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Announcing the TC Early Stage Pitch-Off startups
Next week, TechCrunch is hosting Early Stage — a virtual bootcamp for founders to gain the critical insight needed to launch and scale their companies. Day one is all about how-to’s. What about day two? April 2 is the inaugural TC Early Stage Pitch-Off featuring 10 exceptional early-stage startups.
The Pitch-Off is split into two segments. For the semifinals, each company will pitch for five minutes followed by a Q&A with our expert panel of judges. Check them out here, you might see some names you recognize. Three startups will make it into the final round — same pitch but a new batch of judges with a deeper Q&A.
We know you are excited to see who has made it. Tune in on April 2 to watch TC’s first Early Stage Pitch-Off event. Without further ado:
Session 1: 9:00 a.m. – 9:50 a.m. PDT
Clocr (Austin, Texas) — Clocr provides an all-in-one digital legacy planning and disbursement platform backed by patent-pending security.
Crispify (Tel Aviv, Israel) — Crispify provides air-quality monitoring and management solutions for mobility-as-a-service fleets like Uber, Avis and Zipcar.
Fitted (Philadelphia, Pennsylvania) — Fitted is the ultimate closet management service. [Fitted] combines a subscription laundry service with integrated technology that assists urban dwellers discover, clean and donate their clothes.
hi.health (Vienna, Austria) — hi.health provides zero friction financing for out-of-pocket health expenses, currently in Germany. The offering enables direct reimbursement solutions for pharmacies, medical product and service providers — where previously the insured person had to spend their own money and then file for reimbursement.
Pivot Market (Miami, Florida) — Pivot Market is a B2B marketplace where consumer brands gain immediate distribution in physical stores. Brand rent spaces inside B&M stores and stores earn money by managing those spaces on behalf of the brands.
Session 2: 10:00 a.m. – 10:45 a.m. PDT
Soon (Salt Lake City, Utah) — Soon’s patent-pending cash flow algorithm automates investing from start to finish, with the best combination of simplicity and wealth generation in a personal finance solution. Soon functions across all assets from your checking account to your savings and more.
Nalagenetics (Singapore City, Singapore) — Nalagenetics designs and develops preemptive genetic tests for developing markets. By combining genetic, clinical and behavioral data from patients, Nalagenetics builds localized risk-prediction models for minorities, starting with Asian populations
The Last Gameboard (Boulder, Colorado) — Gameboard is a gaming device and platform that unleashes the power of digital media with tactile movements of physical game pieces, creating a new genre of phygital gaming for tabletop fans.
Attention Quotient by Mindwell Labs (New York, New York) — Mindwell Labs is a precision healthcare technology startup. Its first consumer product is AQ
— the first personalized mental fitness tracking and training app that uses our unique biomarkers to measure and improve attention.
FLX Solutions (Bethlehem, Pennsylvania) — FLX Solutions is pioneering functional applications for robotics with highly intelligent robots that are miniaturized to operate in spaces that humans and traditional robots cannot easily access. Our first product, The FLX BOT, is a patented 1″ diameter snake-like robot that is able to fit into these spaces to inspect, map, and then autonomously perform any required maintenance.
Finals: 11:00 a.m. – 11:30 a.m. PDT
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Y Combinator widens its bet in edtech in latest batch
Y Combinator is slowly growing its stake in education companies, as the sector balloons with newfound demand from remote learners. In its latest batch, the famed accelerator had its highest number of edtech startups yet: 14 companies from around the world, working on everything from teacher monetization to homework apps to ways to train software engineers in an affordable fashion.
While Y Combinator isn’t the definitive source on what success in early-stage startups looks like — it quite literally has a post-mortem dinner after Demo Day to celebrate failure — it does serve well in providing an illustrative glance of how entrepreneurs are thinking about certain sectors in a given moment in time. Managing director Michael Seibel said that the number of startups in each sector isn’t a Y Combinator choice, but is in line with the concentration of applicants in each sector. In other words, YC is backing more edtech companies because more edtech companies are applying to the accelerator.
One dynamic worth pointing out here is that, of the 14 edtech startups in this batch, only two have a woman founder, UPchieve and Degrees of Freedom. Y Combinator provided aggregate batch diversity, stating that 19% of companies in W21 include a woman founder, and 10% of founders in the entire batch are women. It’s a slight uptick from the last batch, but not an immense jump.
diversity of the @ycombinator w21 batch:
19% of the companies have a woman founder (16% S20)
— natasha (@nmasc_) March 23, 2021
With this context, I will use the current edtech cohort within the batch to sketch out one version of the future of education in the eyes of this specific demographic of early-stage founders.
Internationalization is a factor
The current YC batch has 50% of its startups based outside of the United States, a first for the accelerator. The growing internationalization of Y Combinator might help partially explain the uptick in edtech companies. The growth of companies like India’s Byju’s, one of the most valuable edtech companies in the world, shows how consumer spending in education companies internationally is impressive, and it’s clear that early-stage edtech startups are taking note.
Only two of Y Combinator’s 14 edtech investments are from the United States, with the highest concentrations in South America and India.
- Manara: A marketplace to connect Middle East talent to tech jobs.
- Prendea: Peru-based startup that offers live, online after-school classes for Spanish-speaking kids.
- Avion School: The education startup teaches Filipino students to be remote software engineers around the world.
- Poliglota: A language school for Latin America.
The future is consumer over B2B
The vast majority of startups in the current edtech batch charge consumers, instead of institutions or enterprises, for services. In some ways, edtech startups going for consumers instead of institutions isn’t new: it’s always been easier to convince a parent instead of a public school to pay for a service simply due to red tape. Consumers are an easier way to reach a venture-demanded scale, and that’s always been a truth of edtech.
- Kidato: Targeting the middle class of Africa, Kidato is an online school for K-12 students. The startup has a focus on quality and affordability.
- Codingal: An afterschool program for Indian kids to learn coding.
Still, it’s noteworthy that we’re not seeing too much experimentation in business model here, despite the pandemic and that some schools have begun to invest more in edtech services.
A potential hurdle that these companies might face is access. If it costs to use your service, you can only educate so many people from specific income groups. As a result, income share agreements, or ISAs, were especially present in this batch, a set-up that allows a student to hold off on paying for an education until they are employed. Upon employment, said student has to give a percentage of their income to the company until their debt is paid. While the model is controversial, it was popularized by YC graduate Lambda School and continues to be one way to make the upfront cost of school more popular.
- Pragmatic Leaders: The startup wants to build a more cost-effective MBA, which is free until the student is hired post-grad.
- Awari: The São Paulo-based startup uses income share agreements to help students in Brazil afford a tech education. Courses range from data analytics to product UX and growth marketing.
Acadpal, mentioned later, is an outlier here selling to schools in India. Before I move on to our next section, I do want to shout out two startups that I think embody the most ambitious bets in business model:
- UPchieve: A nonprofit for low-income high school students to access free, 24/7 virtual tutoring.
- Degrees of Freedom: The startup wants to offer low-cost higher education experience that is flexible and community-oriented. It costs about $9,000 to attend.
Zoom University lives on
Despite the struggles of “Zoom University,” this batch of edtech founders clearly believe that the future of instruction is through online courses. This was perhaps the most overwhelming thread tying together all the companies in the sector: a bet on one of these companies is a bet that remote education will become status quo.
As previous sections show, a number of startups are offering online coding platforms for specific demographics. Now, I always have my inbox filled with different “Lambda School for X” startups, so seeing a variety of these startups pop up yet again isn’t exactly exciting. However, the pandemic did show how much community and network enhances a school experience. If these online schools can pull off strong partnerships with employers and alumni, I think there’s a huge opportunity here.
- Turing College: The Lithuania-based online data science school uses income-share agreements to bring affordability to education.
- Coderhouse: An Argentina-based startup that wants to build a live, online tech education for the Spanish-speaking populations of the world.
That said, where there’s big opportunity there’s always a lot of competition. These startups will have to find a way to differentiate themselves, like the one below:
- Unschool: The startup wants to tie higher education to employment outcomes, so it’s building a platform to increase completion rates in India with a guarantee of internships.
There were bets on the infrastructure of how courses get done online, from course creation to completion.
- Pensil: A platform that helps YouTube teachers in India monetize their courses.
- Acadpal: A learning app for teachers in India to create and share homework, and for students to complete and discuss assignments.
- CreatorOS – Questbook: This company wants to make it easier for teachers to teach online courses. It gives professionals the tools they need to launch a course within minutes, with a focus on a bite-sized end-product.
In conclusion
To end, the edtech startups in the current YC batch are more complementary to each other than competitive. For a homework platform like Acadpal to succeed, it would be good news for a company like Codingal, which helps bring afterschool learning online, to get funding as well. For Unschool, which ties higher-ed to employment, a company like Degrees of Freedom could be a key partner or integration for students from a low-income background.
Edtech is growing — and fast — so the fragmentation of different plays is somewhat expected. And while this batch’s hard work starts now, it’s illuminating to understand where the earliest entrepreneurs out there are seeing promise.
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How and when to hire your first product manager
In the world of early-stage startups, job titles are often a formality. In reality, each employee may handle a dozen responsibilities outside their job description. The choose-your-own-adventure type of work style is part of the magic of startups and often why generalists thrive here.
However, as a company progresses and the team grows, there comes a time when a founder needs to carve out dedicated roles. Of these positions, product management might be one of the most elusive — and key — roles to fill.
Product management might be one of the most elusive — and key — roles to fill.
We spoke to startup founders and operators to get their thoughts about how and when they hired their first product manager. Some of the things we talked about were:
- Which traits to look for.
- Why it’s important to define the role before you look for your best fit.
- Whether your new hire needs to have a technical background.
- The best questions to ask in an interview.
- How to time your first hire and avoid overhiring.
Don’t hire for the CEO of a product
Let’s start by working backward. Product managers often graduate into a CEO role or leave a company to become a founder. Like founders, talented product managers have innate leadership skills and are able to effectively and clearly communicate. Similarly, both roles require a person who is a visionary when it comes to the product and execution.
David Blake was a product manager before he became a serial edtech founder who created Degreed, Learn In, and most recently, BookClub. He says that experience helped him launch the first prototype of Degreed and attract first clients.
“The must-have skill is the ability to put the team’s best wisdom in check and inform the product decisions with users and potential clients to inform what you are building,” he said. The person “must also be able to take the team’s mission and develop and sell that narrative to users and potential clients. That is how you blaze a new trail, balance risk, while avoiding building a ‘faster horse.”
The overlapping synergies between PMs and founders is part of the reason why the role is so confusing to define and hire for. Ken Norton, former director of product at Figma who recently left to solo advise and coach product managers, says companies can start by defining what PMs are not: The CEO of the product.
“It’s about not handing off the product responsibilities to somebody,” he said. “You want the founder and the CEO to continue to be the evangelist and visionary.” Instead, the role is more about day to day “blocking and tackling.” Norton wrote a piece more than 15 years ago about how to hire a product manager, and it’s still an essential read for anyone interested in the field.
Define the role and set your expectations
Product managers help translate all the jugglers within a startup to each other; connecting the engineer with marketing, design with business development and sales with all the above. The role at its core is hard to define, but at the same time is the necessary plumbing for any startup that wants to be high-growth and ambitious.
While a successful product manager is a strong generalist, they have to have the ability to understand and humanize technical processes. The best candidates, then, have some sort of technical experience as an engineer or otherwise.
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SpineZone is the latest health tech startup to raise millions in the musculoskeletal space
SpineZone is a startup that creates personalized exercise programs and treatment for neck and back pain. The company uses an online platform and in-person clinics to deliver a curriculum that, ideally, helps patients avoid the need for prescription drugs, injections and surgeries, and providers then avoid the cost of all of the above. Co-founded by brothers Kian Raiszadeh and Kamshad Raiszadeh, the company tells TechCrunch that it has raised $12 million in a Series A round led by Polaris Partners and Providence Ventures, with participation from Martin Ventures.
At its core, SpineZone is a virtual physical therapy platform augmented by in-person clinics. The latter bit is important because it takes a video repository, which has health outcomes baked into it, and helps get those same users some real-life support.
Patients can log onto the site, either through smartphone or laptop, and then answer a series of questions around pain and risk factors. Then, patients can go through a series of exercises. These exercises are created in tandem with professionals, and are based on peer-reviewed and evidence-based articles on musculoskeletal health.
Beyond this digital archive of videos, SpineZone offers an in-person clinic option to help patients practice these exercises. Off of this strategy, the startup claims that it has “1 million lives under management.”
SpineZone’s value proposition is that it helps payers and providers, whether that be employers, clinics or health plans such as Cigna or Aetna, avoid placing their patients in surgeries, which are expensive. By taking care of pain issues before they bubble up, SpineZone says that its current partners have been able to have a 50% reduction in surgery rate (it’s worth noting that COVID-19 could also play a role in this because it is high-risk to enter a medical facility).
Partners are happy because footing the bill of a non-operative procedure is remarkably cheaper than a non-operative procedure.
The cost saving that a medical center could endure can be in the millions. For example, the Sharp Community Medical Group saved $3.4 million in cost savings after working with SpineZone for two years.
SpineZone’s business model is a smidge more complicated than your classic SaaS fee. For example, it charges a clinic based on the number of members it serves per month, and also shares in the downside. For example, if SpineZone promises to get a clinic to $12 million in spend from $15 million, and the cost ends up being $17 million, the company will pay the clinic a portion of the difference. Alternatively, if SpineZone got the clinic to $10 million, even below estimates, it shares in the upside.
SpineZone joins a cohort of health tech startups that focus on musculoskeletal conditions. Venture-backed competitors include Peerwell, Force Therapeutics and Hinge Health, which was most recently valued at $3 billion, with plans to go public.
In order to win, many startups, SpineZone including, need value-based care to replace fee-for-service care. Value-based care is the idea that doctors are paid for outcomes instead of the number of times you enter a doctor’s office. The end goal is that this format creates monetary incentives around getting to an outcome faster: If a doctor is going to make $30,000 on fixing a knee, regardless of whether it takes two appointments or 20 appointments, they might as well do a more thorough job upon check-up instead of elongating the process. The flipside of this, of course, is that doctors might optimize for outcome volume and speed rather than the quality of the result itself.
While SpineZone’s early traction is promising, the healthcare ecosystem still has a ways to go before value-based models take precedence. Right now, Kian Raiszadeh estimates that 10 to 20% of revenue in a medical center comes from value-based care. SpineZone is projecting that it will get to 50% of revenue in the near future.
“And that’s the biggest evolution and tallest lift that we’re expecting,” he said.
Early Stage is the premiere ‘how-to’ event for startup entrepreneurs and investors. You’ll hear first-hand how some of the most successful founders and VCs build their businesses, raise money and manage their portfolios. We’ll cover every aspect of company-building: Fundraising, recruiting, sales, legal, PR, marketing and brand building. Each session also has audience participation built-in – there’s ample time included in each for audience questions and discussion.
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How capital-as-a-service can help you get your first check in 2021
“A lot of founders mix up raising money with making money.”
This quote, which Career Karma founder Ruben Harris mentioned off-hand on a phone call with me, has been on my mind for months. In fact, raising money can cost you money, in the form of that sweet, sweet ownership and equity.
That’s why Clearbanc, a startup I have covered for years, has always had a compelling pitch.
The company, co-founded by Michele Romanow and Andrew D’Souza, positions itself as an alternative equity-free capital solution for early-stage founders. Flexing its “20-minute term sheet” the startup uses an algorithm to shift through a startup’s data, and if it has positive ad spend and positive unit economics, they make an investment worth anything from $10,000 to over $10 million. It makes money through a revenue-share agreement versus an equity stake.
“While we’ve invested in over 4,000 businesses using this model, we’ve also turned away over 50,000 who weren’t at this scale or level of repeatability,” D’Souza tells TechCrunch. So, the startup told me this week that they have raised $10 million to create a new product: ClearAngel.
The startup is trying to back anyone with an online business that has early revenue, but pre-broad traction. Clearbanc wants to replace friends and family money, a concept that D’Souza says is “quite elitist,” with its own version of an angel check, while also offering founder services such as supply chain analysis, introductions to networks and competitive landscape analysis.
The startup just needs to make around $1,000 in monthly revenue to qualify for cash. In return for an investment between $10,000 to $50,000, founders have to pay up to 2% of their revenue over four years.
Clearbanc’s repayment works for some startups, but for others, a traditional bank loan could work better. Its biggest hurdle, I’d argue, is that if a startup has great revenue already, you might not want to take a revenue-share agreement loan.
As for if a startup takes ClearAngel capital and doesn’t make the minimum revenue?
“Then the ClearAngel product isn’t working,” he said. “There are bound to be some companies who still can’t make it, that’s the risk we take.”
Alternative capital has pros and cons, just like venture capital has pros and cons. If the end goal is to become a billion-dollar business, what’s the best route to do that? Is taking a revenue-share agreement going to hurt your chances as a pre-seed startup trying to raise capital? Does YC care at all?
Those are some of my biggest questions, and we’ll explore all (and more!) in my alternative financing panel next week for TC Sessions: Justice. It costs $5 to attend the entire conference, and speakers include Backstage Capital’s Arlan Hamilton and Congresswoman Barbara Lee.
Remember that you can get Startups Weekly in your inbox before anyone else, if you subscribe. It’s free! As always, you can find me @nmasc_ on Twitter or e-mail me at natasha.m@techcrunch.com. That is free too!
Coinbase files to go public
After being valued at $100 billion in the secondary markets, Coinbase has finally filed to go public. The S-1, as Winnie founder Sara Mauskopf tweeted, is #goals. The crypto unicorn, as my colleague Alex Wilhelm notes, grew just over 139% in 2020, a massive improvement on its 2019 results.
Here’s what to know:
- The startup is pursuing a direct listing (not a SPAC, which feels important to note these days).
- Five takeaways from Coinbase’s S-1, from how stable its revenue is to what it views as its biggest competition.
Other notes:
- USV, one of the biggest stakeholders in the company, has been aggressively selling off shares ahead of the IPO.
- If Coinbase is worth this much, what is a fair valuation for Stripe?
SAN FRANCISCO, CA – SEPTEMBER 07: Coinbase Co-founder and CEO Brian Armstrong speaks onstage during Day 3 of TechCrunch Disrupt SF 2018 at Moscone Center on September 7, 2018 in San Francisco, California. (Photo by Steve Jennings/Getty Images for TechCrunch)
Mobility-as-a-service
I caught up with Eric Eldon, managing editor at TechCrunch and former Startups Weekly writer, about the recent work he’s been doing with Kirsten Korosec, our transportation editor.
Here’s what he had to say: Startup employees may not be going into the office as often again — or ever. But everyone will still need to go places, or at least want to! How will they do it? What will we do? How will our altered set of needs and wants reshape cities, right as new technologies are fundamentally altering transportation, too? We’re going to be covering this topic in-depth this year, as we all figure out how to go back to work.
Other reading:
- 10 investors predict MaaS, on-demand delivery and EVs will dominate mobility’s post-pandemic future
- Can solid state batteries power up for the next generation of EVs?
- And next week, they are putting together a piece on the changes on the real estate and proptech side
Crazy ride on the night by car. Image Credits: franckreporter/Getty Images.
Spain wants startups to succeed on its soil
The Spanish government, led by Prime Minister Pedro Sanchez, has announced plans to turn itself into an entrepreneurial nation. The Startup Act is the first piece of dedicated legislation meant to help create tech innovation within Spain. The goals are to promote innovation, new capital through domestic and foreign investments, and to seed the future of Spain as a hub for new companies.
Here’s what to know: Driving innovation can start with relaxing on regulatory concerns.
Among a package of some 50 support measures, the entrepreneurial strategy makes a reference to “smart regulation” and floats the idea of sandboxing for testing products publicly (i.e. without needing to worry about regulatory compliance first).
Other news this week:
- Lisbon’s startup scene rises as Portugal gears up to be a European tech tiger
- Dear Sophie: Which immigration options are the fastest?
Image Credits: MHJ (opens in a new window) / Getty Images
Some personal news
As loyal Equity listeners may have already noticed, we’ve been quietly experimenting with the concept of adding on a third show to our weekly production. This week, we told the world! Along with our current shows, which help listeners start and end the week with tech news, we’re going to bring on a Wednesday deep dive into a topic, subject area or person. Our first mid-week episode went live this week, and it was all about space (so yes, expect a lot of puns and Elon jokes).
The show is about to celebrate its four-year anniversary, and I’m about to celebrate my one-year anniversary as a co-host. We’re all so thankful for your support, and can’t wait to bring you more laughs and learnings.
Our latest episodes:
- Why are we still dating LinkedIn in 2021?
- SpaceX is really just SPAC and an ex
- Everyone is going public so what’s wrong with your startup?
Across the week
Seen on TechCrunch
The startup bootcamp you’ve always needed is finally here
Scoop: VCs are chasing Hopin upwards of $5-6B valuation
Lisbon’s startup scene rises as Portugal gears up to be a European tech tiger
Contra wants to be a community for independent workers
Seen on Extra Crunch
Ironclad’s Jason Boehmig: The objective of pricing is to become less wrong over time
As BNPL startups raise, a look at Klarna, Affirm and Afterpay earnings
4 essential truths about venture investing
And that’s the jam-packed week! As an insider tip to those that subscribe, I’m starting to cover health tech (along with edtech) for the TC team. So throw me the smartest person you know on the topic, and extra points if that’s you.
N
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Does SoftBank have 20 more DoorDashes?
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
Natasha and Danny and Alex and Grace were all here to chat through the week’s biggest tech happenings. This week felt oddly comforting from a tech news perspective: Facebook is copying something, early-stage startup data is flawed enough to talk about and sweet DoorDash is buying robots for undisclosed sums.
So, here’s a rundown of the tech news we got into (as always, jokes aren’t previewed so you’ll have to listen to the actual show to get our critique and Award Winning Analysis*):
- Ethena raising $2 million more for corporate training that is not awful, and Zeta raising $1.5 million for couples’ banking. Natasha has been killing the early-stage beat lately.
- How seed data could be getting harder and harder to parse from Alex’s desk, and why VC data in general is dicey, from Danny’s. We discuss if directional data is useful, and why the limited numbers could have a cultural impact on signal.
- Reddit raises $250 million, but doesn’t tell us who the investors are and what the money is precisely going to. Still, the company has had quite a year so far, so the capital comes at an interesting time.
- Justo, an online grocery based in Mexico, raises $65 million as the pandemic continues to shake up the way we live and shop.
- DoorDash buys a salad robot, which brings Natasha nostalgia and Danny anger.
- The inverted SoftBank J-Curve thesis is a must-listen and read.
- And from the world of dating, a big M&A deal that caught our attention, and the latest from the Bumble IPO.
In good news, long-time Equity producer Chris Gates is back starting next week, which means we’ll have our biggest crew ever helping get the show put together. And, in other good news, there’s going to be more Equity than ever for you to hear. Coming soon.
Equity drops every Monday at 7:00 a.m. PST and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.
*OK, so not award-winning yet. But soon enough, because manifestation works.
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African edtech startup uLesson lands a $7.5 million Series A
ULesson, an edtech startup based in Nigeria that sells digital curriculum to students through SD cards, has raised $7.5 million in Series A funding. The round is led by Owl Ventures, which closed over half a billion in new fund money just months ago. Other participants include LocalGlobe and existing investors, including TLcom Capital and Founder Collective.
The financing comes a little over a year since uLesson closed its $3.1 million seed round in November 2019. The startup’s biggest difference between now and then isn’t simply the millions it has in the bank, it’s the impact of the coronavirus pandemic on its entire value proposition.
ULesson launched into the market just weeks before the World Health Organization declared the coronavirus a pandemic. The startup, which uses SD cards as a low-bandwidth way to deliver content, saw a wave of smart devices enter homes across Africa as students adapted to remote education.
“The ground became wet in a way we didn’t see before,” founder and CEO Sim Shagaya said. “It opens up the world for us to do all kinds of really amazing things we’ve wanted to do in the world of edtech that you can’t do in a strictly offline sense,” the founder added.
Similar to many edtech startups, uLesson has benefited from the overnight adoption of remote education. Its positioning as a supplementary education tool helped it surface 70% month over month growth, said Shagaya. The founder says that the digital infrastructure gains will allow them to “go online entirely by Q2 this year.”
It costs an annual fee of $50, and the app has been downloaded more than 1 million times.
With fresh demand, Shagaya sees uLesson evolving into a live, online platform instead of an offline, asynchronous content play. The startup is already experimenting with live tutoring: it tested a feature that allowed students to ask questions while going through pre-recorded material. The startup got more than 3,000 questions each day, with demand so high they had to pause the test feature.
“We want you to be able to push a button and get immediate support from a college student sitting somewhere in the continent who is basically a master in what you’re studying,” he said. The trend of content-focused startups adding on a live tutoring layer continues when you look at Chegg, Quizlet, Brainly and others.
The broader landscape
E-learning startups have been booming in the wake of the coronavirus. It’s led to an influx of tutoring marketplaces and content that promises to serve students. One of the most valuable startups in edtech is Byju’s, which offers online learning services and prepares students for tests.
But Shagaya doesn’t think any competitors, even Byju’s, have cracked the nut on how to do so in a digital way for African markets. There are placement agencies in South Africa and Kenya and offline tutoring marketplaces that send people to student homes, but no clear leader from a digital curriculum perspective.
“Everybody sees that Africa is a big opportunity,” Shagaya said. “But everybody also sees that you need a local team to execute on this.”
Shagaya thinks the opportunity in African edtech is huge because of two reasons: a young population, and a deep penetration of private school-going students. Combined, those facts could create troves of students who have the cash and are willing to pay for supplementary education.
The biggest hurdle ahead for uLesson, and any edtech startup that benefitted from pandemic gains, is distribution and outcomes. ULesson didn’t share any data on effectiveness and outcomes, but says it’s in the process of conducting a study with the University of Georgia to track mastery.
“Content efforts and products [will] live or die at the altar of distribution,” Shagaya said. The founder noted that in India, for example, pre-recorded videos do well due to social nuances and culture. ULesson is trying to find the perfect sauce for videos in markets around Africa and embed that into the product.
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US seed-stage investing flourished during pandemic
As the United States entered its first wave of COVID-19 lockdowns, there were wide expectations in startup land that a reckoning had arrived. But the expected comeuppance of high-burn, high-growth startups fueled by cheap capital provided by venture capitalists raising ever-larger funds, failed to arrive.
Instead, the very opposite came to pass.
Layoffs happened swiftly and aggressively during the early months of the pandemic era. But by the middle of Q2, venture activity had warmed and third quarter dealmaking felt swift and competitive, with some investors describing it as the hottest summer in recent years.
Venture capital as an asset class has survived the pandemic’s stress test.
But somewhat lost amongst the splashy megarounds and high-interest IPOs that can dominate the news cycle were seed-stage startups. The raw little companies that represent the grist that will shape itself into the next set of giants.
TechCrunch explored what happened in seed investing to uncover what was missed amidst the storm and fury of late-stage startup activity. According to a TechCrunch analysis of PitchBook data and a survey of venture capitalists, a few trends became clear.
First, the pattern of rising seed-check sizes seen in prior years continued despite the tumultuous business climate. Second, more expensive and larger seed deals were not only caused by excessive capital present in the private markets. Instead, COVID-19 shook up which startups were considered attractive by private investors. And the changeup did not necessarily raise their number.
Let’s dig into the data and see what it can teach us about this wild year. Then we’ll hear from Eniac Ventures’ Nihal Mehta, Freestyle’s Jenny Lefcourt, Pear VC’s Mar Hershenson and Contrary Capital’s Eric Tarczynski about what they saw in 2020 while writing a chunk of the checks that our data encompasses.
The American seed market in 2020
If you didn’t think much about seed in 2020, you’re not alone. Late, huge rounds consumed most of the media’s oxygen, leaving smaller startups to compete for scraps of attention. There was so much late-stage activity — around 90 $100 million or larger rounds in Q3, for example — it was difficult for smaller investments to command attention.
But despite living in the background, the dollars invested into seed-stage startups in the United States had an up-and-down year that was fascinating:
Image Credits: PitchBook
Seed dollar volume fell as Q1 progressed, reaching a 2020 nadir in April, the start of Q2. But as May arrived, the pace at which investors put money into seed-stage startups accelerated, recovering to January levels — which is to say, pre-pandemic — by June. The COVID dip, for seed, then, was a short-term affair.
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Learn how to score your first check with TMV’s Soraya Darabi on November 10
When it comes to financing a startup, the most important — and hardest — check to land is the very first one.
The growth of accelerators, rolling funds, community funds, hungry angels and institutional investors has given founders more options than ever before, but for women and people of color, access to funding continues to be a struggle.
On Tuesday, November 10 at 11:00 a.m. PT/2:00 p.m. ET, we’re bringing venture capitalist Soraya Darabi of TMV to the Extra Crunch Live stage to talk about how to get that first “yes” as an early-stage company and which founder mistakes often lead her to say “no.” We’ll walk through her theses, which range from future work and edtech, and double-click into what she needs to see in terms of metrics and product upon first pitch.
Darabi founded TMV, formerly Trail Mix Ventures, in 2016, and has built a portfolio that is majority women and minority-owned, including employee wellness platform Bravely, holistic healthcare company Parsley Health and waste reduction upstart Ridwell. TMV is often the first institutional check that a company might raise.
Before TMV, Darabi spent time at The New York Times as the manager of digital partnerships and social media marketing. She also was the co-founder of two companies: Zady, which helps with sustainable fashion manufacturing, and Foodspotting, a visual guide that helps locals find dishes near them that was acquired by OpenTable.
There’s an excess of capital in startupland, which could look remarkably different in the coming months. Join us to learn more about how a venture capitalist is thinking about the next few months, and dare we say, the end of 2020.
Details after the jump:
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Precursor Ventures promotes Sydney Thomas, its first hire, to principal
In 2019, only one Black woman was named partner in venture capital, according to All Raise, a nonprofit focused on accelerating female founders and investors. The data has shown, shows, and will continue to show how the tech industry fails to invest in underrepresented women of color.
Thus, hiring the next generation of founders and decision-makers is key (and promoting them is, too).
Sydney Thomas, who was the first hire at Precursor Ventures, a seed and early-stage focused fund led by Charles Hudson, has been promoted from senior associate to principal. Thomas is joined by Hudson, analyst Ayanna Kerrison and entrepreneur-in-residence Chapman Snowden, to make up Precursor.
After graduating from the Haas School of Business at Berkeley in 2016, Thomas joined Precursor to do what Hudson says most applicants wouldn’t: the operational work of bringing a solo-GP fund, then with less than $5 million in committed capital, to a more organized place.
“The fund was basically running out of my inbox,” Hudson said. “She really helped us get to a much better place operationally.” Thomas started off as an intern, toggling time between working for a Precursor portfolio company and the fund itself, and eventually came on as a senior associate.
As a principal, Thomas will now have more discretion to do deals and make decisions for the firm. “The goal was always for her to get us to a place operationally where she wasn’t as critical,” Hudson notes. Thomas did not respond to request for comment.
Roles within venture have grown increasingly, and often intentionally, vague over time. At any given fund, there can be principals, investors, partners, investing principal partners and senior associate investors. Depending on the fund, each person could just go under the guise of “partner” and call it a day. But in action, every member on a venture team has a varying range of investment autonomy, decision-making authority and weight at the firm.
While the vagueness can balance out egos within a firm, it can often leave founders confused over who has the ability to give them money.
Hudson says he takes role differentiation seriously, and (patiently) wants to build Precursor into a place that helps people in venture get their first start. With Thomas’s promotion, she has the ability to green light investments without the mass overhead of what it means to be a partner.
“I think the only reason to make someone a principal is if you think that they could develop into a partner,” he said.
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