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Pitching a $99 tax advisory service for the masses, Visor has raised $9 million
The only sure things in this life, according to Ben Franklin, are death and taxes. And a new startup called Visor has just raised $9 million in financing to make one of them as painless as possible.
Unlike Nectome, Visor won’t kill anyone, but it may ring the death knell for the high-end tax advisors that most Americans can’t even access to get help filing and paying their taxes. It’s like having a personalized accountant for the cost of a high-end do-it-yourself tax-prep service.
The $9 million Visor raised came from the venture capital firm Defy, with participation from Unusual Ventures, SVB Capital and existing investors like Obvious Ventures, Fika Ventures and Boxgroup, which had put a previous $6.5 million into the company.
The idea for the company had been percolating for co-founder and chief executive Gernot Zacke since he settled in the U.S.
Growing up in Sweden, Zacke was exposed to a much different process for paying taxes. “The experience of filing taxes in Sweden is that you receive a message from the government that stated how much you made and how much you were withholding. That’s it,” said Zacke. “Taxes should be as easy as ordering a cab.”
That’s the service that Visor aims to provide.
“If you think about the market there are two ways to get your taxes done. There’s the DIY space and then there are other online services but it requires the tax payer to fill out the forms and it leaves the tax payer with a little bit of anxiety,” said Zacke. “We’re delivering the CPA experience through the convenience of a web app and a mobile app.”
On average, Americans spend about 13 hours each year dealing with taxes, and the average American doesn’t have the benefits of a professional advisor who can help optimize the process. That’s what Visor wants to provide.
“You provide the same amount of information you provide to a CPA or TurboTax… we make sure that that information is filed securely on AWS and shared between the docs and the backend,” said Zacke.
The target customers for Zacke’s services are folks who have had a change to their tax situation — whether moving, buying a home or any other life event; or folks who have had a CPA and don’t want to pay the higher fees, he said.
Visor currently has an operations team of around 34 people split between San Francisco and Atlanta.
For Zacke, the pain point he’s solving with the Visor service is very real. A former employee of the European investment firm Atomico, Zacke bounced between the U.S. and Europe — eventually running U.S. investments for the firm before leaving to launch Visor.
Other co-founders and senior executives hail from the tax advisory world, and from employee benefits outsourcing services company Zenefits, along with former Venmo and Square developers.
“Taxpayers spend $20 billion a year to get their taxes prepared and are stuck between spending hours filling out DIY tax software and hiring an expensive CPA,” said Zacke, in a statement. “
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Atlassian launches the new Jira Software Cloud
Atlassian previewed the next generation of its hosted Jira Software project tracking tool earlier this year. Today, it’s available to all Jira users. To build the new Jira, Atlassian redesigned both the back-end stack and rethought the user experience from the ground up. That’s not an easy change, given how important Jira has become for virtually every company that develops software — and given that it is Atlassian’s flagship product. And with this launch, Atlassian is now essentially splitting the hosted version of Jira (which is hosted on AWS) from the self-hosted server version and prioritizing different features for both.
So the new version of Jira that’s launching to all users today doesn’t just have a new, cleaner look, but more importantly, new functionality that allows for a more flexible workflow that’s less dependent on admins and gives more autonomy to teams (assuming the admins don’t turn those features off).
Because changes to such a popular tool are always going to upset at least some users, it’s worth noting at the outset that the old classic view isn’t going away. “It’s important to note that the next-gen experience will not replace our classic experience, which millions of users are happily using,” Jake Brereton, head of marketing for Jira Software Cloud, told me. “The next-gen experience and the associated project type will be available in addition to the classic projects that users have always had access to. We have no plans to remove or sunset any of the classic functionality in Jira Cloud.”
The core tenet of the redesign is that software development in 2018 is very different from the way developers worked in 2002, when Jira first launched. Interestingly enough, the acquisition of Trello also helped guide the overall design of the new Jira.
“One of the key things that guided our strategy is really bringing the simplicity of Trello and the power of Jira together,” Sean Regan, Atlassian’s head of growth for Software Teams, told me. “One of the reasons for that is that modern software development teams aren’t just developers down the hall taking requirements. In the best companies, they’re embedded with the business, where you have analysts, marketing, designers, product developers, product managers — all working together as a squad or a triad. So JIRA, it has to be simple enough for those teams to function but it has to be powerful enough to run a complex software development process.”
Unsurprisingly, the influence of Trello is most apparent in the Jira boards, where you can now drag and drop cards, add new columns with a few clicks and easily filter cards based on your current needs (without having to learn Jira’s powerful but arcane query language). Gone are the days where you had to dig into the configuration to make even the simplest of changes to a board.
As Regan noted, when Jira was first built, it was built with a single team in mind. Today, there’s a mix of teams from different departments that use it. So while a singular permissions model for all of Jira worked for one team, it doesn’t make sense anymore when the whole company uses the product. In the new Jira then, the permissions model is project-based. “So if we wanted to start a team right now and build a product, we could design our board, customize our own issues, build our own workflows — and we could do it without having to find the IT guy down the hall,” he noted.
One feature the team seems to be especially proud of is roadmaps. That’s a new feature in Jira that makes it easier for teams to see the big picture. Like with boards, it’s easy enough to change the roadmap by just dragging the different larger chunks of work (or “epics,” in Agile parlance) to a new date.
“It’s a really simple roadmap,” Brereton explained. “It’s that way by design. But the problem we’re really trying to solve here is, is to bring in any stakeholder in the business and give them one view where they can come in at any time and know that what they’re looking at is up to date. Because it’s tied to your real work, you know that what we’re looking at is up to date, which seems like a small thing, but it’s a huge thing in terms of changing the way these teams work for the positive.“
The Atlassian team also redesigned what’s maybe the most-viewed page of the service: the Jira issue. Now, issues can have attachments of any file type, for example, making it easier to work with screenshots or files from designers.
Jira now also features a number of new APIs for integrations with Bitbucket and GitHub (which launched earlier this month), as well as InVision, Slack, Gmail and Facebook for Work.
With this update, Atlassian is also increasing the user limit to 5,000 seats, and Jira now features compliance with three different ISO certifications and SOC 2 Type II.
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Building a great startup requires more than genius and a great invention
Shahin Farshchi
Contributor
Contributor
Shahin Farshchi is a partner at Lux Capital.
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Many entrepreneurs assume that an invention carries intrinsic value, but that assumption is a fallacy.
Here, the examples of the 19th and 20th century inventors Thomas Edison and Nikola Tesla are instructive. Even as aspiring entrepreneurs and inventors lionize Edison for his myriad inventions and business acumen, they conveniently fail to recognize Tesla, despite having far greater contributions to how we generate, move and harness power. Edison is the exception, with the legendary penniless Tesla as the norm.
Universities are the epicenter of pure innovation research. But the reality is that academic research is supported by tax dollars. The zero-sum game of attracting government funding is mastered by selling two concepts: Technical merit, and broader impact toward benefiting society as a whole. These concepts are usually at odds with building a company, which succeeds only by generating and maintaining competitive advantage through barriers to entry.
In rare cases, the transition from intellectual merit to barrier to entry is successful. In most cases, the technology, though cool, doesn’t give a fledgling company the competitive advantage it needs to exist among incumbents and inevitable copycats. Academics, having emphasized technical merit and broader impact to attract support for their research, often fail to solve for competitive advantage, thereby creating great technology in search of a business application.
Of course there are exceptions: Time and time again, whether it’s driven by hype or perceived existential threat, big incumbents will be quick to buy companies purely for technology. Cruise/GM (autonomous cars), DeepMind/Google (AI) and Nervana/Intel (AI chips). But as we move from 0-1 to 1-N in a given field, success is determined by winning talent over winning technology. Technology becomes less interesting; the onus is on the startup to build a real business.
If a startup chooses to take venture capital, it not only needs to build a real business, but one that will be valued in the billions. The question becomes how a startup can create a durable, attractive business, with a transient, short-lived technological advantage.
Most investors understand this stark reality. Unfortunately, while dabbling in technologies which appeared like magic to them during the cleantech boom, many investors were lured back into the innovation fallacy, believing that pure technological advancement would equal value creation. Many of them re-learned this lesson the hard way. As frontier technologies are attracting broader attention, I believe many are falling back into the innovation trap.
So what should aspiring frontier inventors solve for as they seek to invest capital to translate pure discovery to building billion-dollar companies? How can the technology be cast into an unfair advantage that will yield big margins and growth that underpin billion-dollar businesses?
Talent productivity: In this age of automation, human talent is scarce, and there is incredible value attributed to retaining and maximizing human creativity. Leading companies seek to gain an advantage by attracting the very best talent. If your technology can help you make more scarce talent more productive, or help your customers become more productive, then you are creating an unfair advantage internally, while establishing yourself as the de facto product for your customers.
Great companies such as Tesla and Google have built tools for their own scarce talent, and build products their customers, in their own ways, can’t do without. Microsoft mastered this with its Office products in the 1990s through innovation and acquisition, Autodesk with its creativity tools, and Amazon with its AWS Suite. Supercharging talent yields one of the most valuable sources of competitive advantage: switchover cost. When teams are empowered with tools they love, they will loathe the notion of migrating to shiny new objects, and stick to what helps them achieve their maximum potential.
Marketing and distribution efficiency: Companies are worth the markets they serve. They are valued for their audience and reach. Even if their products in of themselves don’t unlock the entire value of the market they serve, they will be valued for their potential to, at some point in the future, be able to sell to the customers that have been tee’d up with their brands. AOL leveraged cheap CD-ROMs and the postal system to get families online, and on email.
Dollar Shave Club leveraged social media and an otherwise abandoned demographic to lock down a sales channel that was ultimately valued at a billion dollars. The inventions in these examples were in how efficiently these companies built and accessed markets, which ultimately made them incredibly valuable.
Network effects: Its power has ultimately led to its abuse in startup fundraising pitches. LinkedIn, Facebook, Twitter and Instagram generate their network effects through internet and Mobile. Most marketplace companies need to undergo the arduous, expensive process of attracting vendors and customers. Uber identified macro trends (e.g. urban living) and leveraged technology (GPS in cheap smartphones) to yield massive growth in building up supply (drivers) and demand (riders).
Our portfolio company Zoox will benefit from every car benefiting from edge cases every vehicle encounters: akin to the driving population immediately learning from special situations any individual driver encounters. Startups should think about how their inventions can enable network effects where none existed, so that they are able to achieve massive scale and barriers by the time competitors inevitably get access to the same technology.
Offering an end-to-end solution: There isn’t intrinsic value in a piece of technology; it’s offering a complete solution that delivers on an unmet need deep-pocketed customers are begging for. Does your invention, when coupled to a few other products, yield a solution that’s worth far more than the sum of its parts? For example, are you selling a chip, along with design environments, sample neural network frameworks and data sets, that will empower your customers to deliver magical products? Or, in contrast, does it make more sense to offer standard chips, licensing software or tag data?
If the answer is to offer components of the solution, then prepare to enter a commodity, margin-eroding, race-to-the-bottom business. The former, “vertical” approach is characteristic of more nascent technologies, such as operating robots-taxis, quantum computing and launching small payloads into space. As the technology matures and becomes more modular, vendors can sell standard components into standard supply chains, but face the pressure of commoditization.
A simple example is personal computers, where Intel and Microsoft attracted outsized margins while other vendors of disk drives, motherboards, printers and memory faced crushing downward pricing pressure. As technology matures, the earlier vertical players must differentiate with their brands, reach to customers and differentiated product, while leveraging what’s likely going to be an endless number of vendors providing technology into their supply chains.
A magical new technology does not go far beyond the resumes of the founding team.
What gets me excited is how the team will leverage the innovation, and attract more amazing people to establish a dominant position in a market that doesn’t yet exist. Is this team and technology the kernel of a virtuous cycle that will punch above its weight to attract more money, more talent and be recognized for more than it’s product?
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Humbition is a new fund led by the Indiegogo’s Slava Rubin
Zocdoc founder Cyrus Massoumi and Indiegogo founder Slava Rubin have created a new $30 million fund called Humbition aimed at early stage, founder-led companies in New York.
“The fund is focused on connecting startups with investors and advisors experienced in building and growing successful businesses,” said Rubin.
“We are seeking to fill a void in NYC, where the vast majority of early stage investors have no significant experience building and scaling businesses,” he said. “The fund’s main areas of investment include marketplaces, consumer and health tech. But the primary criteria for investments is high quality founders. The fund is also seeking out mission-driven businesses because the companies that are socially responsible will be the most successful in the coming decades.”
The fund has brought on ClassPass founder Payal Kadakia, Warby Parker founder Neil Blumenthal, Charity: Water CEO and founder Scott Harrison, and Casper founder and CEO Philip Krim as advisors. They have already invested some of the $30 million raise in Burrow, a couch-on-demand service.
“New York City is home to a tremendous number of mission-driven startups that are simply not receiving the same level of support as their peers in the Bay Area. This void presents a unique opportunity for humbition to reach the incredible local talent who need the funding and guidance to build and grow their businesses in New York City,” said Rubin.
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Meet the startups in the latest Alchemist class
Alchemist is the Valley’s premiere enterprise accelerator and every season they feature a group of promising startups. They are also trying something new this year: they’re putting a reserve button next to each company, allowing angels to express their interest in investing immediately. It’s a clever addition to the demo day model.
You can watch the live stream at 3pm PST here.
Videoflow – Videoflow allows broadcasters to personalize live TV. The founding team is a duo of brothers — one from the creative side of TV as a designer, the other a computer scientist. Their SaaS product delivers personalized and targeted content on top of live video streams to viewers. Completely bootstrapped to date, they’ve landed NBC, ABC, and CBS Sports as paying customers and appear to be growing fast, having booked over $300k in revenue this year.
Redbird Health Tech – Redbird is a lab-in-a-box for convenient health monitoring in emerging market pharmacies, starting with Africa. Africa has the fastest growing middle class in the world — but also the fastest growing rate of diabetes (double North America’s). Redbird supplies local pharmacies with software and rapid tests to transform them into health monitoring points – for anything from blood sugar to malaria to cholesterol. The founding team includes a Princeton Chemical Engineer, 2 Peace Corps alums, and a Pharmacist from Ghana’s top engineering school. They have 20 customers, and are growing 36% week over week.
Shuttle – Shuttle is getting a head start on the future of space travel by building a commercial spaceflight booking platform. Space tourism may be coming sooner than you think. Shuttle wants to democratize access to the heavens above. Founded by a Stanford Computer Science alum active in Stanford’s Student Space Society, Shuttle has partnerships with the leading spaceflight operators, including Virgin Galactic, Space Adventures, and Zero-G. Tickets to space today will set you back a cool $250K, but Shuttle believes that prices will drop exponentially as reusable rockets and landing pads become pervasive. They have $1.6m in reservations and growing.
Birdnest – Threading the needle between communal and private, Birdnest is the Goldilocks of office space for startups. Communal coworking spaces are accessible but have too many distractions. Traditional office spaces are private but inflexible on their terms. Birdnest brings the best of each without the drawbacks: finding, leasing, and operating a network of underutilized spaces inside of private offices. The cofounders, a duo of Duke and Kellogg MBA grads, are at $300K ARR with a fast-growing 50+ client waitlist.
Tag.bio – Tag.bio wants to make data science actionable in healthtech. The founding team is comprised of a former Ayasdi bioinformatician and a former Honda Racing engineer with a Stanford MBA. They’ve developed a next-generation data science platform that makes it easy and fast to build data apps for end users, or as they say, “WordPress for data science.” The result they claim is lightning-fast analysis apps that can be run by end users, dramatically accelerating insight discovery. They count the UCSF Medical Center and a “large Swiss pharma company” as early customers.
nCorium – They’ve built a new server architecture to handle the onslaught of AI to come with what they claim is the world’s first AI accelerator on memory to deliver 30x greater performance than the status quo. The quad founding team is intimidatingly technical — including a UCSD Professor, and former engineers from Qualcomm and Intel with 40 patents among them. They have $300K in pilots.
Spiio – Software eats landscaping with Spiio, which combines cloud-driven AI with physical sensors to monitor watering and landscaping for big companies. Their smart system knows when to water and when not to. This reduces water consumption by 50%, which means their system pays for itself in less than 30 days for big companies. They want to connect every plant to the internet, and look like they are off to a good start — $100K in orders from brand name Valley tech firms, and they are doubling monthly.
Element42 – Fraud is a major problem — For example, if you buy a Rolex on eBay, you run the risk of winding up with a counterfeit. Started by ex-VPs from Citibank, the founders are using risk models and technologies that banks use to help brands combat fraud and counterfeiting. Designed with token economics, they also incentivize customers to buy genuine products by serving exclusive content and promotions only to genuine product holders. Built on blockchain at the core, they claim to be the world’s first peer-to-peer authentication platform for physical assets. They have 45 customers across two industry verticals, 800K in ARR and are a member of World Economic Forum’s global initiatives against corruption.
My90 – Distrust between the public and the police has rarely been more strained than it is today. My90 wants to solve that by collecting data about interactions between the police and the public—think traffic stops, service calls, etc.—and turn these into actionable intelligence via an online analytics dashboard. Users text My90 anonymously about their interactions, and My90’s dashboard analyzes the results using natural language processing. Customers include major city police departments like the San Jose Police Department and the world’s largest community policing program. They have booked $150K in pilots and are expanding aggressively across the US.
Nunetz – A Stanford Computer Science grad and UCSF Neurosurgeon have come together to try to build a single unifying interface to replace the deluge of monitors and data sources in today’s clinical health environment. The goal is to prepare a daily “battle map” for physicians, nurses, and other providers, with an initial focus on the Intensive Care Unit (ICU). They have closed 3 paid pilots with hospitals through grants.
When Labs – If you hate managing people, When Labs wants to unburden you. Using an AI-powered assistant that texts with employees to negotiate assignments for hourly work, WhenLabs is trying to free customers like Hilton from spending money on managers who would normally do this manually. As the system gets smarter, they claim employees will prefer interfacing with their AI bot more than a human. AI and HR is a crowded space, but this might be the team to separate from the pack: the founding team’s previous company had a 9 figure exit to IBM.
FirstCut – FirstCut helps businesses put video content out at scale. Video dominates social media — it creates 10x more comments than text — and is emerging as a necessity for B2B media. But putting video out if you are a B2B marketer normally requires using agencies that charge hefty fees. FirstCut wants to disrupt the agencies with software and marketplaces. They use software automation and an on-demand talent marketplace to offer a fixed price product for video content. They are at $180k revenue, and most of it is moving to recurring subscriptions.
LynxCare – LynxCare claims that 90% of healthcare data goes untapped when doctors make critical decisions about your life. Further, they claim the average person’s life could be extended by 4 years if that data can be converted into insights. Their team of clinicians and data scientists aims to do just that — building a data platform that aggregates disparate data sets and drive insight for better clinical outcomes. And it looks like their platform has fans: they are active in 9 hospitals, count Pharma companies like Pfizer as Partners, and grew 4x over the past year and now are at $800K ARR.
ADIAN – Adian is a B2B SaaS product that digitizes the complex agrochemical supply chain in order to improve the sales process between manufacturers and distributors. The company claims manufacturers reduce costs by 20% and increase sales by 4% by using their online framework. $1.5 Billion and 70,000 orders have gone through the platform to date.
Hardin Scientific – Hardin is building IoT-enabled, Smart Lab Equipment. The hardware becomes a gateway to become the hub for monitoring, controlling, and sharing scientific data across teams. They’ve closed over $1.5m in revenue, and raised $15m in equity and debt financing. One of their smart devices is being used to 3D print bio-tissues and human organs in space.
ZaiNar – This team of 5 Stanford grads — 3 PhD’s and 2 MBAs — joined up with the Co-Founder of BlueKai to build the world’s best time synchronization technology. ZaiNar claims their ability to wirelessly synchronize and distribute time between networked devices is a thousand times better than existing technologies. This enables them to locate RF-emitting devices (i.e. phones, cars, drones, & RFID) at long distances with sub-meter accuracy. Beyond location, this technology has applications across data transmission, 5G communications, and energy grids. ZaiNar has raised a $1.7 million seed from AME Cloud and Softbank, and has built an extensive patent portfolio.
SMART Brain Aging – This startup claims to reduce the onset of dementia by 2.25 years with software. They are the only company approved by Medicare to get reimbursed on a preventative basis for the treatment of dementia. In conjunction with Harvard University, they have developed 20,000 exercises that are clinically proven to reduce the onset of dementia and, they claim, help build neurotransmitters. The company works with 300 patients per week ($2.2 million annual revenue) and is building to a goal of helping 22,000 people in 24 months.
Phoneic – Phoneic believes the data trapped in voice calls from cellphones is a gold mine waiting to be unleashed. Their app records and transcribes cell phones conversations, and the company has built an integration layer to enterprise AI and CRM systems that traditionally didn’t have access to voice data. The team is led by the co-founder of 3jam, one of the first group SMS and virtual number companies, which was acquired by Skype in 2011. He is keenly aware of the power of virality — and like Skype, the use of Phoneic spreads its adoption. The company has already raised $800,000 in seed funding.
Arkose Labs – Whether or not you think Russia interfered with the 2016 election, it’s no secret that bots are having significant impact on society. Arkose Labs wants to fight fraud, without adding friction to legit users. Most fraud prevention platforms today focus on gathering info from the user and providing a probability score that the traffic is good or bad. This leaves companies with a difficult decision where they may be blocking revenue generating users. Arkose has a different approach, and uses a bilateral approach that doesn’t force this tradeoff. They claim to be the only solution to offer a 100% SLA on fraud prevention. Big companies like Singapore Airlines and Electronic Arts are customers. USVP led a $6 million investment into the company.
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What happens when hackers steal your SIM? You learn to keep your crypto offline
A year ago I felt a panic that still reverberates in me today. Hackers swapped my T-Mobile SIM card without my approval and methodically shut down access to most of my accounts and began reaching out to my Facebook friends asking to borrow crypto. Their social engineering tactics, to be clear, were laughable but they could have been catastrophic if my friends were less savvy.
Flash forward a year and the same thing happened to me again – my LTE coverage winked out at about 9pm and it appeared that my phone was disconnected from the network. Panicked, I rushed to my computer to try to salvage everything I could before more damage occurred. It was a false alarm but my pulse went up and I broke out in a cold sweat. I had dealt with this once before and didn’t want to deal with it again.
Sadly, I probably will. And you will, too. The SIM card swap hack is still alive and well and points to one and only one solution: keeping your crypto (and almost your entire life) offline.
Trust No Carrier
Stories about massive SIM-based hacks are all over. Most recently a crypto PR rep and investor, Michael Terpin, lost $24 million to hackers who swapped his AT&T SIM. Terpin is suing the carrier for $224 million. This move, which could set a frightening precedent for carriers, accuses AT&T of “fraud and gross negligence.”
From Krebs:
Terpin alleges that on January 7, 2018, someone requested an unauthorized SIM swap on his AT&T account, causing his phone to go dead and sending all incoming texts and phone calls to a device the attackers controlled. Armed with that access, the intruders were able to reset credentials tied to his cryptocurrency accounts and siphon nearly $24 million worth of digital currencies.
While we can wonder in disbelief at a crypto investor who keeps his cash in an online wallet secured by text message, how many other services do we use that depend on emails or text messages, two vectors easily hackable by SIM spoofing attacks? How many of us would be resistant to the techniques that nabbed Terpin?
Another crypto owner, Namek Zu’bi, lost access to his Coinbase account after hackers swapped his SIM, logged into his account, and changed his email while attempting direct debits to his bank account.
“When the hackers took over my account they attempted direct debits into the account. But because I blocked my bank accounts before they could it seems there are bank chargebacks on that account. So Coinbase is essentially telling me sorry you can’t recover your account and we can’t help you but if you do want to use the account you owe $3K in bank chargebacks,” he said.
Now Zu’bi is facing a different issue: Coinbase is accusing him of being $3,000 in arrears and will not give him access to his account because he cannot reply from the hacker’s email.
“I tried to work with coinbase hotline who is supposed to help with this but they were clueless even after I told them that the hackerchanged email address on my original account and then created a new account with my email address. Since then I’ve been waiting for a ‘specialist’ to email me (was supposed to be 4 business days it’s been 8 days) and I’m still locked out of my account because Coinbase support can’t verify me,” he said.
It has been a frustrating ride.
“As an avid supporter and investor in crypto it baffles me how one of the market leaders who just supposedly launched institutional grade custody solutions can barely deal with a basic account take-over fraud,” Zu’bi said.
How do you protect yourself?
I’ve been using Trezor hardware wallets for a while, storing them in safe places outside of my home and maintaining a separate record of the seeds in another location. I have very little crypto but even for a fraction of a few BTC it just makes sense to practice safe storage. Ultimately, if you own crypto you are now your own bank. That you would trust anyone – including a fiat bank – to keep your digital currency safe is deeply delusional. Heck, I barely trust Trezor and they seem like the only solution for safe storage right now.
When I was first hacked I posted recommendations by crypto exchange Kraken. They are still applicable today:
Call your telco and:
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Set a passcode/PIN on your account
- Make sure it applies to ALL account changes
- Make sure it applies to all numbers on the account
- Ask them what happens if you forget the passcode
- Ask them what happens if you lose that too
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Institute a port freeze
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Institute a SIM lock
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Add a high-risk flag
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Close your online web-based management account
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Block future registration to online management system
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Hack yo’ self
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See what information they will leak
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See what account changes you can make
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They also recommend changing your telco email to something wildly inappropriate and using a burner phone or Google Voice number that is completely disconnected from your regular accounts as a sort of blind for your two factor texts and alerts.
Sadly, doing all of these things is quite difficult. Further, carriers don’t make it easy. In May a 27-year-old man named Paul Rosenzweig fell victim to a SIM-swapping hack even though he had SIM lock installed on his account. A rogue T-Mobile employee bypassed the security, resulting in the loss of a unique three character Twitter and Snapchat account.
Ultimately nothing is secure. The bottom line is simple: if you’re in crypto expect to be hacked and expect it to be painful and frustrating. What you do now – setting up real two-factory security, offloading your crypto onto physical hardware, making diligent backups, and protecting your keys – will make things far better for you in the long run. Ultimately, you don’t want to wake up one morning with your phone off and all of your crypto siphoned off into the pocket of a college kid like Joel Ortiz, a hacker who is now facing jail time for “13 counts of identity theft, 13 counts of hacking, and two counts of grand theft.” Sadly, none of the crypto he stole has surfaced after his arrest.
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What every startup founder should know about exits
The dream of a startup founder can often be summarized by the following well-intentioned, and mostly delusional, quote: “We’ll raise a few rounds and in a few years we’ll IPO on Nasdaq.”
But a more likely scenario looks something like this:
You invest a few years of hard work to build something of value. One day you receive an acquisition offer out of the blue. You’re elated. And you’re not prepared. You drop everything to focus on this opportunity. Exclusive due diligence starts. Your company is a mess (IP, contracts, burn). Days become weeks; weeks become months. You’ve neglected business and fundraising. You’re running out of money. M&A is now your one and only option. The buyer says they found a bunch of cockroaches in the walls and drops the price. Now what?
Sound unlikely?
This is still a favorable situation: You had an offer! Think about how much time you invested in your various funding rounds. The hundreds of names and Google spreadsheet or Streak-powered quasi-CRM process.
Have you spent even a fraction of that on understanding exit paths? If you’d rather not live the situation described above, read along.
The E-word: A strange taboo
Investors live by exits, but many founders keep dreaming of unicornization and avoid the “E-word” until it’s too late. Yet, in 2016, 97 percent of exits were M&As. And most happened before Series B.
Exits matter because that’s when you, your team and your investors get paid. Oddly enough, and to use a chess metaphor, we hear a lot about the “opening game” (lean startup) and the “mid-game” (growth), but very little about this “end game.”
As a result, founders miss opportunities or leave money on the table. This is a shame. Our fund has more than 700 companies in portfolio. We want the best possible exit for each of them. And fortune favors the prepared! Now, how to get 700 exits (and counting)?
To explore the topic, we organized a series of Master Classes tapping corporate buyers, bankers, investors, lawyers and startup CEOs with M&A or IPO experience in San Francisco. It was a group that included the founders of Guitar Hero — bought by Activision; JUMP Bikes — a SOSV portfolio company bought by Uber, Ubiquisys — bought by Cisco and Withings — bought by Nokia. Each one for hundreds of millions.
Their observations can be summarized below.
Maximize optionality
“Founders must be aware of what contributes to an exit. This means understanding partnerships and how they are formed in the business space the entrepreneur is working in,” said one Master Class participant.
As founders, you build your product, your company and… optionality. You need to understand the options open to your company, and take steps to enable them.
The most likely one is an acquisition, but there are others like IPO (including small cap), RTO, SBO, LBO, Equity Crowdfunding and even ICO.
“Exit is not a goal per se, but as a CEO it is something you should think about as early in your cycle as possible, while being business-focused,” said the London-based investor Frederic Rombaut, of Seraphim Capital.
Indeed, most participants said that exits should always be on the chief executive’s agenda, no matter how early in the process. “Exits should be on the CEO agenda. Not front and center, but on the agenda. M&A is a by-product of a great business and targeted BD. IPOs are always an option once you’ve built significant cashflow forecasting.”
It’s important to ask questions like: How many “strategic engagements” with potential buyers have you had this month? Is your message and value clear in their eyes? Have you considered an acquisition track in parallel to a fundraise?
It doesn’t stop there:
- Equity crowdfunding might help close some gaps at seed stage.
- Early IPOs on smaller exchanges can be an option to raise over $10 million — the robotics startup Balyo went public and raised €40 million on Euronext to get rid of a critical “right of first refusal” option held by one of its corporate investors.
- Reverse mergers can work too: the medical exoskeleton company EKSO Bionics went public this way.
One thing is sure: The time to exit is not when you’re running out of money.
Companies are bought, not sold
Unicorn or not, the most likely exit is an acquisition.
As George Patterson, managing director at HSBC in New York said, “Good tech companies are bought, not sold. The question is thus: how to get bought?”
Patterson says it’s important to understand how mergers and acquisitions actually work; how to prepare a startup for an exit; and how to develop a “feel” for the market you’re exiting through and into.
How M&A works
Hearing from corp dev veterans from Cisco, Logitech, Dassault and IBM, a few key ideas emerged:
Motivations vary
It could be from least to most expensive, or as a mix, as listed by Mark Suster, managing partner at Upfront Ventures:
- Talent hire ($1 million/dev as a rule of thumb — location matters)
- Product gap
- Revenue driver
- Strategic threat (avoid or delay disruption)
- Defensive move (can’t afford a competitor to own it)
How corporates find you
Corporates find deals via the development of partnerships, investment (CVC), their business units, corp dev research, media and investor connections.
Asked about the best approach, Todd Neville, manager of Corporate Business Development and Strategy at IBM (who gave the most detailed description of the corp dev process), said, “Do something cool to one of the IBM customers. If they rave about even a POC, we’re interested.”
In other words, business development is corporate development.
Get the house in order
Buyers typically want to know three things:
- Is your IP really yours?
- Is your team capable?
- Will your customers stick around?
For IP, they will check your contracts (staff and contractors), and run some automated code analysis for proprietary code and open source use. They will evaluate potential IP infringement. No point buying you if you end up costing more in lawsuits!
For your team skills: Sitting down with your engineers will tell them plenty enough without understanding the details of this or that algorithm. The last thing a corporate wants is to be accused of stealing!
Lawyers engaged early can help. The later the clean-up, the more costly and painful.
Develop a feel for your “market”
Develop relationships and create champions within corporates. It will help promote your deal when the time comes, and will let you keep your finger on the pulse of corporate strategy to time your moves.
Do you read the earning calls of Cisco or IBM (or others relevant to you)? This is where strategies are presented. Are your keywords coming up there or in their press releases?
Chris Gilbert, former CEO of Ubiquisys (sold to Cisco for more than $300 million) was very deliberate in planning his exit.
“Selling starts on day one and is a leadership-only function — work out who will be your buyer. Only the CEO can do this. Constantly articulate why a company should buy you,” Gilbert said. Bring clear messages into the acquiring company so it can be presented upwards: give them the presentation you would like them to show their boss! When the time is right, force decisions through competition. If you know they have to buy you, your starting position is strong.”
The dark art of price discovery
There are dozens of formulas (from DCF to comparables) to evaluate a deal — which also means none is “correct.” What matters is: How much would you sell for, and how much is the buyer ready to pay?
Gilbert, at Ubiquisys, described how close interactions with his banker helped drive the price up among the bidders assembled.
Just like buyers, we meet bankers and lawyers too rarely at startup events, but there is much to learn with them. They make deals happen, avoid value erosion and optimize price. They often also make introductions before you engage them, to build goodwill and earn your business.
And if you worry about fees, the right banker handsomely pays for itself by finding more bidders and playing “bad cop” for you, avoiding direct confrontation with your future employer. Do you want a slice of the watermelon or the whole grape?
Final twist: Exits are not exits
When asked about what happens after an M&A or IPO, buyers said they generally hoped the founders would stay with them for many years. Often using re-vesting, earn-outs or shares of the acquiring company to incentivize them. Neville, from IBM, mentioned a security company they acquired whose founder is now the head of one of the largest IBM divisions.
In the case of IPOs, supposedly the ultimate “exit,” any block of shares sold by founders would face extreme scrutiny and might cause a price drop.
So who’s exiting during those deals? Investors (and not always).
Eventually, if the average age of a startup at exit is 8-10 years, the active duty period of founders (if not replaced in the meantime) extends even more. Better love the problem you’re solving, and your customers!
Thanks to speakers, participants and supporters of this Master Class series:
London: Frederic Rombaut (Seraphim Capital), Joe Tabberer (FirstBank), Chris Gilbert (Ubiquisys), Jonathan Keeling (Crowdcube), Fred Destin, Tony Fish (AMF Ventures, James Clark (London Stock Exchange), Denise Law (SGCIB).
Paris: Frederic Rombaut (Seraphim Capital), Manuel Gruson (Dassault Systemes), Pierre-Henri Chappaz (Rothschild Global Advisory), Christine Lambert-Goue (All Invest), Olivier Younes (EXPEN), Eric Carreel (Withings), Fabien Bardinet (Balyo), Xavier Lazarus (Elaia Partners), Pierre-Eric Leibovici(Daphni). Jean de La Rochebrochard (Kima Ventures), Jeremy Sartre (SmartAngels), Gwen Regina Tan (Entrepreneur First).
San Francisco: Natasha Ligai (Logitech), Matt Cutler (Cisco),Will Hawthorne, (CODE Advisors), Ryan Rzepecki (JUMP Bikes), Charles Huang (Guitar Hero), Jeff Thomas (Nasdaq), Shahin Farshchi (Lux Capital), Ammar Hanafi (Moment Ventures), Adam J. Epstein (Third Creek Advisors), Nathan Harding (EKSO Bionics), Kate Whitcomb, Anthony Marino and Ethan Haigh (SOSV).
New York: Todd Neville (IBM), George Patterson (HSBC), Ryan Rzepecki (JUMP Bikes), Aaron Kellner (SeedInvest), Jeremy Levine (Bessemer Venture Partners), Taylor Greene (Collaborative Fund), Adam Rothenberg (BoxGroup), Eli Curi (Fenwick & West), Ian Engstrand and Salil Gandhi (Goodwin), Warren Spar(Sparring Partners Capital), Duncan Turner, Vivian Law and Sheng Ge (SOSV).
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Here is where CEOs of heavily funded startups went to school
CEOs of funded startups tend to be a well-educated bunch, at least when it comes to university degrees.
Yes, it’s true college dropouts like Mark Zuckerberg and Bill Gates can still do well. But Crunchbase data shows that most startup chief executives have an advanced degree, commonly from a well-known and prestigious university.
Earlier this month, Crunchbase News looked at U.S. universities with strong track records for graduating future CEOs of funded companies. This unearthed some findings that, while interesting, were not especially surprising. Stanford and Harvard topped the list, and graduates of top-ranked business schools were particularly well-represented.
In this next installment of our CEO series, we narrowed the data set. Specifically, we looked at CEOs of U.S. companies funded in the past three years that have raised at least $100 million in total venture financing. Our intent was to see whether educational backgrounds of unicorn and near-unicorn leaders differ markedly from the broad startup CEO population.
Sort of, but not really
Here’s the broad takeaway of our analysis: Most CEOs of well-funded startups do have degrees from prestigious universities, and there are a lot of Harvard and Stanford grads. However, chief executives of the companies in our current data set are, educationally speaking, a pretty diverse bunch with degrees from multiple continents and all regions of the U.S.
In total, our data set includes 193 private U.S. companies that raised $100 million or more and closed a VC round in the past three years. In the chart below, we look at the universities most commonly attended by their CEOs:1
The rankings aren’t hugely different from the broader population of funded U.S. startups. In that data set, we also found Harvard and Stanford vying for the top slots, followed mostly by Ivy League schools and major research universities.
For heavily funded startups, we also found a high proportion of business school degrees. All of the University of Pennsylvania alum on the list attended its Wharton School of Business. More than half of Harvard-affiliated grads attended its business school. MBAs were a popular credential among other schools on the list that offer the degree.
Where the most heavily funded startup CEOs studied
When it comes to the most heavily funded startups, the degree mix gets quirkier. That makes sense, given that we looked at just 20 companies.
In the chart below, we look at alumni affiliations for CEOs of these companies, all of which have raised hundreds of millions or billions in venture and growth financing:
One surprise finding from the U.S. startup data set was the prevalence of Canadian university grads. Three CEOs on the list are alums of the University of Waterloo . Others attended multiple well-known universities. The list also offers fresh proof that it’s not necessary to graduate from college to raise billions. WeWork CEO Adam Neumann just finished his degree last year, 15 years after he started. That didn’t stop the co-working giant from securing more than $7 billion in venture and growth financing.
- Several CEOs attended more than one university on the list.
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The formula behind San Francisco’s startup success
Why has San Francisco’s startup scene generated so many hugely valuable companies over the past decade?
That’s the question we asked over the past few weeks while analyzing San Francisco startup funding, exit, and unicorn creation data. After all, it’s not as if founders of Uber, Airbnb, Lyft, Dropbox and Twitter had to get office space within a couple of miles of each other.
We hadn’t thought our data-centric approach would yield a clear recipe for success. San Francisco private and newly public unicorns are a diverse bunch, numbering more than 30, in areas ranging from ridesharing to online lending. Surely the path to billion-plus valuations would be equally varied.
But surprisingly, many of their secrets to success seem formulaic. The most valuable San Francisco companies to arise in the era of the smartphone have a number of shared traits, including a willingness and ability to post massive, sustained losses; high-powered investors; and a preponderance of easy-to-explain business models.
No, it’s not a recipe that’s likely replicable without talent, drive, connections and timing. But if you’ve got those ingredients, following the principles below might provide a good shot at unicorn status.
First you conquer, then you earn
Losing money is not a bug. It’s a feature.
First, lose money until you’ve left your rivals in the dust. This is the most important rule. It is the collective glue that holds the narratives of San Francisco startup success stories together. And while companies in other places have thrived with the same practice, arguably San Franciscans do it best.
It’s no secret that a majority of the most valuable internet and technology companies citywide lose gobs of money or post tiny profits relative to valuations. Uber, called the world’s most valuable startup, reportedly lost $4.5 billion last year. Dropbox lost more than $100 million after losing more than $200 million the year before and more than $300 million the year before that. Even Airbnb, whose model of taking a share of homestay revenues sounds like an easy recipe for returns, took nine years to post its first annual profit.
Not making money can be the ultimate competitive advantage, if you can afford it.
Industry stalwarts lose money, too. Salesforce, with a market cap of $88 billion, has posted losses for the vast majority of its operating history. Square, valued at nearly $20 billion, has never been profitable on a GAAP basis. DocuSign, the 15-year-old newly public company that dominates the e-signature space, lost more than $50 million in its last fiscal year (and more than $100 million in each of the two preceding years). Of course, these companies, like their unicorn brethren, invest heavily in growing revenues, attracting investors who value this approach.
We could go on. But the basic takeaway is this: Losing money is not a bug. It’s a feature. One might even argue that entrepreneurs in metro areas with a more fiscally restrained investment culture are missing out.
What’s also noteworthy is the propensity of so many city startups to wreak havoc on existing, profitable industries without generating big profits themselves. Craigslist, a San Francisco nonprofit, may have started the trend in the 1990s by blowing up the newspaper classified business. Today, Uber and Lyft have decimated the value of taxi medallions.
Not making money can be the ultimate competitive advantage, if you can afford it, as it prevents others from entering the space or catching up as your startup gobbles up greater and greater market share. Then, when rivals are out of the picture, it’s possible to raise prices and start focusing on operating in the black.
Raise money from investors who’ve done this before
You can’t lose money on your own. And you can’t lose any old money, either. To succeed as a San Francisco unicorn, it helps to lose money provided by one of a short list of prestigious investors who have previously backed valuable, unprofitable Northern California startups.
It’s not a mysterious list. Most of the names are well-known venture and seed investors who’ve been actively investing in local startups for many years and commonly feature on rankings like the Midas List. We’ve put together a few names here.
You might wonder why it’s so much better to lose money provided by Sequoia Capital than, say, a lower-profile but still wealthy investor. We could speculate that the following factors are at play: a firm’s reputation for selecting winning startups, a willingness of later investors to follow these VCs at higher valuations and these firms’ skill in shepherding portfolio companies through rapid growth cycles to an eventual exit.
Whatever the exact connection, the data speaks for itself. The vast majority of San Francisco’s most valuable private and recently public internet and technology companies have backing from investors on the short list, commonly beginning with early-stage rounds.
Pick a business model that relatives understand
Generally speaking, you don’t need to know a lot about semiconductor technology or networking infrastructure to explain what a high-valuation San Francisco company does. Instead, it’s more along the lines of: “They have an app for getting rides from strangers,” or “They have an app for renting rooms in your house to strangers.” It may sound strange at first, but pretty soon it’s something everyone seems to be doing.
It’s not a recipe that’s likely replicable without talent, drive, connections and timing.
A list of 32 San Francisco-based unicorns and near-unicorns is populated mostly with companies that have widely understood brands, including Pinterest, Instacart and Slack, along with Uber, Lyft and Airbnb. While there are some lesser-known enterprise software names, they’re not among the largest investment recipients.
Part of the consumer-facing, high brand recognition qualities of San Francisco startups may be tied to the decision to locate in an urban center. If you were planning to manufacture semiconductor components, for instance, you would probably set up headquarters in a less space-constrained suburban setting.
Reading between the lines of red ink
While it can be frustrating to watch a company lurch from quarter to quarter without a profit in sight, there is ample evidence the approach can be wildly successful over time.
Seattle’s Amazon is probably the poster child for this strategy. Jeff Bezos, recently declared the world’s richest man, led the company for more than a decade before reporting the first annual profit.
These days, San Francisco seems to be ground central for this company-building technique. While it’s certainly not necessary to locate here, it does seem to be the single urban location most closely associated with massively scalable, money-losing consumer-facing startups.
Perhaps it’s just one of those things that after a while becomes status quo. If you want to be a movie star, you go to Hollywood. And if you want to make it on Wall Street, you go to Wall Street. Likewise, if you want to make it by launching an industry-altering business with a good shot at a multi-billion-dollar valuation, all while losing eye-popping sums of money, then you go to San Francisco.
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Join me at the amazing Blue Lacuna space in Chicago
Some folks I met in Chicago are holding an amazing event at a great place on South Canalport Avenue. This former macaroni factory now builds startups and I’ll be helping judge their pitch-off alongside some Chicago luminaries.
You can RSVP here and sign up for a spot to pitch here. We’ll choose eight startups to pitch there are some great prizes available.
Blue Lacuna is at 2150 South Canalport Avenue in Chicago and the event is on April 19 at 6pm. Grab your tickets early for this cool meet and greet.
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