Andreessen Horowitz

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Andreessen Horowitz isn’t alone in leaving behind VC as we know it — and more company is coming

This morning, Forbes wrote a lengthy profile of Andreessen Horowitz, the now 10-year-old venture firm that its rivals love to hate but nevertheless tend to copy. It’s a great read that revisits some of the firm’s wins and losses and, interestingly, regrets, including the founders’ early predisposition to talk trash about the rest of the venture industry.

As Ben Horowitz tells reporter Alex Konrad, “I kind of regret it, because I feel like I hurt people’s feelings who were perfectly good businesses . . . I went too far.”

The story also suggests that Andreessen Horowitz — whose agency-like model has been widely replicated by other big venture firms — is re-shaping venture capital a second time. It’s doing this, says Forbes, by turning itself into a registered investment advisor.

But the firm isn’t alone is morphing into something very different than it once was, including an RIA. SoftBank is already one. General Catalyst appears to be in the process of registering as one, too. (It recently withdrew its status as a so-called exempt reporting advisor.) Other big firms with a range of un-VC-like products are similarly eyeing the same move.

They don’t have much choice. While VCs have traditionally been able to dabble in new areas through their limited partner agreements with their own investors, they’ve also faced what’s traditionally been a 20 percent cap on these activities, like buying in the public markets, investing in other funds, issuing debt to fund buyouts, and acquiring equity through secondary transactions.

Put another way, 20 percent of their capital could be used to experiment, but the rest had to be funneled into typical venture capital-type deals.

For Andreessen Horowitz, that cap clearly began to grate. An early and enduring believer in cryptocurrencies, marketplaces, and applications, the firm grew particularly frustrated over its inability to invest more of its flagship fund into crypto startups. It raised a separate crypto fund last year so it could move more aggressively on opportunities, but according to Forbes, the constraints that came with creating that separate legal entity gave rise to new aggravations.

By becoming a registered investment advisor, Andreessen Horowitz will no longer have to limit these stakes, including in its general fund — the newest of which it’s expected to announce shortly. It will also have the freedom to invest any percentage of its fund that it wants in larger high-growth companies, to buy shares from founders and early investors, and to trade public stocks, as Forbes notes.

It’s the same reason that SoftBank is a registered investment advisor and other big firms with more assets will invariably be, as well. As longtime startup attorney Barry Kramer observes, “Like the now-giant operating companies that VCs once funded, like Google and Apple and Amazon — each of which used to play in discrete market segments and now overlap — hedge funds, mutual funds, secondary funds, and venture funds that used to play in discrete market segments are starting to overlap, too.”

In fact, the opportunity to shop for secondary stakes alone could drive a venture firm to restructure. “Secondary markets are eating” the public markets, observes Barrett Cohn on the investment bank Scenic Advisement, which helps broker sales between equity buyers and sellers. Cohn has a vested interest in this turnabout, but it’s also hard to argue he’s wrong, considering how long startups remain private, and how much more secondary activity now takes place before companies are acquired, go public, or conk out.

Little wonder the powerful venture capital lobby group — the National Venture Capital Association — has been trying to talk the SEC into changing its definition of what constitutes a venture capital firm. It recognizes that it will lose more and more members if venture firms aren’t afforded more flexibility.

In the meantime, becoming an RIA isn’t without its downsides — a lot of them, notes Bob Raynard, the managing director of the fund administration services company Standish Management in San Francisco.

Though he thinks many firms like Andreessen Horowitz may not have a choice at a certain point (“I think there are a lot of other growth equity and venture firms that should be registered for their own sake”), the new rules to which it will be adapting can “be quite onerous,” beginning with a complete lack of privacy, as well as expenses.

One estimate we found suggests that the median annual compliance costs are eight times higher for RIAs than for exempt registered advisors.

“If [Andreessen Horowitz] is becoming an RIA, its cost structure just went way up,” says Raynard, observing that a compliance officer will have to sign off on everything an employee at the firm does, as well as the investing decisions that its partners’ spouses, children, and even parents make. “As a VC, you don’t have to report your trades,” Raynard notes, but an RIA has to ensure that nothing and no one with a pecuniary interest in the firm creates an expensive misstep.

One could also imagine it creating headaches for limited partners, who typically like to invest in distinct asset classes, whether venture capital or private equity or hedge funds. If Andreessen Horowitz, among other firms, starts to look like an amalgamation of all three, how will it be viewed? In which bucket will it land?

The firm declined to answer that question and others of ours today, saying it’s focused for now on completing the process of registering as an RIA. Raynard pushes back on the idea that its new look might throw off the institutions that have long funded it, however. “I think regulators will view it as a good thing, and I think most LPs would view it as a favorable shift, because of increased outside scrutiny involved.”

Indeed, Raynard thinks that beyond expenses and added layers of management and and an eagle-eyed SEC watching more closely, a bigger trade-off as venture firms become investment firms more broadly could be that it becomes harder to recruit.

Despite widespread interest in working for a brand-name firm, “if you’re a junior-level person and you’re being recruited by a firm that’s a registered investment advisor versus a venture firm where your deals are not being scrutinized and you have some privacy,” says Raynard, “it’s something you’re going to think about.”

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Kong raises $43M Series C for its API platform

Kong, the open core API management and life cycle management company previously known as Mashape, today announced that it has raised a $43 million Series C round led by Index Ventures. Previous investors Andreessen Horowitz and Charles River Ventures (CRV), as well as new investors GGV Capital and World Innovation Lab, also participated. With this round, Kong has now raised a total of $71 million.

The company’s CEO and co-founder Augusto Marietti tells me the company plans to use the funds to build out its service control platform. He likened this service to the “nervous system for an organization’s software architecture.”

Right now, Kong is just offering the first pieces of this, though. One area the company plans to especially focus on is security, in addition to its existing management tools, where Kong plans to add more machine learning capabilities over time, too. “It’s obviously a 10-year journey, but those two things — immunity with security and machine learning with [Kong] Brain — are really a 10-year journey of building an intelligent platform that can manage all the traffic in and out of an organization,” he said.

In addition, the company also plans to invest heavily in its expansion in both Europe and the Asia Pacific market. This also explains the addition of World Innovation Lab as an investor. The firm, after all, focuses heavily on connecting companies in the U.S. with partners in Asia — and especially Japan. As Marietti told me, the company is seeing a lot of demand in Japan and China right now, so it makes sense to capitalize on this, especially as the Chinese market is about to become more easily accessible for foreign companies.

Kong notes that it doubled its headcount in 2018 and now has more than 100 enterprise customers, including Yahoo! Japan, Ferrari, SoulCycle and WeWork.

It’s worth noting that while this is officially a Series C investment, Marietti is thinking of it more like a Series B round, given that the company went through a major pivot when it moved from being Mashape to its focus on Kong, which was already its most popular open-source tool.

“Modern software is now built in the cloud, with applications consuming other applications, service to service,” said Martin Casado, general partner at Andreessen Horowitz . “We’re at the tipping point of enterprise adoption of microservices architectures, and companies are turning to new open-source-based developer tools and platforms to fuel their next wave of innovation. Kong is uniquely suited to help enterprises as they make this shift by supporting an organization’s entire service architecture, from centralized or decentralized, monolith or microservices.”

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Pinterest files confidentially to go public

Visual search engine Pinterest has joined a long list of high-flying technology companies planning to go public in 2019. The business has confidentially submitted paperwork to the Securities and Exchange Commission for an initial public offering slated for later this year, according to a report from The Wall Street Journal.

Pinterest declined to comment.

Founded in 2008 by Ben Silbermann, earlier reports indicated the company was planning to debut on the stock market in April. In late January, Pinterest took its first official step toward a 2019 IPO, hiring Goldman Sachs and JPMorgan Chase as lead underwriters for its offering.

The company garnered a $12.3 billion valuation in 2017 with a $150 million financing.

Touting 250 million monthly active users, Pinterest has raised nearly $1.5 billion in venture capital funding from key stakeholders Bessemer Venture Partners, Andreessen Horowitz, FirstMark Capital, Fidelity and SV Angel. The business brought in some $700 million in ad revenue in 2018, per reports, a 50 percent increase year-over-year.

Pinterest employs 1,600 people across 13 cities, including Chicago, London, Paris, São Paulo, Berlin and Tokyo. The company says half its users live outside the U.S.

Pinterest will likely follow Lyft, Uber and Slack to the public markets, which have all filed confidential paperwork for IPOs or, in Slack’s case, a reported direct listing, expected in the coming months.

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Databricks raises $250M at a $2.75B valuation for its analytics platform

Databricks, the company founded by the original team behind the Apache Spark big data analytics engine, today announced that it has raised a $250 million Series E round led by Andreessen Horowitz. Coatue Management, Green Bay Ventures, Microsoft and NEA, also participated in this round, which brings the company’s total funding to $498.5 million. Microsoft’s involvement here is probably a bit of a surprise, but it’s worth noting that it also worked with Databricks on the launch of Azure Databricks as a first-party service on the platform, something that’s still a rarity in the Azure cloud.

As Databricks also today announced, its annual recurring revenue now exceeds $100 million. The company didn’t share whether it’s cash flow-positive at this point, but Databricks CEO and co-founder Ali Ghodsi shared that the company’s valuation is now $2.75 billion.

Current customers, which the company says number around 2,000, include the likes of Nielsen, Hotels.com, Overstock, Bechtel, Shell and HP.

“What Ali and the Databricks team have built is truly phenomenal,” Green Bay Ventures co-founder Anthony Schiller told me. “Their success is a testament to product innovation at the highest level. Databricks is without question best-in-class and their impact on the industry proves it. We were thrilled to participate in this round.”

While Databricks is obviously known for its contributions to Apache Spark, the company itself monetizes that work by offering its Unified Analytics platform on top of it. This platform allows enterprises to build their data pipelines across data storage systems and prepare data sets for data scientists and engineers. To do this, Databricks offers shared notebooks and tools for building, managing and monitoring data pipelines, and then uses that data to build machine learning models, for example. Indeed, training and deploying these models is one of the company’s focus areas these days, which makes sense, given that this is one of the main use cases for big data, after all.

On top of that, Databricks also offers a fully managed service for hosting all of these tools.

“Databricks is the clear winner in the big data platform race,” said Ben Horowitz, co-founder and general partner at Andreessen Horowitz, in today’s announcement. “In addition, they have created a new category atop their world-beating Apache Spark platform called Unified Analytics that is growing even faster. As a result, we are thrilled to invest in this round.”

Ghodsi told me that Horowitz was also instrumental in getting the company to re-focus on growth. The company was already growing fast, of course, but Horowitz asked him why Databricks wasn’t growing faster. Unsurprisingly, given that it’s an enterprise company, that means aggressively hiring a larger sales force — and that’s costly. Hence the company’s need to raise at this point.

As Ghodsi told me, one of the areas the company wants to focus on is the Asia Pacific region, where overall cloud usage is growing fast. The other area the company is focusing on is support for more verticals like mass media and entertainment, federal agencies and fintech firms, which also comes with its own cost, given that the experts there don’t come cheap.

Ghodsi likes to call this “boring AI,” since it’s not as exciting as self-driving cars. In his view, though, the enterprise companies that don’t start using machine learning now will inevitably be left behind in the long run. “If you don’t get there, there’ll be no place for you in the next 20 years,” he said.

Engineering, of course, will also get a chunk of this new funding, with an emphasis on relatively new products like MLFlow and Delta, two tools Databricks recently developed and that make it easier to manage the life cycle of machine learning models and build the necessary data pipelines to feed them.

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Startups Weekly: Even Gwyneth Paltrow had a hard time raising VC

I spent the week in Malibu attending Upfront Ventures’ annual Upfront Summit, which brings together the likes of Hollywood, Silicon Valley and Washington, DC’s elite for a two-day networking session of sorts. Cameron Diaz was there for some reason, and Natalie Portman made an appearance. Stacey Abrams had a powerful Q&A session with Lisa Borders, the president and CEO of Time’s Up. Of course, Gwyneth Paltrow was there to talk up Goop, her venture-funded commerce and content engine.

“I had no idea what I was getting into but I am so fulfilled and on fire from this job,” Paltrow said onstage at the summit… “It’s a very different life than I used to have but I feel very lucky that I made this leap.” Speaking with Frederic Court, the founder of Felix Capital, Paltrow shed light on her fundraising process.

“When I set out to raise my Series A, it was very difficult,” she said. “It’s great to be Gwyneth Paltrow when you’re raising money because people take the meeting, but then you get a lot more rejections than you would if they didn’t want to take a selfie … People, understandably, were dubious about [this business]. It becomes easier when you have a thriving business and your unit economics looks good.”

In other news…

The actor stopped by the summit to promote his startup, HitRecord . I talked to him about his $6.4 million round and grand plans for the artist-collaboration platform.

Backed by GV, Sequoia, Floodgate and more, Clover Health confirmed to TechCrunch this week that it’s brought in another round of capital led by Greenoaks. The $500 million round is a vote of confidence for the business, which has experienced its fair share of well-publicized hiccups. More on that here. Plus, Clutter, the startup that provides on-demand moving and storage services, is raising at least $200 million from SoftBank, sources tell TechCrunch. The round is a big deal for the LA tech ecosystem, which, aside from Snap and Bird, has birthed few venture-backed unicorns.

Pinterest, the nine-year-old visual search engine, has hired Goldman Sachs and JPMorgan Chase as lead underwriters for an IPO that’s planned for later this year. With $700 million in 2018 revenue, the company has raised some $1.5 billion at a $12 billion valuation from Goldman Sachs Investment Partners, Valiant Capital Partners, Wellington Management, Andreessen Horowitz, Bessemer Venture Partners and more.

Kleiner Perkins went “back to the future” this week with the announcement of a $600 million fund. The firm’s 18th fund, it will invest at the seed, Series A and Series B stages. TCV, a backer of Peloton and Airbnb, closed a whopping $3 billion vehicle to invest in consumer internet, IT infrastructure and services startups. Partech has doubled its Africa VC fund to $143 million and opened a Nairobi office to complement its Dakar practice. And Sapphire Ventures has set aside $115 million for sports and entertainment bets.

The co-founder of Y Combinator will throw a sort of annual weekend getaway for nerds in picturesque Boulder, Colo. Called the YC 120, it will bring toget her 120 people for a couple of days in April to create connections. Read TechCrunch’s Connie Loizos’ interview with Altman here.

Consumer wellness business Hims has raised $100 million in an ongoing round at a $1 billion pre-money valuation. A growth-stage investor has led the round, with participation from existing investors (which include Forerunner Ventures, Founders Fund, Redpoint Ventures, SV Angel, 8VC and Maverick Capital) . Our sources declined to name the lead investor but said it was a “super big fund” that isn’t SoftBank and that hasn’t previously invested in Hims.

Five years after Andreessen Horowitz backed Oculus, it’s leading a $68 million Series A funding in Sandbox VR. TechCrunch’s Lucas Matney talked to a16z’s Andrew Chen and Floodgate’s Mike Maples about what sets Sandbox apart.

Here’s your weekly reminder to send me tips, suggestions and more to kate.clark@techcrunch.com or @KateClarkTweets

In a new class-action lawsuit, a former Munchery facilities worker is claiming the startup owes him and 250 other employees 60 days’ wages. On top of that, another former employee says the CEO, James Beriker, was largely absent and is to blame for Munchery’s downfall. If you haven’t been keeping up on Munchery’s abrupt shutdown, here’s some good background.

Consolidation in the micromobility space has arrived — in Brazil, at least. Not long after Y Combinator-backed Grin merged its electric scooter business with Brazil-based Ride, it’s completing another merger, this time with Yellow, the bike-share startup based in Brazil that has also expressed its ambitions to get into electric scooters.

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase editor-in-chief Alex Wilhelm, TechCrunch’s Silicon Valley editor Connie Loizos and Jeff Clavier of Uncork Capital chat about $100 million rounds, Stripe’s mega valuation and Pinterest’s highly anticipated IPO.

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Anchorage emerges with $17M from a16z for ‘omnimetric’ crypto security

I’m not allowed to tell you exactly how Anchorage keeps rich institutions from being robbed of their cryptocurrency, but the off-the-record demo was damn impressive. Judging by the $17 million Series A this security startup raised last year led by Andreessen Horowitz and joined by Khosla Ventures, #Angels, Max Levchin, Elad Gil, Mark McCombe of Blackrock and AngelList’s Naval Ravikant, I’m not the only one who thinks so. In fact, crypto funds like Andreessen’s a16z crypto, Paradigm and Electric Capital are already using it.

They’re trusting in the guys who engineered Square’s first encrypted card reader and Docker’s security protocols. “It’s less about us choosing this space and more about this space choosing us. If you look at our backgrounds and you look at the problem, it’s like the universe handed us on a silver platter the Venn diagram of our skill set,” co-founder Diogo Monica tells me.

Today, Anchorage is coming out of stealth and launching its cryptocurrency custody service to the public. Anchorage holds and safeguards crypto assets for institutions like hedge funds and venture firms, and only allows transactions verified by an array of biometrics, behavioral analysis and human reviewers. And because it doesn’t use “buried in the backyard” cold storage, asset holders can actually earn rewards and advantages for participating in coin-holder votes without fear of getting their Bitcoin, Ethereum or other coins stolen.

The result is a crypto custody service that could finally lure big-time commercial banks, endowments, pensions, mutual funds and hedgies into the blockchain world. Whether they seek short-term gains off of crypto volatility or want to HODL long-term while participating in coin governance, Anchorage promises to protect them.

Evolving past “pirate security”

Anchorage’s story starts eight years ago when Monica and his co-founder Nathan McCauley met after joining Square the same week. Monica had been getting a PhD in distributed systems while McCauley designed anti-reverse engineering tech to keep U.S. military data from being extracted from abandoned tanks or jets. After four years of building systems that would eventually move more than $80 billion per year in credit card transactions, they packaged themselves as a “pre-product acqui-hire” Monica tells me, and they were snapped up by Docker.

As their reputation grew from work and conference keynotes, cryptocurrency funds started reaching out for help with custody of their private keys. One had lost a passphrase and the $1 million in currency it was protecting in a display of jaw-dropping ignorance. The pair realized there were no true standards in crypto custody, so they got to work on Anchorage.

“You look at the status quo and it was and still is cold storage. It’s the same technology used by pirates in the 1700s,” Monica explains. “You bury your crypto in a treasure chest and then you make a treasure map of where those gold coins are,” except with USB keys, security deposit boxes and checklists. “We started calling it Pirate Custody.” Anchorage set out to develop something better — a replacement for usernames and passwords or even phone numbers and two-factor authentication that could be misplaced or hijacked.

This led them to Andreessen Horowitz partner and a16z crypto leader Chris Dixon, who’s now on their board. “We’ve been buying crypto assets running back to Bitcoin for years now here at a16z crypto. [Once you’re holding crypto,] it’s hard to do it in a way that’s secure, regulatory compliant, and lets you access it. We felt this pain point directly.”

Andreessen Horowitz partner and Anchorage board member Chris Dixon

It’s at this point in the conversation when Monica and McCauley give me their off-the-record demo. While there are no screenshots to share, the enterprise security suite they’ve built has the polish of a consumer app like Robinhood. What I can say is that Anchorage works with clients to whitelist employees’ devices. It then uses multiple types of biometric signals and behavioral analytics about the person and device trying to log in to verify their identity.

But even once they have access, Anchorage is built around quorum-based approvals. Withdrawals, other transactions and even changing employee permissions requires approval from multiple users inside the client company. They could set up Anchorage so it requires five of seven executives’ approval to pull out assets. And finally, outlier detection algorithms and a human review the transaction to make sure it looks legit. A hacker or rogue employee can’t steal the funds even if they’re logged in because they need consensus of approval.

That kind of assurance means institutional investors can confidently start to invest in crypto assets. That swell of capital could help replace the retreating consumer investors who’ve fled the market this year, leading to massive price drops. The liquidity provided by these asset managers could keep the whole blockchain industry moving. “Institutional investing has had centuries to build up a set of market infrastructure. Custody was something that for other asset classes was solved hundreds of years ago, so it’s just now catching up [for crypto],” says McCauley. “We’re creating a bigger market in and of itself,” Monica adds.

With Anchorage steadfastly handling custody, the risk these co-founders admit worries them lies in the smart contracts that govern the cryptocurrencies themselves. “We need to be extremely wide in our level of support and extremely deep because each blockchain has details of implementation. This is inherently a very difficult problem,” McCauley explains. It doesn’t matter if the coins are safe in Anchorage’s custody if a janky smart contract can botch their transfer.

There are plenty of startups vying to offer crypto custody, ranging from Bitgo and Ledger to well-known names like Coinbase and Gemini. Yet Anchorage offers a rare combination of institutional-since-day-one security rigor with the ability to participate in votes and governance of crypto assets that’s impossible if they’re in cold storage. Down the line, Anchorage hints that it might serve clients recommendations for how to vote to maximize their yield and preserve the sanctity of their coin.

They’ll have crypto investment legend Chris Dixon on their board to guide them. “What you’ll see is in the same way that institutional investors want to buy stock in Facebook and Google and Netflix, they’ll want to buy the equivalent in the world 10 years from now and do that safely,” Dixon tells me. “Anchorage will be that layer for them.”

But why do the Anchorage founders care so much about the problem? McCauley concludes that, “When we look at what’s potentially possible with crypto, there a fundamentally more accessible economy. We view ourselves as a key component of bringing that future forward.”

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Startups Weekly: Squad’s screen-shares and Slack’s swastika

We’re three weeks into January. We’ve recovered from our CES hangover and, hopefully, from the CES flu. We’ve started writing the correct year, 2019, not 2018.

Venture capitalists have gone full steam ahead with fundraising efforts, several startups have closed multi-hundred million dollar rounds, a virtual influencer raised equity funding and yet, all anyone wants to talk about is Slack’s new logo… As part of its public listing prep, Slack announced some changes to its branding this week, including a vaguely different looking logo. Considering the flack the $7 billion startup received instantaneously and accusations that the negative space in the logo resembled a swastika — Slack would’ve been better off leaving its original logo alone; alas…

On to more important matters.

Rubrik more than doubled its valuation

The data management startup raised a $261 million Series E funding at a $3.3 billion valuation, an increase from the $1.3 billion valuation it garnered with a previous round. In true unicorn form, Rubrik’s CEO told TechCrunch’s Ingrid Lunden it’s intentionally unprofitable: “Our goal is to build a long-term, iconic company, and so we want to become profitable but not at the cost of growth,” he said. “We are leading this market transformation while it continues to grow.”

Deal of the week: Knock gets $400M to take on Opendoor

Will 2019 be a banner year for real estate tech investment? As $4.65 billion was funneled into the space in 2018 across more than 350 deals and with high-flying startups attracting investors (Compass, Opendoor, Knock), the excitement is poised to continue. This week, Knock brought in $400 million at an undisclosed valuation to accelerate its national expansion. “We are trying to make it as easy to trade in your house as it is to trade in your car,” Knock CEO Sean Black told me.

Cybersecurity stays hot

While we’re on the subject of VCs’ favorite industries, TechCrunch cybersecurity reporter Zack Whittaker highlights some new data on venture investment in the industry. Strategic Cyber Ventures says more than $5.3 billion was funneled into companies focused on protecting networks, systems and data across the world, despite fewer deals done during the year. We can thank Tanium, CrowdStrike and Anchorfree’s massive deals for a good chunk of that activity.

Send me tips, suggestions and more to kate.clark@techcrunch.com or @KateClarkTweets

Fundraising efforts continue

I would be remiss not to highlight a slew of venture firms that made public their intent to raise new funds this week. Peter Thiel’s Valar Ventures filed to raise $350 million across two new funds and Redpoint Ventures set a $400 million target for two new China-focused funds. Meanwhile, Resolute Ventures closed on $75 million for its fourth early-stage fund, BlueRun Ventures nabbed $130 million for its sixth effort, Maverick Ventures announced a $382 million evergreen fund, First Round Capital introduced a new pre-seed fund that will target recent graduates, Techstars decided to double down on its corporate connections with the launch of a new venture studio and, last but not least, Lance Armstrong wrote his very first check as a VC out of his new fund, Next Ventures.

More money goes toward scooters

In case you were concerned there wasn’t enough VC investment in electric scooter startups, worry no more! Flash, a Berlin-based micro-mobility company, emerged from stealth this week with a whopping €55 million in Series A funding. Flash is already operating in Switzerland and Portugal, with plans to launch into France, Italy and Spain in 2019. Bird and Lime are in the process of raising $700 million between them, too, indicating the scooter funding extravaganza of 2018 will extend into 2019 — oh boy!

Startups secure cash

  • Niantic finally closed its Series C with $245 million in capital commitments and a lofty $4 billion valuation.
  • Outdoorsy, which connects customers with underused RVs, raised $50 million in Series C funding led by Greenspring Associates, with participation from Aviva Ventures, Altos Ventures, AutoTech Ventures and Tandem Capital.
  • Ciitizen, a developer of tools to help cancer patients organize and share their medical records, has raised $17 million in new funding in a round led by Andreessen Horowitz.
  • Footwear startup Birdies — no, I don’t mean Allbirds or Rothy’s — brought in an $8 million Series A led by Norwest Venture Partners, with participation from Slow Ventures and earlier investor Forerunner Ventures.
  • And Brud, the company behind the virtual celebrity Lil Miquela, is now worth $125 million with new funding.

Feature of the week

TechCrunch’s Josh Constine introduced readers to Squad this week, a screensharing app for social phone addicts.

Listen to me talk

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase editor-in-chief Alex Wilhelm and I marveled at the dollars going into scooter startups, discussed Slack’s upcoming direct listing and debated how the government shutdown might impact the IPO market.

Want more TechCrunch newsletters? Sign up here.

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Earnin raises $125M to help workers track and cash out wages in real time

Before Ram Palaniappan founded Earnin, he developed a system for employees at a payments company called UniRush, where he spent eight years as president. If you needed money before payday, he would write you a check from his checking account and when payday rolled around, employees would reimburse him.

Despite being paid what Palaniappan thought were fair wages, his workers often found themselves in a bind, needing access to wages they couldn’t expect to see in their own bank accounts for days.

“This is such a core pain point,” Palaniappan told TechCrunch. “Over three-fourths of the country live paycheck to paycheck … It’s an issue of fairness. We all have gotten used to getting paid every two weeks, but most employees would rather be paid before they work.”

Palaniappan decided to transform what he had been doing as a favor to employees into a real business with Earnin (formerly known as Activehours), a startup that helps hourly, gig and salary workers track their earnings and transfer them to their checking accounts in real time using a mobile application. Today, the company is announcing a $125 million Series C funding from top-tier investors DST Global, Andreessen Horowitz, Spark Capital, Matrix Partners, March Capital Partners, Coatue Management and Ribbit Capital. Palaniappan declined to disclose the valuation.

Earnin founder and chief executive officer Ram Palaniappan

Here’s how it works: An employee signs up on the Earnin app and connects their bank account. Earnin infers the person’s pay cycle and debits their account the amount they’ve borrowed on their payday. Earnin charges no fees or interest; instead, it operates on a pay it forward revenue model some would balk at. Earnin users have the option to “tip” the app after each transaction and that tip, in turn, is used to fund the next user’s withdrawal. If a user tips more than Earnin thinks is reasonable for the given withdrawal, it will notify the user and give them the option to dial back the tip amount.

What the company has found is that users are usually more than happy to contribute to the Earnin community of workers.

“So often, people are trying to help each other out,” Palaniappan said. “That’s the most powerful piece — how much support the community is providing to each other.”

Earnin was launched in 2014 and has previously raised $65 million in venture capital funding. With the latest investment, it will expand its engineering and product teams across its offices in Palo Alto — where it’s headquartered — as well as in Cincinnati and Vancouver.

The app, often among the App Store’s top 10 financial apps, has more than 1 million downloads, the company says, and is used by employees at more than 50,000 companies — many of which check the app every day. Palaniappan says its users are working more than 15 million hours per week. If each user works an estimated 40 hours per week, that means the app has roughly 375,000 weekly active users.

He added that the startup’s growth in the last four years has been “quite remarkable.” Given the investor support it’s received, it’s likely to step into “unicorn” territory soon. Ribbit Capital, for example, is a leading fintech investing firm with capital invested in Coinbase, Revolut, Gusto, Wealthfront, NuBank, Brex and more.

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Meet Jennifer Tejada, the secret weapon of one of Silicon Valley’s fastest-growing enterprise software startups

PagerDuty, an eight-year-old, San Francisco-based company that sends companies information about their technology, doesn’t receive a fraction of the press that other fast-growing enterprise software companies receive. In fact, though it counts as customers heavyweight companies like Capital One, Spotify and Netflix; it employs 500 employees; and it has five offices around the world, it has largely operated out of the spotlight.

That’s changing. For one thing, the company is now a so-called unicorn, after raising $90 million in a September round led by Wellington and T. Rowe Price that brought its total funding to $173 million and its valuation to $1.3 billion. Crowded as the unicorn club may be these days, that number, and those backers, makes PagerDuty a startup of interest to a broader circle of industry watchers.

Another reason you’re likely to start hearing more about PagerDuty is its CEO of three years, Jennifer Tejada, who is rare in the world of enterprise startups because of her gender, but whose marketing background makes her even more of an anomaly — and an asset.

In a world that’s going digital fast, Tejada knows PagerDuty can appeal to a far wider array of customers by selling them a product they can understand.

It’s a trick she first learned at Proctor & Gamble, where she spent seven years after graduating from the University of Michigan with both a liberal arts and a business management degree. In fact, in her first tech job out of P&G, working for the bubble-era supply chain management startup I2 Technologies (it went public and was later acquired), Tejada says she became “director of dumb it down.”

Sitting in PagerDuty’s expansive second floor office space in San Francisco — space that the company will soon double by taking over the first floor — Tejada recalls acting “like a filter for very technical people who were very proud of the IP they’d created” but who couldn’t explain it to anyone without relying on jargon. “I was like, ‘How are you going to get someone to pay you $2 million for that?’”

Tejada found herself increasingly distilling the tech into plain English, so the businesspeople who have to sign big checks and “bet their careers on these investments” could understand what they were being pitched. She’s instilling that same ethos at PagerDuty, which was founded in 2009 to help businesses monitor their tech stacks, manage disruptions and alert engineers before things catch on fire but, under Tejada’s watch, is evolving into a service that flags opportunities for its customers, too.

As she tells it, the company’s technology doesn’t just give customers insights into their service ecosystem and their teams’ health, and it doesn’t just find other useful kernels, like about which operations teams are the most productive and why. PagerDuty is also helping its clients become proactive. The idea, she says, is that “if you see traffic spiking on a website, you can orchestrate a team of content marketers or growth hackers and get them in that traffic stream right then, instead of reading about it in a demand-gen report a week later, where you’re, like, ‘Great, we totally missed that opportunity.’”

The example is a bit analogous to what Tejada herself brings to the table, which includes strong people skills (she’s very funny) and a knack for understanding what consumers want to hear, but also a deep understanding of finance and enterprise software.

As corny as it sounds, Tejada seems to have been working toward her current career her whole life.

Not that, like the rest of us, she knew exactly what she was doing at all times. On the contrary, one part of her path started when, after spending four years as the VP of global marketing for I2 — four years during which the dot-com bubble expanded wildly, then popped — Tejada quit her job, went home for the holidays and, while her baffled family looked on, booked a round-trip ticket to Australia to get away and learn about yachts.

She left the experience not only with her skipper certification but in a relationship with her now-husband of 16 years, an Australian with whom she settled in Sydney for roughly 12 years.

There, she worked for a private equity firm, then joined Telecom New Zealand as its chief marketing officer for a couple of years, then landed soon after at an enterprise software company that catered to asset-intensive industries, including mining, as its chief strategy officer. When that private-equity backed company was sold, Tejada took a breath, then was recruited to lead, for the first time, another company: Keynote Systems, a publicly traded internet and mobile cloud testing and monitoring company that she steered to a sale to the private equity firm Thomas Bravo a couple of years later.

The move gave her an opportunity to spend time with her now teenage daughter and husband, but she also didn’t have a job for the first time in many years, and Tejada seems to like work. Indeed, within one year, after talking with investors who’d gotten to know her over her various roles, as well as eager recruiters, Tejada —  who says she is “not a founder but a great adoptive parent” — settled on the 50th of 51 companies she was asked to consider joining. It was PagerDuty.

She has been overseeing wild growth ever since. The company now counts more than half of the Fortune 50 as its customers. It has also doubled its headcount a couple of times since she joined roughly 28 months ago, and many of its employees (upwards of 43 percent) are now women, as well as engineers from more diverse backgrounds than you might see at a typical Silicon Valley startup.

That’s no accident. Diversity breeds diversity, in Tejada’s view, and diversity is good for business.

“I wouldn’t say we market to women,” says Tejada, explaining that diversity to her is not just about gender but also age and ethnic background and lifestyle choice and location and upbringing and expertise.

“We’ve made a conscious effort to build an inclusive culture where all kinds of people want to work. And you send that message out into the market, there’s a lot of people who hear it and wonder if it could possibly be true. And then they come to a PagerDuty event, or they come into the office, and they see something different than they’ve seen before. They see people they can relate to.”

Why does it matter when it comes to writing code? Because a big part of coding is problem-solving for one thing, says Tejada. “When you have people from diverse backgrounds chunking through a big hairy problem together, those different perspectives will get you to a more insightful answer.” Tejada also believes there’s too much bias in application development and user experience. “There’s a lot of gobbledygook in our app that lots of developers totally understand but that isn’t accessible to everyone — men, women, different functional types of users, people of a different age. Like, how accessible is our mobile app to someone who’s not a native-first mobile user, who started out on an analog phone, moved to a giant desktop, then to a laptop and is now using a smartphone? You have to think about the accessibility of your design in that regard, too.”

What about the design of PagerDuty’s funding? Before parting ways, we ask Tejada about the money PagerDuty raised a couple of months ago, and what it means for the company.

Unsurprisingly, as to whether the company plans to go public any time soon, her answers are variously, “I’m just building an enduring company,” and, “We’re still enjoying the benefits of being a private company.”

But Tejada also seems mindful of not raising far more money for PagerDuty than it needs to scale, even while there’s an ocean of capital surrounding it.

“Going back to the early ’90s, in my career I have not seen a market where there has been more ready availability to capital, between tax reforms and sovereign cash and big corporates and low interest rates and huge venture funds, not to mention the increased willingness of big institutional investors to become LPs.” But even while the “underlying drivers and secular trends and leading indicators” suggest a healthy market for SaaS technology for a long time to come, that “doesn’t mean the labor markets are going to stay the same. It doesn’t mean the geopolitical environments are not going to change. When you let the scarcity issue in the market drive your valuation, you’re also responsible for growing into that valuation, no matter what happens in the macro environment.”

Where Tejada doesn’t necessarily want to be so measured is when it comes to PagerDuty’s place in its market.

And that can be challenging as the company gains more traction — and more attention.

“If you do the right thing for your customers, and you do the right thing by your employees, all the rest will fall into place,” she says. “But the minute you take your eye off the ball, the minute you don’t earn the trust of your customer every day, the minute you stop innovating in service of them, you’re gonna start going backwards,” she says with a shrug.

Tejada recalls a conversation she had with her executive team last week, including with Alex Solomon, the company’s CTO and the one of three PagerDuty founders who remains actively engaged with the company. (Co-founder Andrew Miklas moved on to venture capital last year; Baskar Puvanathasan meanwhile left the company in March.) “They probably wanted to kill me,” she says laughing. “I told them I don’t think we’re disrupting ourselves enough. They’re like, ‘Jenn, let up.’ But that’s what happens to companies. They have their first success and they miss that second wave or third wave, and the next thing you know, you’re Kodak.”

PagerDuty, she says, “is not going to be Kodak.”

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With $300M in new funding, Devoted Health launches its Medicare Advantage plan in Florida

Devoted Health, a Waltham, Mass.-based insurance startup, has raised a $300 million Series B and is enrolling to its Medicare Advantage plan members in eight Florida counties.

The company, which helps Medicare beneficiaries access care through its network of physicians and tech-enabled healthcare platform, has raised the funds from lead investor Andreessen Horowitz, Premji Invest and Uprising.

The company declined to disclose its valuation.

Devoted’s founders are brothers Todd and Ed Park — the company’s executive chairman and chief executive officer, respectively. Todd co-founded a pair of now publicly traded companies, Athenahealth, a provider of electronic health record systems, and health benefits platform Castlight Health. He also served as the U.S. chief technology officer during the Obama administration. Ed, for his part, was the chief operating officer of Athenahealth until 2016 and a member of Castlight’s board of directors for several years.

Venrock partners Bryan Roberts — Devoted’s founding investor — and Bob Kocher — its chief medical officer — are also part of the company’s founding team.

The Park brothers have tapped Jeremy Delinsky, the former CTO at Wayfair and Athenahealth, as COO; DJ Patil, a former data scientist at the White House, as its head of technology; and Adam Thackery, the former CFO of Universal American, as its chief financial officer.

Its board includes former Health and Human Services Secretary Kathleen Sebelius and former Senate Majority Leader Bill Frist. As part of the latest round, a16z’s Vijay Pande will join its board, too.

The company says it’s committed to treating its customers as if they were members of its employees’ own families. For Patil, the startup’s head of tech, that’s made the entire process of building Devoted a very emotional one.

“I’ve cried a lot at this company,” Patil told TechCrunch. “You meet these seniors and they’ve done everything right. They’ve worked so incredibly hard their entire lives. They’ve given it their all for the American dream. They’ve paid into this model of healthcare and they deserve better.”

Devoted, which previously raised $69 million across two financing rounds in 2017 from Oak HC/FT, Venrock, F-Prime Capital Partners, Maverick Ventures and Obvious Ventures, has begun enrolling to its Medicare Advantage plan seniors located in Broward, Hillsborough, Miami-Dade, Osceola, Palm Beach, Pinellas, Polk and Seminole counties. It will begin providing care January 1, 2019.

Its long-term goal is to offer insurance plans to seniors nationwide.

“We are responsible for these people’s healthcare, so we need to get it right,” Patil said.

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