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IPOs, crypto funds and other things I missed this week
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
What a week it’s been. I’m exhausted. Not only are we another cycle deeper into the COVID-19 quarantine, but there seems to be more news than ever to sift through. I’ve fallen behind. So, today, this little column is taking look back at things that it missed but wanted to cover. (There may come a day when we run out of stuff to talk about, but it’s not coming any time soon.)
So let’s talk about a16z’s new crypto fund, recent economic data, the Ebang F-1, Lime’s layoffs, Procore’s IPO delay and fresh valuation, stocks, Luckin, and, if we have time, Twitter’s changing jobs data. Let’s get this all out of our heads and into the world.
Odds, ends
To annoy my editors, we’re using bullet points this morning. Bullet points are great way to convey a bloc of information in a neat format. Let the haters hate, we have a lot of ground to cover:
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Coinbase Wallet lets you earn interest with deeper DeFi integration
Coinbase’s mobile wallet app Coinbase Wallet puts you in control of your crypto assets. The app already lets you access decentralized crypto apps (dapps) using a dapp browser. But Coinbase is going one step further, with deep integrations with some of the most popular DeFi projects.
DeFi means “decentralized finance,” and it has been a hot trend in the cryptocurrency space. DeFi projects try to reproduce traditional financial products in the blockchain. For instance, you can lend and borrow money, invest in derivative assets and more.
A popular category of DeFi projects has been lending protocols, such as Compound and dYdX. Those protocols work pretty muck like LendingClub, but on the blockchain. Some users send money to a DeFi lending project to contribute to liquidity pools. Other users borrow money from that pool. Interest rates go up and down depending on supply and demand.
With today’s update, you can contribute to lending protocols much more easily. Coinbase Wallet lets you pick a cryptocurrency, compare interest rates across multiple DeFi protocols, interact with those protocols and view your balances in a unified dashboard, you don’t have to use Coinbase Wallet’s dapp browser.
Interest rates will change over time. At any time, you can check the current interest rate, see how much you’ve earned already and withdraw your crypto assets.
Those protocols rely on collateralized borrowing in order to avoid default payments. It means that borrowers have to lock crypto assets as collateral. You often have to provide a bigger collateral than what you’re trying to borrow with those DeFi protocols — that’s the downside of not relying on credit history and external financial data.
Again, this isn’t a traditional finance product. Your deposits are not insured and there could be some bugs in DeFi protocols. For instance, bZx recently suffered from a “flash loan” attack. But it’s an interesting crypto use case.
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Coinbase launches margin trading for some users
Cryptocurrency exchange Coinbase is launching margin trading today. Margin trading lets you trade on leverage. But it works both ways — margin trading lets you multiply your gains and your losses.
Margin trading is going to be available on Coinbase Pro, the company’s exchange interface for educated investors. Both retail and institutional investors will be able to submit margin trading orders with up to 3x leverage. It’ll work with any pair of assets with USD as the base currency.
For now, the feature is limited to 23 U.S. states if you’re a retail investor. Institutional investors in 45 states and nine international countries can access margin trading, though.
There are many potential use cases for margin trading. For instance, you can allocate a tiny portion of your portfolio to a margin trading order to hedge across multiple positions. Coinbase believes it has enough liquidity to help investors set up sophisticated margin trading orders.
If you’re a retail customer living in one of the 23 states where margin trading is available, you might not be able to use it. The company wants to restrict margin trading to the most advanced traders.
Coinbase is going to track your past activity on Coinbase Pro and look at trades, balances, deposits and withdrawals. If you’re an active trader, you’ll be able to access margin trading.
Here’s the list of 23 U.S. states with margin trading for retail investors: Florida, Texas, Illinois, New Jersey, Virginia, Georgia, Arkansas, Alaska, Oregon, Connecticut, New Hampshire, Massachusetts, Nebraska, North Carolina, Oklahoma, Colorado, Kansas, Maine, South Carolina, Utah, Wisconsin, Wyoming and West Virginia.
Disclosure: I own small amounts of various cryptocurrencies.
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Coinbase poaches Google Shopping VP as CPO for cryptocommerce
“We’re trying to shift cryptocurrency from this speculative asset class to driving real-world utility,” Coinbase CEO Brian Armstrong tells me. How? Through commerce and micropayments. But now Coinbase has the who to build it. Today the startup announced it has hired away former head of Product for Indian e-commerce giant Flipkart and Google Shopping VP of Product Surojit Chatterjee to become Coinbase’s chief product officer.
“I’ve always enjoyed being associated with technology that is on the brink of changing how we live” writes Chatterjee. “Google ads has helped democratize commerce, Flipkart and ecommerce has revolutionized life in India, and I believe Coinbase is going to turn conventional finance on its head.”
Chatterjee spent more than 11 years at Google over two stints, the first as a founding member of Google’s mobile search Ads product that’s grown to tens of billions in revenue per year. When he starts at Coinbase next week, Armstrong tells me he’ll help Coinbase organize its complex array of products, including its cryptocurrency exchange, wallet, stablecoin, incentivized crypto education platform Earn and Coinbase Commerce that lets businesses take payments in Bitcoin, Ethereum and more. Chatterjee replaces Jeremy Henrickson, the former Coinbase CPO who departed in December 2018.
“Surojit is a huge asset here because we’re a product-led company,” Armstrong says. “We have different leaders and they increasingly have responsibilities around P&L. Having one really experienced chief product officer that can mentor them and teach them to own revenues and budgets — really in the model of Google — that will professionalize Coinbase.”
One opportunity Armstrong hopes Chatterjee can help Coinbase seize on is building products for emerging markets where financial infrastructure is weak. “E-commerce is not equally distributed around the world. Micropayments don’t work that well … Him spending time living in India, a developing market, he deeply understands mobile money.” Given the explosion of phone-based payments, the demonetization and the prevalence of cash on delivery methods in India that Flipkart dealt with, “his background is kind of ideal from that worldly perspective,” Armstrong explains.
Chatterjee cites his upbringing as inspiration to deliver “economic freedom for everyone,” as Armstrong says is Coinbase’s mission. “Growing up in India in a poor middle-class household, I saw very closely what a lack of liquid cash does to a family’s lifestyle,” Chatterjee recalls.
“As a kid I would go with my mom to a local bank to withdraw money. And believe me when I tell you that the process was epic!” It included withdrawal slips, tokens and anxiously trying to match current signatures to versions decades old. When India demonetized and made everyone exchange their cash, “My dad, who was almost 80 at that time, stood in a queue for five hours to get 2000 Rs, which was the per-day limit for the first week. That’s less than $30!” Digital money could ensure people always have access to everything they own.
Surojit Chatterjee (far right) rides along for a Flipkart delivery to understand the consumer commerce experience
In developed countries, Armstrong sees a chance for Chatterjee to enable digital content creators to turn their passion into their profession. “There’s lots of people who lurk on Reddit or Stack Overflow and answer questions … If there was real money on these things, these could be their full time jobs — contributing content on user-generated social sites,” Armstrong predicts. “I think you’d see a lot more contributions, as well.”
Now might be the perfect time to hire Chatterjee since we’re in a lull period for cryptocurrency in the wake of the rush at the end of 2018. “Crypto is always challenging to navigate. In these periods when it’s relatively quiet, we tend to do really well,” Armstrong says. The company grew market share, volume and app installs versus competitors between 50% and 100%, according to the CEO. Referencing ancient war strategy, Armstrong concludes that, “There’s years where you just want to train the soldiers and stockpile resources and you’re basically just preparing. We’re building the company, not just responding to crazy hype.”
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Political ‘fixer’ Bradley Tusk closes second fund on $70M
Tusk Venture Partners, the venture capital firm led by Bradley Tusk and managing partner Jordan Nof, has secured $70 million for its second flagship fund, the firm has confirmed to TechCrunch following a report by Fortune this morning.
Fundraising for the effort began in January, when the pair filed paperwork with the U.S. Securities Exchange Commission for Tusk Venture Partners II. The firm, and affiliated political advisory outfit Tusk Ventures, is behind a number of high-profile startups, including e-scooter “unicorn” Bird, cryptocurrency exchange Coinbase and Ro, a direct-to-consumer healthcare business best known for selling erectile dysfunction medication.
The New York-based firm, founded in 2011, previously raised $36 million for its debut fund — capital it used to back fantasy sports company Fanduel, insurtech business Lemonade and D2C vitamin seller Care/of.
Tusk, before launching Tusk Ventures, served as campaign manager for Mike Bloomberg, as deputy governor of Illinois and as communications director for Senator Chuck Schumer. He also penned the book, The Fixer: My Adventures Saving Startups from Death by Politics, released in 2018.
Naturally, Tusk Ventures provides companies more than just checks. The politically savvy team lends its expertise to support companies plagued with regulatory barriers and communications issues, as well as help with grassroots organizing, opposition research and partnerships.
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Omni storage & rentals fails, shutters, sells engineers to Coinbase
$35 million-funded Omni is packing up and shutting down after struggling to make the economics of equipment rentals and physical on-demand storage work out. It’s another victim of a venture capital-subsidized business offering a convenient service at an unsustainable price.
The startup fought for a second wind after selling off its physical storage operations to competitor Clutter in May. Then sources tell me it tried to build a whitelabel software platform for letting brick-and-mortar merchants rent stuff like drills or tents as well as sell them so Omni could get out of hands-on logistics. But now the whole company is folding, with Coinbase hiring roughly 10 of Omni’s engineers.
“They realized that the core business was just challenging as architected” a source close to Omni tells TechCrunch. “The service was really great for the consumer but when they looked at what it would take to scale, that would be difficult and expensive.” Another source says Omni’s peak headcount was around 70.
The news follows TechCrunch’s report in October that Omni had laid off operations teams members and was in talks to sell its engineering team to Coinbase. Omni had internally discussed informing its retail rental partners ahead of time that it would be shutting down. Meanwhile, it frantically worked to stop team members from contacting the press about the startup’s internal troubles.
“We’ll be winding down operations at Omni and closing the platform by the end of this year. We are proud of what we built and incredibl y thankful for everyone who supported our vision over the past five and a half years” an Omni spokesperson says. Omni CEO Tom McLeod did not respond to multiple requests for comment. Oddly, Omni was still allowing renters to pay for items as of this morning, though it’s already shut down its blog and hasn’t made a public announcement about its shut down.
“Coinbase has reached an agreement with Omni to hire members of its engineering team. We’re always looking for top-tier engineering talent and look forward to welcoming these new team members to Coinbase” a Coinbase spokesperson tells us. The team was looking for more highly skilled engineers they could efficiently hire as a group, though it’s too early to say what they’ll be working on.
Omni originaly launched in 2015, offering to send a van to your house to pick up and index any of your possession, drive them to a nearby warehouse, store them, and bring them back to you whenever you needed for just a few dollars per month. It seemed too good to be true and ended up being just that.
Eventually Omni pivoted towards letting you rent out what you were storing so you and it could earn some extra cash in 2017. Sensing a better business model there, it sold its storage business to Softbank-funded Clutter and moved to helping retail stores run rental programs. But that simply required too big of a shift in behavior for merchants and users, while also relying on slim margins.
One major question is whether investors will get any cash back. Omni raised $25 million from cryptocurrency company Ripple in early 2018. Major investors include Flybridge, Highland, Allen & Company, and Founders Fund, plus a slew of angels.
The implosion of Omni comes as investors are re-examining business fundamentals of startups in the wake of Uber’s valuation getting cut in half in the public markets and the chaos at WeWork ahead of its planned IPO. VCs and their LPs want growth, but not at the cost of burning endless sums of money to subsidize prices just to lure customers to a platform.
It’s one thing if the value of the service is so high that people will stick with a startup as prices rise to sustainable levels, as many have with ride hailing. But for Omni, ballooning storage prices pissed off users as on-demand became less afforable than a traditional storage unit. Rentals were a hassle, especially considering users had to pick-up and return items themselves when they could just buy the items and get instant delivery from Amazon.
Startups that need a ton of cash for operations and marketing but don’t have a clear path to ultra-high lifetime value they can earn from customers may find their streams of capital running dry.
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$35M-funded Omni rentals in acqui-hire talks with Coinbase
Physical storage-turned-rentals startup Omni is dealing with layoffs today, two sources familiar with the situation tell TechCrunch. Omni just shed seven operations team members. The startup is in talks to sell its engineering team to Coinbase after also receiving interest from Thumbtack.
Omni’s rental business was doing poorly without enough users paying a few bucks to borrow a tent, bike or power drill. Omni had planned to launch a white-labeled platform allowing brick-and-mortar merchants to operate and market their own rental business.
But despite having plenty of cash left after raising $25 million from cryptocurrency company Ripple early last year, Omni feared the new platform would flop too and its prospects would worsen.
The company is in talks with Coinbase to hire some of the engineering staff, who would have them work on Coinbase Earn, which rewards users with cryptocurrency for completing online educational programs. Some employees are interviewing at Coinbase today. However, a Coinbase spokesperson told me there’s currently no official deal — before noting that there is nothing on the record they can share. Omni promised TechCrunch a statement but then refused to talk on the record.
Omni got its start in on-demand storage, where it would come to your home, pick up and tag your stuff, store it in a warehouse and bring it back whenever you wanted it. It grew popular in San Francisco and started to scale out to other cities. In April, Omni began allowing users to earn money by renting out their stored goods to other Omni customers.
But by May, Omni was selling its storage business to SoftBank-funded competitor Clutter, and the transition was rocky. Users complained about changing prices and misplaced items, alarmed that suddenly a different startup had control of their possessions.
I was formerly a happy Omni customer of its storage business, but the transition to Clutter was botched and shook faith that users’ stuff would be taken care of. At one point they lost some of my belongings, until C-level executives stepped in to figure out what happened.
Going forward, instead of storing goods itself, Omni would rely on local storefronts for pickup and drop-off of rentals. But many users balked at the hassle of rentals when Amazon makes buying so easy.
One source said that Omni had discussed telling rental partners in two weeks that it would be shutting down the rental service, though TechCrunch cannot confirm that. Another source said Omni was frantically trying to stop members of its team from talking to the press today.
Omni’s vision of cloud storage for the physical world and access over ownership had attracted capital from Flybridge, Highland, Allen & Company, Founders Fund, Precursor and a wide array of angels. But efforts to change user behavior and operate a logistically complicated business, matched with spotty execution, led the startup to hit the skids and seek a soft landing.
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Coinbase announces USDC Bootstrap Fund to support DeFi projects
Coinbase is announcing a new initiative called the USDC Bootstrap Fund. As the name suggests, the company wants to support developers with a fund composed of USDC tokens.
DeFi, or Decentralized Finance, is a recent trend in the blockchain space. DeFi projects are traditional financial products that you’d expect from a traditional bank, such as lending protocols and derivatives, built on top of a blockchain.
Thanks to the decentralized nature of these protocols, it’s harder to censor them and more people should theoretically be able to access those services.
Going back to Coinbase, the company thinks there’s not enough liquidity for some DeFi protocols. The startup wants to improve that by investing USDC directly in DeFi protocols. Those investments are smart contracts, and returns should be provided by a counterparty, such as a borrower or taker.
In other words, it’ll become much easier to borrow USDC using some DeFi protocols as Coinbase is providing a pool of USDC tokens. Counterparties will have to provide crypto collateral and pay some interest rate.
Coinbase is also announcing its first two investments through the USDC Bootstrap Fund. The company is handing 1 million in USDC to Compound, and 1 million in USDC to dYdX.
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Work Life Ventures raises $5M for debut enterprise SaaS seed fund
Brianne Kimmel had no trouble transitioning from angel investor to general partner.
Initially setting out to garner $3 million in capital commitments, Kimmel, in just two weeks’ time, closed on $5 million for her debut venture capital fund Work Life Ventures. The enterprise SaaS-focused vehicle boasts an impressive roster of limited partners, too, including the likes of Zoom chief executive officer Eric Yuan, InVision CEO Clark Valberg, Twitch co-founder Kevin Lin, Cameo CEO Steven Galanis, Andreessen Horowitz general partners Marc Andreessen and Chris Dixon, Initialized Capital GP Garry Tan and fund-of-funds Slow Ventures, Felicis Ventures and NFX.
At the helm of the new fund, Kimmel joins a small group of solo female general partners: Dream Machine’s Alexia Bonatsos is targeting $25 million for her first fund; Day One Ventures’ Masha Drokova raised $20 million for her debut effort last year; and Sarah Cone launched Social Impact Capital, a fund specializing in impact investing, in 2016, among others.
Meanwhile, venture capital fundraising is poised to reach all-time highs in 2019. In the first half of the year, a total of $20.6 billion in new capital was introduced to the startup market across more than 100 funds.
For most, the process of raising a successful venture fund can be daunting and difficult. For well-connected and established investors in the Bay Area, like Kimmel, raising a fund can be relatively seamless. Given the speed and ease of fund one in Kimmel’s case, she plans to raise her second fund with a $25 million target in as little as 12 months.
“The desire for the fund is to take a step back and imagine how do we build great consumer experiences in the workplace,” Kimmel tells TechCrunch.
Kimmel has been an active angel investor for years, sourcing top enterprise deals via SaaS School, an invite-only workshop she created to educate early-stage SaaS founders on SaaS growth, monetization, sales and customer success. Prior to launching SaaS School, which will continue to run twice a year, Kimmel led go-to-market strategy at Zendesk, where she built the Zendesk for Startups program.
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“You start by advising, then you start with very small angel checks,” Kimmel explains. “I reached this inflection point and it felt like a great moment to raise my own fund. I had friends like Ryan Hoover, who started Weekend Fund focused on consumer, and Alexia is one of my friends as well and I saw what she was doing with Dream Machine, which is also consumer. It felt like it was the right time to come out with a SaaS-focused fund.”
Emerging from stealth today, Work Life Ventures will invest up to $150,000 per company. To date, Kimmel has backed three companies with capital from the fund: Tandem, Dover and Command E. The first, Tandem, was amongst the most coveted deals in Y Combinator’s latest batch of companies. The startup graduated from the accelerator with millions from Andreessen Horowitz at a valuation north of $30 million.
Dover, another recent YC alum, provides recruitment software and is said to be backed by Founders Fund in addition to Work Life. Command E, currently in beta, is a tool that facilities search across multiple desktop applications. Kimmel is also an angel investor in Webflow, Girlboss, TechCrunch Disrupt 2018 Startup Battlefield winner Forethought, Voyage and others.
Work Life is betting on the consumerization of the enterprise, or the idea that the next best companies for modern workers will be consumer-friendly tools. In her pitch deck to LPs, she cites the success of Superhuman and Notion, a well-designed email tool and a note-taking app, respectively, as examples of the heightened demand for digestible, easy-to-use B2B products.
“The next generation of applications for the workplace sees people spinning out of Uber, Coinbase and Airbnb,” Kimmel said. “They’ve faced these challenges inside their highly efficient tech company so we are seeing more consumer product builders deeply passionate about the enterprise space.”
But Kimmel doesn’t want to bury her thesis in jargon, she says, so you won’t find any B2B lingo on Work Life’s website or Instagram.
She’s focusing her efforts on a more important issue often vacant from conversations surrounding investment in the future of work: diversity & inclusion.
Kimmel meets with every new female hire of her portfolio companies. Though it’s “increasingly non-scalable,” she admits, it’s part of a greater effort to ensure her companies are thoughtful about D&I from the beginning: “Because I have a very focused fund, it’s about maintaining this community and ensuring that people feel like their voices are heard,” she said.
“I want to be mindful that I am a female GP and I feel [proud] to have that title.”
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Blade raises $4.3M from Coinbase, SV Angel to reshape cryptocurrency derivatives trading
Exchanges like Coinbase have ballooned in size by taking the mechanics of equity markets and fitting them to cryptocurrency markets, but as the space expands in its scope and craftiness, new exchanges trading asset classes native to cryptocurrency are taking off and attracting the attention of top Silicon Valley VCs. Oh, and Coinbase, too.
Blade is a new cryptocurrency derivatives exchange launching in three weeks. Prior to starting the company, CEO Jeff Byun and his co-founder Henry Lee founded OrderAhead, a delivery startup platform that was eventually acquired in-part by Square in 2017. The pair’s newest company shares little in common with their previous venture, but they are bringing aboard some of the same investors to support them.
Blade is announcing that they’ve raised $4.3 million in seed funding from a host of investors, including Coinbase, SV Angel, A.Capital, Slow Ventures, Justin Kan and Adam D’Angelo.
The exchange is tackling perpetual swap contracts.
Perpetuals are a crypto-native trading instrument that Byun says are “arguably the fastest growing segment of cryptocurrency trading.” They allow traders to bet on the future values of cryptocurrencies in relation to another and the instruments have no expiration dates, unlike fixed maturity futures. Traders can bet on how the price of Bitcoin can increase relative to USD, but they can also make bets relative to other altcoins like Monero, DogeCoin, Zcash, Ripple and Binance Coin. Here’s what’s on the Blade menu at the moment.
Blade’s noteworthy spins on perpetuals trading — compared to other exchanges — are that most of the contracts will be set up on simplified vanilla contracts, the perpetuals will also be margined/settled in USD Tether and the company is offering higher leverages (up to 150x on BTC-USD and BTC-KRW) on trades.
Blade is raising funds from Silicon Valley’s VCs, but U.S. investors won’t be legally able to participate in the exchange. U.S. government agencies have been a bit more stringent in regulating cryptocurrencies, so there’s more trading activity taking place on exchanges outside the jurisdiction. Blade itself is an offshore entity with a U.S. subsidiary; its primary market is East Asia.
“It’s kind of a bifurcated market,” Byun tells TechCrunch. “Either you have exchanges like Coinbase or Gemini or Bitrex that cater to the U.S. market that are highly regulated or the exchanges that cater to the non-U.S. market that are much less regulated, but that’s where most of the volume is.”
While the company is still three weeks away from launch, the founders have bold ambitions.
“In the long term, we want to be the CME (Chicago Mercantile Exchange) of crypto,” Byun tells me. “Coinbase and Binance are building this foundational structure for crypto, but I think we are too and in a sense that derivatives are at their core about risk transfer, we want to be building the foundational layer for risk transfer in the crypto markets.”
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