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Startups Weekly: Lessons from a failed founder
I sat down with Menlo Ventures partner Shawn Carolan this week to talk about his early investment in Uber. Menlo, if you remember, led Uber’s Series B and has made a hefty sum over the year selling shares in the ride-hailing company. I’ll have more on that later; for now, I want to share some of the insights Carolan had on his experience ditching venture capital to become a founder.
Around when Menlo made its first investment in Uber, Carolan began taking a step back from the firm and building Handle, a startup that built tools to help people be more productive. Despite years of hard work, Handle was ultimately a failure. Carolan said he shed a lot of tears over its demise, but used the experience to connect more intimately with founders and to offer them more candid, authentic advice.
“People in the valley are always achievement-oriented; it’s always about the next thing and crushing it and whatever,” Carolan told TechCrunch. “When [Handle] shut down, I had this spreadsheet of all the people who I felt like I disappointed: Seed investors who invested in me, all the people at Menlo and my friends who had tweeted out early stuff. It was a long spreadsheet of like 60 people. And when I started a sabbatical, what I said was I’m going to go connect with everyone and apologize.”
Today, Carolan encourages founders to own their vulnerabilities.
“It’s OK to admit when you’re wrong,” he said. “Now I can see it on [founders’] faces, I can see when they’re scared. And they’re not going to say they’re scared but I know it’s tough. This is one of the toughest things that you’re going to go through. Now I can be there emotionally for these founders and I can say ‘here’s how you do it, here’s how you talk to your team and here’s what you share.’ A lot of founders feel like they have to do this alone and that’s why you have to get comfortable with your vulnerability.”
After Handle shuttered, Carolan returned to Menlo full time and made the firm a boatload of money from Roku’s IPO and now Uber’s. Anyway, thought those were some nice anecdotes that should be shared since most of our feeds are dominated by Silicon Valley hustle porn.
Want more TechCrunch newsletters? Sign up here. Ok, on to other news…
IPO corner
- Uber dropped its S-1: We’ve got the basic deets, a rundown on key stakeholders, the company’s plan to help drivers buy stock, a look at all the money it’s has made from global divestitures and a glimpse at the company’s R&D spending for self-driving cars.
- Pinterest is an “undercorn”: The visual search engine set its IPO range at $15 to $17 per share earlier this week. That translates to a midrange valuation of $10.64 billion, nearly $2 billion less than the company’s most recent private market valuation of $12.3 billion, hence “undercorn.”
- PagerDuty pops: The SaaS business’s shares began trading on the NYSE on Thursday, popping more than 60 percent on their debut.
- Jumia makes history: Jumia became the first startup from Africa to list on a major global exchange this week when it debuted its shares on the NYSE under the ticker symbol “JMIA.”
- Lyft declines: The Uber competitor finished out the week trading at less than $60 per share, significantly below its initial share price of $74. Ouch.
There were so many fund announcements this week; here’s a quick list.
- Source Code Capital raises $570M
- B Capital nets $406M
- Defy.VC gets $262M
- Slow Ventures grabs $220M
- LiveOak Venture Partners secures $105M
- Octopus Ventures nabs £83M
Lots of great new exclusive content for our Extra Crunch subscribers is on the site, including this deep dive into the challenges of transportation startup profits. Plus: When to ditch a nightmare customer, before they kill your startup; The right way to do AI in security; and The definitive Niantic reading guide.
Sinema, that one MoviePass competitor, has run into its fair share of bumps in the road. TechCrunch’s Brian Heater hopped on the phone with the startup’s CEO this week to learn more about those bumps, why its terminating accounts en masse, a class-action lawsuit its battling and more.
Photo by Stephen McCarthy / RISE via Sportsfile
- Grab plans to raise $2B more this year
- Online fantasy sports service Dream11 surpasses $1B valuation
- The SoftBank Vision Fund backs travel platform Klook
- Klaviyo raises $150M Series B
- Mos raises $4M for its college financial aid platform
TechCrunch’s Startup Battlefield brings the world’s top early-stage startups together on one stage to compete for non-dilutive prize money, and the attention of media and investors worldwide. Here’s a quick update on some of our BF winners and finalists:
- Bouy Labs, which builds IoT monitors for water use and response, was acquired by Resideo
- Connect Med, a telemedicine platform focused on serving the sub-Saharan African market, has sold to Merck
- Pi, a wireless charging startup, has rebranded to Spansive as it expands to new countries
- Unbound brings the first ever high-fashion jewelry vibrator to market
If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm, myself and Phil Libin, the founder of Evernote and AllTurtles, chat about the importance of IPOs. Plus, in a special Equity Shot, Alex and I unpack the Uber S-1.
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Equity Shot: A deep dive into the Uber S-1
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
It’s time for another Equity Shot, a quick-take episode centered around a breaking news event. This time, as you already guessed, Kate Clark and I sat down to dig into the Uber S-1. It’s a huge, complex document, but we did our best to summarize what’s inside.
First, we talked through yearly results, looking back a half-decade into Uber’s revenue growth. In the filing, Uber reported 2018 revenues of $11.27 billion, net income of $997 million and adjusted EBITDA losses of $1.85 million. We highlighted those numbers, talked about operating losses and the company’s gyrating net results that included the positive impacts of various divestitures.
Yes, this S-1 required a bit more unpacking than most. We apologize for the frantic scrolling, we were pouring through the document live and we were a bit excited. This is an IPO that’s been talked about for years and will be easily one of the largest floats of all time.
Anyway, an S-1 brings insights to more than just a company’s financials, so we spent time highlighting key stakeholders, or, in other words, the people are are going to get really really really rich off Uber’s IPO. That includes Uber co-founder and chief executive officer Travis Kalanick, famous venture capital firms like the SoftBank Vision Fund and Benchmark, and more.
The IPO, remember, is expected to sell $10 billion in stock (primary and secondary) and value the company at $100 billion or more.
If 30 minutes digging through the S-1 wasn’t enough for you, don’t fret, we’ll be following the Uber IPO for weeks — probably months — to come.
Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast, Pocket Casts, Downcast and all the casts.
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Ride-hailing, bike and scooter companies probably raised less money than you thought
Jason Rowley
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Jason Rowley is a venture capital and technology reporter for Crunchbase News.
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After years of fierce competition as private companies, Uber and Lyft are going public on U.S. markets. Scooter service providers, the transportation trend du jour, raised hundreds of millions of dollars to scatter scooters on city sidewalks (to the chagrin of residents and regulators alike) throughout 2017 and 2018. On the other side of the Pacific, Grab and Go-Jek are raising gobs of cash as they continue to scale upward and outward.
Of all the seed, early and late-stage venture funding raised over the past couple of years, how much of the total went to companies in the ride-hailing, food delivery and last-mile transportation categories (which encompasses bikes and scooters)? Probably not as much as you’d think.
Taken together, companies in these sectors raised less than 10 percent of the total venture dollar volume reported for each of the past five full calendar years.
We’ve charted it out based on yearly totals. Take a peek:
To be sure, we’re still talking about a lot of money here. Companies in these three categories raised more than $22 billion in venture funding rounds (not including private equity) in 2017 and more than $18 billion in 2018.
Ventures in the transportation space loom large in the media, and how could they not? It’s a forbiddingly capital-intensive market to play in, requiring companies to raise massive sums, which make for good headlines.
In its early years, competition between on-demand, point-to-point transportation marketplace companies rewarded brashness and speed with early scale and the long-term structural advantages conferred to first the firms which grew the fastest.
But those advantages may not have been as stiff as first expected. Lyft beat Uber to the public markets, raised its valuation during its IPO roadshow, priced at the top of its extended range and then popped 21 percent when it started trading.
That success means that the red chunks of our above chart weren’t all fool’s bets. Instead, a good chunk of the equity represented is now liquid. Of course, there’s a lot more work to do for literally every other ride-hailing, ridesharing, scooter-renting and other wheels-providing unicorns in the world: They still have to go public.
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Equity Shot: Lyft is public — what does that mean for other IPO-ready unicorns?
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
Sure, we just aired a new episode, but things keep happening, and after talking about this crop of IPOs for so long, we can’t help ourselves. (You can follow us on Twitter, here and here, by the way, if Equity isn’t enough for you.)
Lyft, as you know, started trading today, closing the loop on a long saga that brought the smaller of the two domestic ride-hailing unicorns to the public markets.
After so much speculation about which of the two would get out the door first, Lyft did, and now we get to see what sort of pricing shenanigans happen next. Does Uber drop rates and punish Lyft? Or does Uber work to cut its losses, lowering its expenses and providing a clearer path toward profitability before its April IPO roadshow kicks off? (Not a path to profitability, mind; Uber and Lyft need to show a path to the direction of profitability first.)
We hit all the bases, going over the company’s pricing path, its varying share figures, final raise metrics and more. If you want the hard stuff, we’ve got a shot for you.
Now that the Lyft IPO has wrapped, we’ll be shifting our focus to Pinterest, Zoom and, of course, Uber. Stay tuned.
OK, now we’re done. Until next Friday. Unless something else happens.
Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast, Pocket Casts, Downcast and all the casts.
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Flying taxi startup Blade is helping Silicon Valley CEOs bypass traffic
One year after a $38 million Series B valued on-demand aviation startup Blade at $140 million, the company has begun taxiing the Bay Area’s elite.
As part of a new pilot program, Blade has given 200 people in San Francisco and Silicon Valley exclusive access to its mobile app, allowing them to book helicopters, private jets and even seaplanes at a moments notice for $200 per seat, at least.
Blade, backed by Lerer Hippeau, Airbus, former Google CEO Eric Schmidt and others, currently flies passengers around the New York City area, where it’s headquartered, offering the region’s wealthy $800 flights to the Hamptons, among other flights at various price points. According to Business Insider, it has worked with Uber in the past to help deep-pocketed Coachella attendees fly to and from the Van Nuys Airport to Palm Springs, renting out six-seat helicopters for more than $4,000 a pop.
Its latest pilot seems to target business travelers, connecting riders to the San Francisco International Airport and Oakland International Airport to Palo Alto, San Jose, Monterey and Napa Valley. The goal is to shorten trips made excruciatingly long due to bad traffic in major cities like New York, Los Angeles and San Francisco. Recently, the startup partnered with American Airlines to better establish its network of helicopters, a big step for the company as it works to integrate with existing transportation infrastructure.
New work with @flybladenow pic.twitter.com/eONvKU3rhM
— Tyler Babin (@Tyler_Babin) March 11, 2019
Blade, led by founder and chief executive officer Rob Wiesenthal, a former Warner Music Group executive, has raised about $50 million in venture capital funding to date. To launch at scale and, ultimately, to compete with the likes of soon-to-be-public transportation behemoth Uber, it will have to land a lot more investment support.
Uber too has lofty plans to develop a consumer aerial ridesharing business, as do several other privately-funded startups. Called UberAIR, Uber will offer short-term shareable flights to commuters as soon as 2023. The company has raised billions of dollars to turn this sci-fi concept into reality.
Then there’s Kitty Hawk, a company launched by former Google vice president and Udacity co-founder Sebastian Thrun, which is developing an aircraft that can take off like a helicopter but fly like a plane for short-term urban transportation purposes. Others in the air taxi or vertical take-off and landing aircraft space, including Volocopter, Lilium and Joby Aviation, have raised tens of millions to eliminate traffic congestion or, rather, to chauffer the rich.
Blade’s next stop is India, the Financial Times reports, where it will conduct a pilot connecting travelers in downtown Mumbai and Pune. The company tells TechCrunch they are currently exploring one additional domestic pilot and one additional international pilot.
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SoftBank’s Vision Fund invests $1.5B in Chinese second-hand car startup Chehaoduo
SoftBank’s Vision Fund is taking a bet on China’s auto market after it agreed to pour $1.5 billion into online car trading group Chehaoduo, which literally means “many cars” in Chinese.
The Beijing-based company operates two main sites — peer-to-peer online marketplace Guazi for used vehicles, and Maodou, which retails new sedans through direct sales and financial leasing. (These sub-brands are more subtly named; they translate to “sunflower seeds” and “edamame,” respectively.)
Chehaoduo said it will deploy the proceeds on technology investments as well as the development of new products and services. It also plans to ramp up its marketing efforts and continue to open brick-and-mortar stores, an omnichannel move it believes can enhance trust in consumers used to meeting dealers in person and differentiate it from peers with an exclusively online focus. Chehaoduo currently runs 600 offline stores nationwide supporting new and used car dealing along with after-sales services.
The sizable funding round arrived at a time when China’s softening economy is sapping consumer confidence, but the company’s two-pronged strategy makes sure it covers a broad range of consumer demands. New passenger car sales in China — the world’s largest auto market — fell for the first time since the 1990s to 23.7 million units last year, according to a report by China’s Association of Automobile Manufacturers, the country’s top auto association.
On the other hand, used cars became a more economical choice in a consumer culture that, unlike many countries in the west, has been slow to embrace second-hand goods. But that mindset is shifting as people feel the heat of the Chinese economic downturn: Secondhand car sales were up 13 percent during the first 11 months of 2018, data from China’s Automobile Dealers Association show.
“China’s used car market is growing rapidly but online penetration remains low and auto financing is underutilized compared to developed markets. In just three years, Chehaoduo Group, through the Guazi brand, has leveraged the latest innovations in data-driven technology to establish China’s leading car trading platform,” says Eric Chen, partner at SoftBank’s Investment Advisers, in a statement.
The Japanese investment group has been a prolific backer in the mobility industry through a variety of affiliated companies with Vision Fund being one. SoftBank’s massive portfolio includes the likes of Uber, Didi Chuxing and Grab .
Chehaoduo counts Uxin and Renrenche as its most serious rivals. Uxin raised $225 million from a U.S. initial public offering last June while Renrenche lured Goldman Sachs in a $300 million funding round last year that also saw participation from Didi and Tencent.
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Nigerian logistics startup Kobo360 raises $6M, expands in Africa
Jake Bright
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Jake Bright is a writer and author in New York City. He is co-author of The Next Africa.
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Nigerian trucking logistics startup Kobo360 has raised $6 million to upgrade its platform and expand operations to Ghana, Togo and Cote D’Ivoire.
The company — with an Uber -like app that connects truckers and companies with freight needs — gained the equity financing in an IFC-led investment. The funding saw participation from others, including TLcom Capital and Y Combinator.
With the investment, Kobo360 aims to become more than a trucking transit app.
“We started off as an app, but our goal is to build a global logistics operating system. We’re no longer an app, we’re a platform,” founder Obi Ozor told TechCrunch.
In addition to connecting truckers, producers and distributors, the company is building that platform to offer supply chain management tools for enterprise customers.
“Large enterprises are asking us for very specific features related to movement, tracking and sales of their goods. We either integrate other services, like SAP, into Kobo or we build those solutions into our platform directly,” said Ozor.
Kobo360 will start by developing its API and opening it up to large enterprise customers.
“We want clients to be able to use our Kobo dashboard for everything; moving goods, tracking, sales and accounting…and tackling their challenges,” said Ozor.
Kobo360 will also build more physical presence throughout Nigeria to service its business. “We’ll open 100 hubs before the end of 2019…to be able to help operations collect proof of delivery, to monitor trucks on the roads and have closer access to truck owners for vehicle inspection and training,” said Ozor.
Kobo360 will add more warehousing capabilities, “to support our reverse logistics business” — one of the ways the company brings prices down by matching trucks with return freight after they drop their loads, rather than returning empty, according to Ozor.
Kobo360 will also use its $6 million investment to expand programs and services for its drivers, something Ozor sees as a strategic priority.
“The day you neglect your drivers you are not going to have a company, only issues. If Uber were more driver-focused it would be a trillion-dollar company today,” he said.
The startup offers drivers training and group programs on insurance, discounted petrol and vehicle financing (KoboWin). Drivers on the Kobo360 app earn on average of approximately $5,000 per month, according to Ozor.
Under KoboCare, Kobo360 has also created an HMO for drivers and an incentive-based program to pay for education. “We give school fee support, a 5,000 Naira bonus per trip for drivers toward educational expenses for their kids,” said Ozor.
Kobo360 will complete limited expansion into new markets Ghana, Togo and Cote D’Ivoire in 2019. “The expansion will be with existing customers, one in the port operations business, one in FMCG and another in agriculture,” said Ozor.
Ozor thinks the startup’s asset-free, digital platform and business model can outpace traditional long-haul 3PL providers in Nigeria by handling more volume at cheaper prices.
“Owning trucks is just too difficult to manage. The best scalable model is to aggregate trucks,” he told TechCrunch in a previous interview.
With the latest investment, IFC’s regional head for Africa Wale Ayeni and TLcom senior partner Omobola Johnson will join Kobo360’s board. “There’s a lot of inefficiencies in long-haul freight in Africa…and they’re building a platform that can help a lot of these issues,” said Ayeni of Kobo360’s appeal as an investment.
The company has served 900 businesses, aggregated a fleet of 8,000 drivers and moved 155 million kilograms, per company stats. Top clients include Honeywell, Olam, Unilever, Dangote and DHL.
MarketLine estimated the value of Nigeria’s transportation sector in 2016 at $6 billion, with 99.4 percent comprising road freight.
Logistics has become an active space in Africa’s tech sector, with startup entrepreneurs connecting digital to delivery models. In Nigeria, Jumia founder Tunde Kehinde departed and founded Africa Courier Express. Startup Max.ng is wrapping an app around motorcycles as an e-delivery platform. Nairobi-based Lori Systems has moved into digital coordination of trucking in East Africa. And U.S.-based Zipline — which launched drone delivery of commercial medical supplies in partnership with the government of Rwanda and support of UPS — is in “process of expanding to several other countries,” according to a spokesperson.
Kobo360 has plans for broader Africa expansion but would not name additional countries yet.
Ozor said the company is profitable, though the startup does not release financial results. Wale Ayeni also wouldn’t divulge revenue figures, but confirmed IFC’s did full “legal and financial due diligence on Kobo’s stats,” as part of the investment.
Ozor named Lori Systems as Kobo360’s closest African startup competitor.
On the biggest challenge to revenue generation, it’s all about service delivery and execution, according to Ozor.
“We already have volume and demand in the market. The biggest threat to revenues is if Kobo360’s platform doesn’t succeed in solving our client’s problems and bringing reliability to their needs,” he said.
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