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Extra Crunch roundup: RapidSOS EC-1, how to prep for an M&A exit, inside Genki Forest
According to one estimate, Americans call 911 about 240 million times every year.
Sending emergency services to the right location sounds straightforward, but each 911 call is routed through one of thousands of call centers known as public safety answering points (PSAPs).
“Every 911 center is very different and they are as diverse and unique as the communities that they serve,” said Karin Marquez, senior director of public safety at RapidSOS.
One PSAP that serves New York City is a 450,000-square-foot, blast-resistant cube set on nine acres, but you also have “agencies in rural America that have one person working 24/7 and they’re there to answer three calls a day,” Marquez noted.
Founded eight years ago, RapidSOS processes more than 150 million emergencies each year across approximately 5,000 PSAPs. The company’s technology helps call centers integrate requests from cell phones, landlines and IoT devices.
“Its technology is almost certainly integrated into the smartphone you’re carrying and many of the devices you have lying around,” Managing Editor Danny Crichton writes in a four-part series that studies the company’s origins and ensuing success:
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Use discount code ECFriday to save 20% off a one- or two-year subscription
- Part 1: The early years and why a consumer app company turned to govtech and integrated services for technology and device companies.
- Part 2: How RapidSOS made its pivot and why its current business model has performed so well.
- Part 3: To transform 911 services, RapidSOS established dozens of corporate and individual partnerships.
- Part 4: Examines the future of 911 and RapidSOS in light of limited infrastructure funding.
“I’ve honestly never met a company like RapidSOS with so many signed partnerships,” says Danny, who initially wrote about the firm six years ago.
“It’s closed dozens of partnerships and business development deals, and with some of the biggest names in tech. How does it do it? This story is about how it built a successful BD engine.”
Thanks very much for reading Extra Crunch this week!
Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist
How to prepare for M&A, your most likely exit avenue
Image Credits: Reinhard Krull / EyeEm (opens in a new window) / Getty Images
The headlines might be littered with mega deals, IPOs and SPACs, but in all likelihood, you will exit your startup via a relatively smaller merger or acquisition, Ben Boissevain writes in a guest column.
“The IPO market is healthy again, but M&A still represents 88% of exits: So far this year, there were 503 IPOs and 5,203 deals,” writes Boissevain, founder of Ascento Capital.
“While it is good to strive for a billion-dollar-plus sale, a successful IPO or a SPAC deal, it is practical to prepare your startup for a smaller transaction.”
Duolingo boosts IPO price target in boon to edtech startups
Image Credits: Nigel Sussman (opens in a new window)
U.S. edtech company Duolingo bumped up its IPO price range Monday morning, targeting $95 to $100 per share, up from previous guidance of $85 to $95 per share.
“The fact that Duolingo is raising its IPO price range indicates that we are more likely on the path for a strong offering than a weak one,” Alex Wilhelm notes.
Data-driven iteration helped China’s Genki Forest become a $6B beverage giant in 5 years
Image Credits: VCG (opens in a new window) / Getty Images
Many Extra Crunch readers will not have heard of China’s fastest-growing bottled beverage company: Genki Forest is a direct-to-consumer startup that started selling its sodas, milk teas and other products just five years ago.
Today, its products are available in 40 countries and the company hopes to generate revenue of $1.2 billion in 2021. After closing its latest funding round, Genki Forest is valued at $6 billion.
Industry watchers frequently compare the upstart to giants like PepsiCo and Coca-Cola, but founder Binsen Tang comes from a tech background, having funded ELEX Technology, a social gaming company that found success internationally.
“China doesn’t need any more good platforms,” Tang told his team in 2015, “but it does need good products.”
Leveraging China’s robust distribution network, lighting-fast manufacturing capabilities and a vast pool of data that enables holistic digitization, Genki Forest sells more than 30% of its products online.
“Everything feels right about the company,” said VC investor Anna Fang. “The space, the founder, the products and the back end … they exemplify the new Chinese consumer brand.“
Sequoia’s Mike Vernal outlines how to design feedback loops in the search for product-market fit
Sequoia’s Mike Vernal joined us on TechCrunch Early Stage: Marketing and Fundraising to discuss how founders should approach product-market fit, with a specific focus on tempo.
It doesn’t mean fast in the kind of uncontrolled, reckless, crashing sense. It means fast in a sort of consistent, maniacal, get-a-little-bit-better-each-day kind of way. And it’s actually one of the top things that we look for, at least when evaluating a team: How consistently fast they move.
As China shakes up regulations, tech companies suffer
Image Credits: Nigel Sussman (opens in a new window)
Alex Wilhelm spent the end of last week and the beginning of this one looking at Chinese regulations targeting its edtech sector, aiming to understand “precisely what is going on with the various regulatory changes.”
“For startups, the regulatory changes aren’t a death blow; indeed, many Chinese tech startups won’t be affected by what we’ve seen thus far,” he writes. “But on the whole, it feels like the risk profile of doing business in China has risen.”
Automakers have battery anxiety, so they’re taking control of the supply
Image Credits: Porsche AG
To ensure a steady supply of batteries, automakers are increasingly looking to joint ventures.
“Like if you’re VW, and you say, ‘We’re going to go 50% electric by whatever year,’ but then the batteries don’t show up, you’re bankrupt, you’re dead,” Sila Nano CEO Gene Berdichevsky said in a recent interview.
“Their scale is so big that even if their cell partners have promised them to deliver, automakers are scared that they won’t.”
Pro tips from the team behind Kickstarter’s most funded app
Image Credits: AndreyPopov / Getty Images
The team at memoryOS “spent countless hours researching down the rabbit hole of crowdfunding tips and tricks” before it successfully became the most-funded app on Kickstarter, the company’s CEO, Alex Ruzh, writes in a guest column.
“We’re sharing our approach (and secrets) to building a successful crowdfunding campaign because we know just how tough it can be to launch your own product,” he writes.
SOSV partners explain how deep tech startups can fundraise successfully
Startups developing so-called deep tech often find it challenging to raise capital for various reasons.
At TechCrunch Early Stage: Marketing and Fundraising, two experienced investors, SOSV partners Pae Wu and Garrett Winther, spoke on the subject and advised startups facing a challenging fundraising path.
Checkout is the key to frictionless B2B e-commerce
Image Credits: Dilok Klaisataporn (opens in a new window)
Processing payments, credit and authorizations for B2B purchases is all handled electronically, but that’s not a panacea.
For example, volume sellers prefer to work through traditional accounts payable systems instead of paying the service fees smaller companies accept as the cost of doing business.
However, the combination of fraud and identity protection with credit handling and digital payments “creates a powerful network, the type that can not only build trust but enable one-click transactions at scale,” says Andrew Steele, an investor at Activant Capital.
Cowboy Ventures’ Ted Wang: CEO coaching is ‘about having a second set of eyes’
At TechCrunch Early Stage: Marketing and Fundraising, Cowboy Ventures’ Ted Wang spoke about why he encourages founders in his portfolio to work with executive coaches.
I don’t think you need to limit advice from people who are “been there, done that.” I think it is really important to get input from those people, but in terms of personal development, I think you want insight from people who understand how human beings listen and learn and grow.
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Cowboy Ventures’ Ted Wang: CEO coaching is ‘about having a second set of eyes’
Earlier this month, Cowboy Ventures’ Ted Wang joined us at TechCrunch Early Stage: Marketing and Fundraising, where he spoke about executive coaching and why he encourages founders in his portfolio to have a CEO coach. Wang, who has an executive coach himself, sees coaching as a key way to drive sustained personal growth, a factor that he believes separates the middling CEOs from the best ones.
Why CEOs need coaching
Just like professional athletes at the top of their game still need coaching, executives can need external validation and comment on where they are and aren’t delivering, Wang says. These insights can be tough for executives to catch on their own and might require a level of honesty that can be challenging for a CEO to expect from anyone involved with their company.
Roger Federer — the famous tennis player who has won 20 Grand Slam events — he has a coach, but he doesn’t just have a coach, he has a coach for tennis. I’m pretty sure Roger knows the rules of the game and all the different strokes he needs to hit, so why would he have a coach? The answer is really that it’s about having a second set of eyes; when you’re in the moment … it’s hard to be able to see yourself and assess yourself. (Timestamp: 4:52)
Coaches can help entrepreneurs reflect and reframe the things being communicated with them.
A good example — you might be at a board meeting and one of your board members is being critical of your VP of marketing, and one way to think of that is “Oh, OK, here are some things we need to solve for this person,” but another point of view that a coach might open your eyes to, is actually maybe this person thinks you’re not hiring the right people. (Timestamp: 8:59)
While advisers can help startups navigate tactical situations, therapists may be more focused on helping clients navigate emotional states and improve themselves. Coaching exists in a very nebulous gray area between startup advisers and licensed therapists, Wang says, but coaching is more focused on improving yourself as a business leader rather than solving a particularly vexing startup issue.
When you’re in the moment … it’s hard to be able to see yourself and assess yourself.
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Mobile.dev launches with $3M seed to catch app issues pre-production
As mobile developers build apps, they push them out into the world and problems inevitably develop, which engineers have to scramble to fix. Mobile.dev, a new startup from a former Uber engineer, wants to flip that story and catch errors before the app launches. Today, the company emerged from stealth with a beta of their solution and a $3 million seed investment led by Cowboy Ventures with participation from multiple tech luminaries.
While he was at Uber, company CEO and co-founder Leland Takamine says that he observed this workflow where an app was put out in the world, a company set up tooling to monitor the app and then worked to fix the problem as users reported issues or the monitoring software picked them up. At Uber, they began building tooling to try to catch problems pre-production.
When he started mobile.dev with COO Jacob Krupski, the goal was to build something like this, but for every company regardless of the size. “The insight that we had was that anything we could do to catch problems before releasing an app was 100 times more valuable than anything that you can monitor in production,” Takamine told me.
And that’s what the company aims to do.”Our mission at mobile.dev at a high level is to empower companies to deliver high-quality mobile applications. And more specifically, stop sacrificing users and start catching issues before you release,” he said.
He says that when he speaks to app developers about a solution like this, they are intrigued because as he says “it’s really a no-brainer” question, but unless you have the scale of a company like Uber and vast engineering resources there hasn’t been a solution like this available for the average company or individual developer. And it was that deep technical expertise he built at Uber that laid the groundwork for what they are building at mobile.dev.
The two founders launched the company a year ago and have been working with design partners and initial customers, particularly Reddit. The product goes into beta today. For now, they are the only two employees, but that is going to change with the new capital as they look to add more engineering talent.
With a very specific set of skills required to build a solution like this, it makes it even more challenging to hire diverse employees, but Takamine says that the goal is to build a diverse team. “I think it’s making sure that we look beyond just our immediate network and making sure that we’re looking at diverse sources,” he said.
The company launched during the pandemic and with just the two founders involved have been fully remote up until now, and they intend to keep it that way as they add new employees in the coming months.
“We’re going to be fully remote, I think we have a great advantage that we’re starting from remote, and it’s much more difficult to transition from an office to remote. So we’re starting from first principles here and building our culture around remote work,” he said.
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Contra wants to be the community that independent workers are missing
Whether you’re working on something new according to your Twitter bio, or self-employed, according to your LinkedIn bio, founder Ben Huffman thinks his platform, Contra, will be the best way for independent workers to explain and monetize what they are working on.
Contra is a platform that wants professionals to create profiles that show project-based identities, versus a role-based identity that one would show on LinkedIn. It’s been built for what Huffman thinks is the future: digital knowledge workers, a term he uses to describe independent tech workers who freelance for different companies or gigs.
The early adopters are independent workers who want to work or advise for a product team.
“So you can think about any type of modern-day product team consisting of like a designer, an engineer, a PM, maybe a writer, or maybe someone else distributing content. There’s a high degree of referability amongst these user types,” he said.
Users would showcase the tools they use, projects they’ve led and initiatives they’ve pushed instead of simply writing “Former Stripe Engineer” and calling it a day.
“What you don’t know is what problems they solved at Stripe,” Huffman explained, and Contra wants to give users space to explain that.
A Contra profile looks like a storefront for an independent creators’ business. The first thing you will see is project experience, with the option to toggle between services currently available for sale, recommendations from the referral network and, finally, the About page.
A goal of Contra’s, per Huffman, is to help independent workers create high-signal referral networks so they can land new opportunities and gigs. Whenever a user posts a new project experience to their resume, they can add who they worked with as a collaborator.
It’s different from LinkedIn, where you can add anyone you meet and they become a “connection.” Contra requires you to have work experience with your network, making the referral network high-signal. Contra positions referrals high-up on profiles, reminiscent of the MySpace Top 10.
Referrals as a core mechanism to get jobs could disproportionately hurt Black and brown founders, who have been left out of networks. But Huffman says that Contra doesn’t only rely on referrals, it also helps position someone as more than their resume.
“Most resumes are filtered out by AI today and have historically disadvantaged BPOC candidates,” he said. “With a project focus instead of roles and education credential-focus on the identity, we help undiscovered talent get ahead.”
Huffman, who experienced resume bias first-hand as a college dropout with no-credentials from a rural area, thinks that his tool can combat bias in an effective way. The best-case scenario would be if Contra could help a talented designer based in Minneapolis get an opportunity in a city like San Francisco or New York by showcasing their work.
But Contra has ambition to be more than just the latest startup to aim at LinkedIn, Huffman tells TechCrunch. Beyond being a professional network, it wants to also be a place where independent workers can make money for their services and get inbound customers. He describes Contra as a LinkedIn meets Shopify for independent workers.
In other words, Contra is a profile that independent workers can build and then monetize off of, as well as track engagement on how certain services of theirs might be in more demand than others.
“We’re trying to enable people to monetize the value they create, versus the time they spend in places,” says Huffman. The goal here is to “enable people to build these identities, and give them infrastructure to be successful as an independent worker. Contra integrates with Stripe to bring on payments infrastructure, letting workers actually sell their services on the platform.
From an independent worker’s perspective, the internal view offers analytics to understand what the public is looking at on their profile, from what services are most in demand to what projects get the most attention. The analytics, which are private to everyone except the user, also helps workers understand what the conversion rate is once people come to their platform.
It is free to make money and a profile on Contra, which differentiates it from freelance marketplaces like UpWork and Fiverr, which take a percent cut of earnings. Since Contra doesn’t charge a commission on earnings, it monetizes through a SaaS subscription, $29 a month, that includes benefits such as same-day payouts and higher visibility in the platform to eventually get better opportunities.
A potentially large new competitor might be from LinkedIn itself, which is developing a new service called Marketplaces to help freelancers find and book work. Facebook is also working on a tool related to freelancers. Huffman sees Contra’s focus on professional identity as a competitive advantage, and the fact that the tool might be taking commissions.
“It makes what we are doing that much more relevant,” he said.
Luckily, the startup has raised a $14.5 million Series A round to meet its competition head on. The financing event was led by Unusual Ventures, with participation from Cowboy Ventures and Li Jin’s recently announced Atelier Ventures.
Contra wouldn’t disclose the number of users it currently has but did confirm that the total is “in the six-figure range.”
The cash will be used to increase the speed in which it can ship features, as well as build out an ambassador program, in which it will pay users $1,000 a month to test out the product and support the shift to independent work.
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Drata raises $3.2M for its compliance audit platform
Drata, a startup that helps businesses get their SOC 2 compliance, today announced that it has raised a $3.2 million seed round led by Cowboy Ventures and that it is coming out of stealth. Other investors include Leaders Fund, SV Angel and a group of angel investors.
Like similar services, Drata helps businesses automate a lot of the evidence collection as they prepare for a SOC 2 audit. The focus of the service is obviously on running tests against the SOC 2 framework to help businesses prepare for their audit (and to prepare the right materials for the auditor). To do so, it features integrations with a lot of standard online business tools and cloud services to regularly pull in data. One nifty feature is that it also lets you step through all of the various sections of the SOC 2 criteria to check your current readiness for an audit.
At the end of the day, tools like Drata are meant to get you through an audit, but at the same time, the idea here is also to give you a better idea of your own security posture. For that, Drata offers continuous control monitoring, as well as tools to track if your employees have turned on all the right controls on their work computers, for example. Because companies have to regularly renew their certification, too, Drata can help them to continuously collect all of the data for their renewal, something that previously often involved boring — and quickly forgotten — manual tasks, like taking screenshots of various settings every month or so.
Image Credits: Drata
Drata co-founder and CEO Adam Markowitz worked on the space shuttle engines after graduating from college, and then launched his own startup, Portfolium, when that program ended. Portfolium, which helped students showcase their work in the form of — you guessed it — a portfolio, eventually sold to Instructure in 2019, where Markowitz stayed on until he launched Drata last June, together with a group of former Portfolium founders and engineers. Besides Markowitz, the co-founders include CTO Daniel Marashlian and CRO Troy Markowitz. It was the team’s experience seeing companies go through the audit process, which has traditionally been a drawn-out and manual process, that led them to look at building their own solution.
The company already managed to sign up a number of customers ahead of its official launch. These include Spot by NetApp, Accel Robotics, Abnormal Security, Chameleon and Vareto. As Markowitz told me, even though Drata already had customers that were using the service to prepare for their audits, the team wanted to remain in stealth mode until it had used its own tool to go through its own audit. With that out of the way, and Drata receiving its SOC 2 certification, it’s now ready to come out of stealth.
As the number of companies that need to go through these kinds of audits increases, it’s maybe no surprise that we’re also seeing a growing number of companies that aim to automate much of this process. With that, unsurprisingly, the number of VC investments in this space also continues to increase. In recent months, Secureframe and Strike Graph announced their own funding rounds, for example.
Image Credits: Drata
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LaunchNotes raises a $1.8M seed round to help companies communicate their software updates
LaunchNotes, a startup founded by the team behind Statuspage (which Atlassian later acquired) and the former head of marketing for Jira, today announced that it has raised a $1.8 million seed round co-led by Cowboy Ventures and Bull City Ventures. In addition, Tim Chen (general partner, Essence Ventures), Eric Wittman (chief growth officer, JLL Technologies), Kamakshi Sivaramakrishnan (VP Product, LinkedIn), Scot Wingo (co-founder and CEO, Spiffy), Lin-Hua Wu (chief communications officer, Dropbox) and Steve Klein (co-founder, Statuspage) are participating in this round.
The general idea behind LaunchNotes is to help businesses communicate their software updates to internal and external customers, something that has become increasingly important as the speed of software developments — and launches — has increased.
In addition to announcing the new funding round, LaunchNotes also today said that it will revamp its free tier to include the ability to communicate updates externally through public embeds as well. Previously, users needed to be on a paid plan to do so. The team also now allows businesses to customize the look and feel of these public streams more and it did away with subscriber limits.
“The reason we’re doing this is largely because [ … ] our long-term goal is to drive this shift in how release communications is done,” LaunchNotes co-founder Jake Brereton told me. “And the easiest way we can do that and get as many teams on board as possible is to lower the barrier to entry. Right now, that barrier to entry is asking users to pay for it.”
As Brereton told me, the company gained about 100 active users since it launched three months ago.
Image Credits: LaunchNotes
“I think, more than anything, our original thesis has been validated much more than I expected,” co-founder and CEO Tyler Davis added. “This problem really does scale with team size and in a very linear way and the interest that we’ve had has largely been on the much larger, enterprise team side. It’s just become very clear that that specific problem — while it is an issue for smaller teams — is much more of a critical problem as you grow and as you scale out into multiple teams and multiple business units.”
It’s maybe no surprise then that many of the next items on the team’s roadmap include features that large companies would want from a tool like this, including integrations with issue trackers, starting with Jira, single sign-on solutions and better team management tools.
“With that initial cohort being on the larger team size and more toward enterprise, issue tracker integration is a natural first step into our integrations platform, because a lot of change status currently lives in all these different tools and all these different processes and LaunchNotes is kind of the layer on top of that,” explained co-founder Tony Ramirez. “There are other integrations with things like feature flagging systems or git tools, where we want LaunchNotes to be the one place where people can go. And for these larger teams, that pain is more acute.”
The fact that LaunchNotes is essentially trying to create a system of record for product teams was also part of what attracted Cowboy Ventures founder Aileen Lee to the company.
Image Credits: LaunchNotes
“One of the things that I thought was kind of exciting is that this is potentially a new system of record for product people to use that kind of lives in different places right now — you might have some of it in Jira and some in Trello, or Asana, and some of that in Sheets and some of it in Airtable or Slack,” she said. She also believes that LaunchNotes will make a useful tool when bringing on new team members or handing off a product to another developer.
She also noted that the founding team, which she believes has the ideal background for building this product, was quite upfront about the fact that it needs to bring more diversity to the company. “They recognized, even in the first meeting, ‘Hey, we understand we’re three guys, and it’s really important to us to actually build out [diversity] on our cap table and in our investing team, but then also in all of our future hires so that we are setting our company up to be able to attract all kinds of people,” she said.
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8 edtech investors talk re-skilling, digital universities, ISAs and other post-pandemic trends
We know that the coronavirus has brought unprecedented attention to the edtech market, but now what? What happens when schools are no longer clambering toward an overnight solution? When the surges slow? When our world reopens and there doesn’t need to be a full-suite of at-home solutions for kids and parents?
As the next wave of edtech companies are being built to address these novel use cases, investors are looking for solutions that aren’t simply pandemic-era important. To some, that means skipping the latest videoconferencing platform play and maybe cutting a check to a digital-only university. To others, it means looking for the platform that will educate a diverse range of users, especially the unemployed.
A spree of recent consolidation within the market shows that there is a need for a better plumbing system in the fragmented world of edtech.
We turned to eight investors in the space to understand which subcategories are shaping up to be the future, following up on our first survey last fall when the world was very different, and another in early April when less was understood about the pandemic. Our goal here was to find nonobvious ways innovation is living within the noisier-than-ever sector. The result? Intel on nascent trends, deal-makers and what adaption looks like amid a time of uncertainty.
Today you’ll get a deep dive on the nerdy stuff from the following investors:
- Reach Capital’s Jennifer Carolan, Shauntel Garvey and Chian Gong
- Ian Chiu, Owl Ventures
- Jan Lynn-Matern, Emerge Education
- David Eichler, TCV
- Rebecca Kaden, Union Square Ventures
- Jomayra Herrera, Cowboy Ventures
Investors differed on which subcategories benefitted the most, but it’s clear that the pandemic didn’t lift up the entirety of the edtech space. One investor noted that the pandemic made them even less interested in ISAs, while other venture capitalists noted how valuable the financing instrument is now, more than ever before.
We got into some of the big themes that have risen in the past few months: online learning, re-skilling, ISAs, virtual universities and where each investor draws their line around these categories.
A common theme throughout the commentary now is that the opportunity presented by coronavirus is not being met with complacency, but instead a push to grow better. Investors talked about innovation needs to account for childcare, cost, digital infrastructure, and the addressable population, pandemic or not.
I think that’s enough teasing. Now, onto the answers.
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Cowboy VC’s Aileen Lee: Your coronavirus scenario planning should be more conservative
The tech industry (and the world at large) is not experiencing temporary anxiety — the uncertainty we’re all coping with is the new normal.
Sudden shifts in behavior have made some startups targeting slow-moving, old-school industries more relevant than they could have imagined, such as those in telehealth, distance learning and remote work. Most, however are seeing massive decreases in revenue, forcing them to cut costs and even lay off teams to slash burn rates. Other startups simply won’t be here in three to six months.
Cowboy Ventures founder and managing partner Aileen Lee, who coined the term “unicorn,” says tech companies going through scenario planning need to begin thinking long-term.
“We’ve spent the last month scenario planning with our portfolio companies, and in most cases, we’ll have conversations about what these scenarios can include,” said Lee. “And when we look at the planning around those scenarios, they often don’t feel conservative enough. Most entrepreneurs are optimists, and we are, too! But it seems safer to have more conservative plans [and start expecting] that this is going to impact us for longer and be worse than we expected.”
Lee and Cowboy Ventures partner Ted Wang joined TechCrunch on Tuesday for our first episode of Extra Crunch Live, a virtual speaker series for Extra Crunch members. In a live Q&A that included questions from myself and the Extra Crunch audience, Wang and Lee covered a wide range of topics, including PPP loans, advice for business leaders around layoffs, the right time to seek funding and the right firms from which to seek that funding, how to pitch during a downturn and which sectors in particular Cowboy is interested in financing right now.
You can check out the best insights from the call, or catch up on the full conversation via the YouTube embed below.
We have several outstanding guests, including Charles Hudson, Mitch and Freada Kapor, Mark Cuban, Roelof Botha, Hunter Walk and Kirsten Green, joining us on Extra Crunch Live over the next few weeks. Sign up for Extra Crunch to get access to all of them.
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6 VCs explain why seed investors now favor enterprise startups
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
Today we’re digging into seed-stage companies, the vanguard of the venture market. In particular, we’re trying to understand why the ratio of seed deals now favor enterprise startups over their consumer-focused brethren. The fact that seed investors recently inverted their preferences, cutting more checks to enterprise (B2B) startups in 2019 than consumer-oriented companies (B2C) was news.
We wrote about the trend here, as regular readers will recall.
To better understand what’s going on, I spoke with a number of early-stage venture investors who recently dropped by Equity, came highly recommended by peers, and several I know personally. The goal was to get a handful of inputs from different firms to get under the skin of the trend.
What in the hell is going on in seed? Let’s find out.
Why are enterprise seed deals on top?
This morning we’ll hear from Jenny Lefcourt at Freestyle Capital, Jomayra Herrera of Cowboy Ventures, Hunter Walk from Homebrew, Iris Choi of Floodgate, Sarah Guo from Greylock and Ajay Agarwal of Bain Capital Ventures. As you can see, we picked a list of investors form firms of different sizes, theses and focus. However, each investing group either focuses on early-stage investments that include seed deals or dabbles in them.
Here’s what we want to know: why did the the majority of seed deals swap from consumer-focused startups to enterprise-focused deals?
Our investing group detailed a number of explanations, a handful of which echoed each other. To best convey their thinking, we’ll quote each investor at moderate length. If you are in a hurry, the most common point made against consumer-focused seed deals is go-to-market difficulty in the current market.
Other reasons include price, secular changes to the technology landscape, and the changing experience profile of the investing class themselves. (Minor edits made to select responses for clarity.)
Freestyle’s Jenny Lefcourt said via email that consumers are an increasingly difficult cohort to sell to, because they “became fickle with the proliferation of VC-backed, consumer-focused startups over the past few years.” As a result, consumers became “harder and more expensive to acquire and even harder to retain,” meaning higher customer acquisition costs (CAC) and lower lifetime value (LTV).
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Final ticket release to the 14th Annual TechCrunch Summer Party
One of Silicon Valley’s most fun and enduring traditions — the 14th Annual TechCrunch Summer Party — takes place on July 25. If you don’t have a ticket yet, know this: We just released the last batch of tickets. Once they’re gone, that’s it. No party for you. Don’t miss out on a night of fun and opportunity — buy your ticket today.
The Park Chalet, San Francisco’s coastal beer garden, provides a picturesque setting (ocean views anyone?) for a casual evening celebrating the early-startup spirit. Hang out and enjoy local craft beer, cocktails, delicious food and great conversation with other fearless tech entrepreneurs.
TechCrunch parties provide a relaxed way to connect and network, and they’re known as a place where startup magic happens. Who knows? You might meet your future co-founder or funder. Aaron Levie and Dylan Smith, founders of Box, met one of their first investors at a TechCrunch party.
It shouldn’t be too difficult to chat up an investor since our lead VC partner, Merus Capital, will be in the house, along with August Capital, Battery Ventures, Cowboy Ventures, Data Collective, General Catalyst and Uncork Capital.
No TechCrunch event would be complete without exciting startups showcasing their tech and talent.
Here’s the when, where and how:
- When: July 25 from 5:30 p.m. – 9:00 p.m.
- Where: Park Chalet in San Francisco
- How much: $95
As always, you have a chance to win great door prizes, including TechCrunch swag, Amazon Echos and tickets to Disrupt San Francisco 2019.
The 14th Annual TechCrunch Summer Party takes place on July 25, and this is the last ticket release. Don’t miss out on a convivial evening of food, drink, connection and possibility in the company of your entrepreneurial peers. Buy your ticket right here.
Want a free ticket to Disrupt SF?
Volunteer for the Summer Party and work with the TechCrunch team for a few hours. Sign up to volunteer here.
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