary advantages of virtual events versus traditional face-to-face conferences, where people do not conveniently wear a hat with their LinkedIn profile visible.

Source: Tech Crunch

You may not be familiar with the term “dark patterns” but the manipulative design phenomenon is ubiquitous in the apps and services we use every day.

Dark patterns nudge consumers to make choices that enrich companies, usually at their own expense. That can look like misleading wording that leads someone to sign their personal data away or a hidden button that results in a renewed subscription they’d probably rather cancel.

If you run across a sketchy dark pattern design, you can now report it on Darkpatternstipline.org, a dedicated site hosted by Consumer Reports. The new tip line is a joint project from the EFF, PEN America, Consumer Reports and Access Now, among other digital rights advocates.

Collecting dark pattern reports is an effort that could actually have teeth now, thanks to new laws taking aim at the manipulative design practice.

In March, California modified its landmark privacy law, the California Consumer Privacy Act (CCPA), to ban dark patterns in tech’s own backyard. “These protections ensure that consumers will not be confused or misled when seeking to exercise their data privacy rights,” California Attorney General Xavier Becerra said of the new regulations.

Even Congress is worried about dark patterns. In 2019, a bipartisan bill called the DETOUR Act sought to outlaw user interfaces “obscuring, subverting, or impairing user autonomy” for large companies with more than 100 million users. While that legislation didn’t go anywhere, coercive design choices are one of the many concerns that lawmakers have on their radar as they seek to implement new federal regulations for big tech companies.

For the tip line’s creators, flagging concerns for the regulators shaping tech policy is a priority. “If we want to stop dark patterns on the internet and beyond, we first have to assess what’s out there, and then use these examples to influence policymakers and lawmakers,” EFF Designer Shirin Mori said.

“We hope the Dark Patterns Tip Line will help us move towards more fair, equitable, and accessible technology products and services for everyone.”

Source: Tech Crunch