Extra Crunch
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How this startup built and exited to Twitter in 1,219 days
By the summer of 2016, Marie Outtier had spent eight years as a consultant advising media agencies and martech companies on marketing growth strategy.
Pierre-Jean “PJ” Camillieri started as a music software engineer before joining one of Apple’s consumer electronics divisions. Inspired by Siri, he left to start Timista, a smart lifestyle assistant.
When the two joined forces to co-found Aiden.ai, the combination was potent — one was a consummate marketer, the other, a specialist in machine learning. Their goal: create an AI-driven marketing analyst that offered actionable advice in real time.
Humans who manage ad campaigns must analyze vast amounts of numbers, but Outtier and Camillieri envisioned a tool that could make optimization recommendations in real time. Analytics are vast and unwieldy, so theirs was a no-brainer proposition with a market crying out for solutions.
The company’s first office was at Bloom Space in Gower Street, London. It was just a handful of hot desks and a nearby sofa shared with four other startups. That summer, they began in earnest to build the company. A few months later, they had a huge opportunity when the still 100% bootstrapped company was selected for Techcrunch Disrupt’s Startup Battlefield competition.
Interviewed by TechCrunch, they explained their proposition: Marketers wanted to know where a digital marketing campaign was getting the most traction: Twitter or Facebook. You might need to check several dashboards across multiple accounts, plus Google analytics to compile the data — and even if you conclude that one platform is outperforming the other, that might change next week as users shift attention to Instagram, potentially wasting 60% of ad spend.
Aiden was intended to feel like just another co-worker, relying on natural language processing to make the exchange feel chatty and comfortable. It queried data from multiple dashboards and quickly compiled it into flash charts, making it easy to find and digest.
Eventually, instead of managing 10 clients, marketing analysts would be able to manage 50 using dynamic predictions as well as visualizations. Aiden incorporated Outtier’s expertise into its algorithms so it could suggest how to tweak a Facebook campaign and anticipate what was going to happen.
Was appearing at Disrupt a significant moment? “It was a big deal for us,” says Outtier. “The exposure gave us ammunition to raise our first round. And being part of the Disrupt Battlefield alumni gave us many meaningful networking and PR opportunities.”
A few weeks later the company had raised a seed round of $750,000. But not without difficulty. By this time Outtier was in the latter stages of pregnancy. Raising money under these circumstances was difficult, but, she says, “it can be done. It’s tougher than ‘normal circumstances.’ It’s a bit like running a marathon, but with a fridge on your back.”
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7 VCs talk about today’s esports opportunities
Even before the COVID-19 shutdown, venture funding rounds and total deal volume of VC funding for esports were down noticeably from the year prior. The space received a lot of attention in 2017 and 2018 as leagues formed, teams raised money and surging popularity fostered a whole ecosystem of new companies. Last year featured some big fundraises, but esports wasn’t the hot new thing in the tech world anymore.
This unexpected, compulsory work-from-home era may drive renewed interest in the space, however, as a larger market of consumers discover esports and more potential entrepreneurs identify pain points in their experience.
To track where new startups could arise this year, I asked seven VCs who pay close attention to the esports market where they see opportunities at the moment:
- Peter Levin, Griffin Gaming Partners
- Beth Ferriera, Firstmark
- Ethan Kurzweil, Bessemer Venture Partners
- Jens Hilgers, BitKraft Ventures
- Doug Higgins, Sapphire Sport
- Rick Yang, NEA
- Kevin Baxpehler, Remagine Ventures
Their responses are below.
This is the second investor survey I’ve conducted to better understand VCs’ views on gaming startups amid the pandemic; they complement my broader gaming survey from October 2019 and an eight-article series on virtual worlds I wrote last month. If you missed it, read the previous survey, which investigated the trend of “games as the new social networks”.
Peter Levin, Griffin Gaming Partners
Which specific areas within esports are most interesting to you right now as a VC looking for deals? Which areas are the least interesting territory for new deals?
Everything around competitive gaming is of interest to us. With Twitch streaming north of two BILLION hours of game play thus far during the pandemic, this continues to be an area of great interest to us. Fantasy, real-time wagering, match-making, backend infrastructure and other areas of ‘picks and shovels’-like plays remain front burner for us relative to competitive gaming.
What challenges does the esports ecosystem now need solutions to that didn’t exist (or weren’t a focus) 2 years ago?
As competitive gaming is still so very new with respect to the greater competitive landscape of content, teams and events, the Industry should be nimble enough to better respond to dramatic market shifts relative to its analog, linear brethren. A native digital industry, getting back “online’”will be orders of magnitude more straightforward than in so many other areas.
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Digging for dollar signs amid edtech’s current momentum
Edtech was long defined by stodgy sales cycles, sluggish adoption and splashy pitches to K-12 districts with tight budgets, but the COVID-19 pandemic turned that reputation on its head in short order.
Now, companies in the space are entering Q2 — traditionally a slower time reserved for product development and extra focus on existing clients — busier than ever. In this piece, we’ll unpack some of the dollar signs indicating that edtech may be entering a new era.
Broader investor interest
A number of edtech founders who are not seeking venture capital have recently told me their inboxes are cluttered with notes from investors looking to chat.
It’s a refreshing break from the usual fundraising doom-and-gloom we’ve been hearing about during this pandemic, but I want to note the nuance: We’re seeing investors who have never been interested in edtech become bullish on the category as a whole. If these investors put their money where their mouths are, we’ll start to see an uptick of venture funding sector-wide.
For EdSights, co-founded by sister duo Claudia and Carolina Recchi, doors are opening. Before COVID-19, they say they mainly attracted interest from opportunity investors and edtech investors. Now, they’re talking to a number of VCs, none solely from edtech-focused funds.
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Zetta Venture Partners’ Jocelyn Goldfein chats about AI investing
Earlier this month, href=”https://www.zettavp.com/”>Zetta Venture Partners, a B2B, AI-focused venture outfit, announced a new $180 million fund.
As new VC funds are anecdotally a bit thinner on the ground these days — and because we’re in the midst of economic upheaval, which is changing investing patterns and shaking up startup verticals — I got on the phone with Zetta’s Jocelyn Goldfein (a TechCrunch regular) to chat about what her firm is doing and what’s up with AI investing.
The fund
Zetta’s new fund is about 50% larger than its preceding capital pool, which was roughly double its first fund. If you don’t want to do the math, Zetta’s first fund was worth $60 million, and its second $125 million.
Zetta will invest in B2B-focused, AI-powered seed-stage startups like it has before, but with more capital. I was curious about cadence: Would the firm write more checks more quickly now that it has more capital? Per Goldfein, the firm is keeping its pace and strategy pretty much the same with preceding funds, though it has promoted a principal from within who will begin to lead deals from the new fund.
Why more money if things are mostly looking the same? Zetta wants the capability to write larger checks and take a bit more ownership, so it needs more capital. In turn, defending those percentages requires more capital; you get the idea.
Pace, pricing
Early in our chat with Goldfein it became obvious that it’s an active time for AI-focused startups to raise, thanks to COVID-19-driven uncertainty. According to Goldfein, founders who have yet to raise their first capital are “looking at the funding window and thinking, oh, boy, if we thought we might raise three months from now, maybe we should just try now.” Even more, some companies that have already raised are going back to the market for top-ups. Goldfein said those startups are looking for “a little extra runway.”
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5 top gaming investors explain how the pandemic is reshaping MMOs and social games
Now that the COVID-19 pandemic has forced millions into isolation, video games are seeing a surge in usage as people seek entertainment and social interaction.
When we surveyed gaming-focused VCs in October, Andreessen Horowitz partner Jonathan Lai predicted that “next-generation games will be bigger than anything we’ve seen yet,” eventually reaching “Facebook scale.” This month, when we asked 17 VCs how this era would impact consumer startups, gaming was one of the top verticals they named.
We wanted to learn more about how the venture community thinks about the future of this sector, so we asked five experienced gaming investors about where they do — and don’t — see new opportunities within this trend:
- Kevin Zhang, Upfront Ventures
- Ryann Lai, Makers Fund
- Shanti Bergel, Transcend Fund
- Bertrand Vernizeau, Game Seer Venture Partners
- Siamac Kamalie, Skycatcher
Below are their responses, edited for space and clarity. We’ll follow up with surveys on other gaming categories in the next couple of weeks.
And if you’re interested in understanding the challenges for gaming companies aiming to become next-generation social platforms, be sure to read my eight-part series on virtual worlds.
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A full-time VC & part-time ER doctor shares his thoughts on COVID-19
An emergency room physician for the past 12 years, Dr. Robert Mittendorff joined Norwest Venture Partners eight years ago as a healthcare investor; the firm invests in a number of healthcare startups, including Talkspace, which raised a $50 million Series D last year, and TigerConnect.
As the COVID-19 pandemic spreads, Mittendorff is spending his weekdays with portfolio companies and weekends working with Kaiser Permanente in San Francisco. While he notes that his medical colleagues are “bearing the brunt” of the pandemic by working full time, we wanted to hear from someone who has a foot in both the investing and the healthcare world right now.
In this interview, he discusses what he’s learned from both roles, how it has influenced his healthcare investments, and offers his predictions regarding which companies will fare the best in the future.
This interview has been edited for length and clarity.
TechCrunch: How did you get to where you are today?
Dr. Robert Mittendorff: So, my journey to being a venture capitalist at Norwest and investing in healthcare companies as well as an emergency physician was really a parallel set of paths that overlapped and that cross every once in a while and now usually on a daily basis.
I started off life as a biomedical engineer really focused on wanting to be on the side of innovation and on the development of technologies to help human health. I knew early on that I wanted to be on the business side [of that], but it was important for me to understand and really be deeply in touch with what it was like to be a provider.
The journey started out going to engineering school, medical school, and then business school in the middle of medical school. I trained at Stanford, which really exposed me to county hospitals, which are probably going to be the more challenging situations as the weeks go on here, and then to Kaiser Permanente. And then, of course, Stanford, I was exposed to San Francisco General and then the Santa Clara Valley Hospital. I always practice part-time following up so it’s been 12 years as an attending, practicing part-time as an emergency physician.
In the venture space I saw an opportunity to really help select entrepreneurs and markets to grow them to a higher impact state.
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Indie.vc founder Bryce Roberts: Profitability is ‘more achievable than a Series A round’
Despite all evidence to the contrary, there’s more to building a startup than raising venture capital.
Founders are finding success without overly relying on VC dollars; some are even sharing profits with their respective employees and customers without the help of traditional funding and Silicon Valley power dynamics.
As some investors slow down their funding pace, it has become clear that profitability trumps funding and venture capital can only take a startup so far when the economy tanks and outside cash streams dry up.
In the Indie.vc portfolio, profitability is its driving force. In fact, its main criterion for funding is that a startup must be on a clear path to profitability with durable fundamentals like high gross margins or the ability to start charging for a product right away, as opposed to companies that need a significant amount of upfront investment for research and development.
Profitability, Indie.vc founder Bryce Roberts tells TechCrunch, needs to be a habit, and founders need to recognize that it’s not a switch they can just turn on. Startups looking to prioritize profitability need to start out as revenue-driven businesses that replace funding milestones with profitability goals.
“Genuinely, it’s not rocket science,” he says. “Profitability isn’t this crazy, elusive thing. It’s literally more achievable than a Series A round. It’s way more achievable than a Series B round. If you look at the kind of fall-off between those rounds, most entrepreneurs would be better off finding their path to profitability and scale.”
Indie.vc, which recently announced its latest batch of investments, advises founders to make sure they have what they need to be stable and then to create and measure value, Roberts says. That value, which differs depending on the company, must be quantifiable as some metric or revenue.
To do that, Roberts says founders should adopt a mindset where they’re focused on creating revenue opportunities, rather than cost savings. Indie.vc’s model also does not prioritize hiring ahead of growth, a strategy that seems to be working for its portfolio during the pandemic.
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Seed investors take long view on promising enterprise startups
The job of an early-stage startup founder is challenging in good times, never mind a crash like the one we are experiencing today.
While most expect private investing to slow down, it’s clear that some investments are still happening in spite of the pandemic, if the stories we are writing on TechCrunch are any indication.
But the downturn is bound to have an impact on the types of deals that receive funding; any startup that offers a good or service requiring human interaction or installation will face an uphill battle, at least in the short term. That said, enterprise SaaS vendors, especially ones that solve hard problems, help with work-from-home or collaboration, or better yet, help increase efficiency and save money, are still very much in demand.
Nobody can do anything about the CIO who is hunkering down until things improve — but that’s not everyone. Companies might be thinking twice about where they spend money, but some are still helping drive the net-new, post-COVID-19 investments happening from seed to late stage across many sectors.
We looked at data and spoke to a couple of enterprise-focused, NYC-based seed investors to better understand their investing cadence. Nobody painted a rosy picture of today’s climate, but seed investors were never about immediate gratification, especially where enterprise startups are concerned. That means, if a seed-stage investor believes in the founders and their vision and the company can ride out today’s economic upset, there’s still money in the till — at least for now.
Seed investment generally in decline
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Decrypted: Space hacking, iPhone vulnerability, Zoom’s security boom
Security startups to the rescue.
As we continue to ride out the pandemic, security experts are closely monitoring the surge of coronavirus-related cyber threats. Just this week, Google’s Threat Analysis Group, its elite threat hunting unit, says that while the overall number of threats remains largely the same, opportunistic hackers are retooling their efforts to piggyback on coronavirus.
Some startups are downsizing and laying off staff, but several cybersecurity startups are faring better, thanks to an uptick in demand for security protections. As the world continues to pivot toward working from home, it has blown up key cybersecurity verticals in ways we never expected. To wit, identity startups are needed more than ever to make sure only remote employees are getting access to corporate systems.
Can the startups take on the giants at their own game?
THE BIG PICTURE
Another payments processor drops the security ball
For the third time this year, a payments processor has admitted to a security lapse. First it was Cornerstone, then it was nCourt. This time it’s Paay, a New York-based card payment processor startup that left a database on the internet unprotected and without a password. Worse, the data was storing full, plaintext credit card numbers.
Anyone who knew where to look could have accessed the data. Luckily, a security researcher found it and reported it to TechCrunch. We alerted the company; it quickly took the data offline, but Paay denied that the data stored full credit card numbers. We even sent the co-founder a portion of the data showing card numbers stored in plaintext, but he did not respond to our follow-up.
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Precursor Ventures’ Charles Hudson on ‘the conversation no one has during an upmarket’
For pre-seed startups, precarious times are baseline until they secure their first customer, first hire and first check. But no matter how built-in turbulence might be for a pre-seed founder, we’re entering a period where stresses are amplified and outlooks are unpredictable.
In light of the new market conditions, a harder fundraising market and slower expected growth, Charles Hudson (founder and general partner of Precursor Ventures) is urging his portfolio companies to reassess their futures with a refreshingly human question: “Are you excited and prepared to run this company for the next two years?
If not, you might want to do something else. Why? Because if a super early-stage company manages to survive the COVID-19 era, making it out the other end, it’s not clear that they’ll be venture-ready when markets recover. As Hudson put it, “there’s never been a better time to maybe fold.” That’s because, he explained, startups that merely survive won’t be judged merely against their peers that also survived; they will also compete with brand-new startups for capital and companies that didn’t need to hunker down during lean times.
It’s possible to make it through, but it won’t be an easy path.
TechCrunch spoke with Hudson earlier this week as part of our ongoing Extra Crunch Live series that brings leading founders and investors to our (virtual) stage. Between our editors and journalists and the best questions from the audience, we’re working with guests to understand the new world that we find ourselves in. That we’re hosting these events virtually instead of in-person is testament to our changed reality.
But the chat was far from all gloom; Hudson is bullish on a number of things. Niche publications with subscription economics? Yes. Social services targeting particular audiences? Yep! Precursor is still cutting checks into net-new deals, and while it’s wrapping up its second main fund and first opportunity fund, the firm is also raising a new, larger capital pool.
The conversation ran the full hour we had set aside for it, meaning we had to condense some later discussions about fintech and the new trade-off between growth and profit, but we did get to diversity in venture and startups in the future, and what impact a recession might have on both (it’s a bigger possible impact than you’re considering).
Hit the jump for the best Hudson takeaways and the full audio recording from the session. Head here if you need Extra Crunch access; there are some trials for just a few bucks, so everyone can access the chat. Let’s go!
Raising a fund in the COVID-19 era
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