Keith Rabois
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Seed funding tips and tricks from Uncork Capital founder Jeff Clavier
Angel funding, seed investing and generally focusing on earlier stage investing is a huge business in the world of startups these days — it helps investors get in early to the most promising companies, and (because of the smaller size of the checks) allows for even the less prolific to spread their bets.
There was a time when it was immensely difficult for a founder to get a first check, not least because there were fewer people writing them. However, Jeff Clavier was an exception to that rule.
As the founder of Uncork Capital (formerly known as SoftTech VC), he has been in the business of angel and seed investing for 16 years, popularizing the opportunity and highlighting the need for more support at this stage — well before it was cool. You could say he was early to early stage.
Clavier said that at the end of 2019, it was estimated that there were more than 1,000 firms focusing on seed investing in the market, but by the end of this year, there will be about 2,000. “Don’t ask me whether it makes any sense because when I started 16 years ago, I didn’t think would be a big deal,” he said. “But certainly that creates a bit of a conundrum for founders to try and understand.”
As of now, Clavier has made nearly 230 investments and counting.
TechCrunch Early Stage, our virtual conference highlighting that stage of startup life, was the perfect venue to hear from him on all things seed investing and building startups today. Below are some highlights, a link to the video and a pitch deck he put together for the chat. Questions were edited for space and clarity.
Not all VCs are created equal (so know who you are pitching)
First thing to understand is that not all VCs are created equal. There are a bunch of different firms, tons of them out there, and you as a founder need to understand what are the specifics of your pitch opportunity, how to match with the right firm, and to figure out what stage of “early” you happen to be.
Startups can be super early, or mid-stage, which is typically what we refer to as pre-seed. Then there’s the seed stage, where you have developed a product, with a demo. And there is post-seed, where you have product but are not quite ready to raise a Series A. So who are the firms that can actually be the right fit for me at those different stages? The qualification part of the targeting is really important. Especially in a COVID environment when you can’t spend the same kind of time with each other.
It’s useful for founders to try and understand investors better, maybe asking a couple of questions like, “When is the last time you made a brand new investment at seed stage?” And “How has your investment process changed as a result of COVID?”
For investors, you want to understand how you’re going to evolve your process to cope with the fact that you don’t spend time with those founders face-to-face. Some firms are still struggling with that.
At Uncork, we’re now past the point of portfolio triage that we had in the first few weeks of of the pandemic. What was surprising to me was the speed and velocity at which some deals actually.
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Startups Weekly: Flexport, Clutter and SoftBank’s blood money
The Wall Street Journal published a thought-provoking story this week, highlighting limited partners’ concerns with the SoftBank Vision Fund’s investment strategy. The fund’s “decision-making process is chaotic,” it’s over-paying for equity in top tech startups and it’s encouraging inflated valuations, sources told the WSJ.
The report emerged during a particularly busy time for the Vision Fund, which this week led two notable VC deals in Clutter and Flexport, as well as participated in DoorDash’s $400 million round; more on all those below. So given all this SoftBank news, let us remind you that given its $45 billion commitment, Saudi Arabia’s Public Investment Fund (PIF) is the Vision Fund’s largest investor. Saudi Arabia is responsible for the planned killing of dissident journalist Jamal Khashoggi.
Here’s what I’m wondering this week: Do CEOs of companies like Flexport and Clutter have a responsibility to address the source of their capital? Should they be more transparent to their customers about whose money they are spending to achieve rapid scale? Send me your thoughts. And thanks to those who wrote me last week re: At what point is a Y Combinator cohort too big? The general consensus was this: the size of the cohort is irrelevant, all that matters is the quality. We’ll have more to say on quality soon enough, as YC demo days begin on March 18.
Anyways…
Surprise! Sort of. Not really. Pinterest has joined a growing list of tech unicorns planning to go public in 2019. The visual search engine filed confidentially to go public on Thursday. Reports indicate the business will float at a $12 billion valuation by June. Pinterest’s key backers — which will make lots of money when it goes public — include Bessemer Venture Partners, Andreessen Horowitz, FirstMark Capital, Fidelity and SV Angel.
Ride-hailing company Lyft plans to go public on the Nasdaq in March, likely beating rival Uber to the milestone. Lyft’s S-1 will be made public as soon as next week; its roadshow will begin the week of March 18. The nuts and bolts: JPMorgan Chase has been hired to lead the offering; Lyft was last valued at more than $15 billion, while competitor Uber is valued north of $100 billion.
Despite scrutiny for subsidizing its drivers’ wages with customer tips, venture capitalists plowed another $400 million into food delivery platform DoorDash at a whopping $7.1 billion valuation, up considerably from a previous valuation of $3.75 billion. The round, led by Temasek and Dragoneer Investment Group, with participation from previous investors SoftBank Vision Fund, DST Global, Coatue Management, GIC, Sequoia Capital and Y Combinator, will help DoorDash compete with Uber Eats. The company is currently seeing 325 percent growth, year-over-year.
Here are some more details on those big Vision Fund Deals: Clutter, an LA-based on-demand storage startup, closed a $200 million SoftBank-led round this week at a valuation between $400 million and $500 million, according to TechCrunch’s Ingrid Lunden’s reporting. Meanwhile, Flexport, a five-year-old, San Francisco-based full-service air and ocean freight forwarder, raised $1 billion in fresh funding led by the SoftBank Vision Fund at a $3.2 billion valuation. Earlier backers of the company, including Founders Fund, DST Global, Cherubic Ventures, Susa Ventures and SF Express all participated in the round.
Here’s your weekly reminder to send me tips, suggestions and more to kate.clark@techcrunch.com or @KateClarkTweets.
Menlo Ventures has a new $500 million late-stage fund. Dubbed its “inflection” fund, it will be investing between $20 million and $40 million in companies that are seeing at least $5 million in annual recurring revenue, growth of 100 percent year-over-year, early signs of retention and are operating in areas like cloud infrastructure, fintech, marketplaces, mobility and SaaS. Plus, Allianz X, the venture capital arm attached to German insurance giant Allianz, has increased the size of its fund to $1.1 billion and London’s Entrepreneur First brought in $115 million for what is one of the largest “pre-seed” funds ever raised.
Flipkart co-founder invests $92M in Ola
Redis Labs raises a $60M Series E round
Chinese startup Panda Selected nabs $50M from Tiger Global
Image recognition startup ViSenze raises $20M Series C
Circle raises $20M Series B to help even more parents limit screen time
Showfields announces $9M seed funding for a flexible approach to brick-and-mortar retail
Podcasting startup WaitWhat raises $4.3M
Zoba raises $3M to help mobility companies predict demand
Indian delivery men working with the food delivery apps Uber Eats and Swiggy wait to pick up an order outside a restaurant in Mumbai. ( INDRANIL MUKHERJEE/AFP/Getty Images)
According to Indian media reports, Uber is in the final stages of selling its Indian food delivery business to local player Swiggy, a food delivery service that recently raised $1 billion in venture capital funding. Uber Eats plans to sell its Indian food delivery unit in exchange for a 10 percent share of Swiggy’s business. Swiggy was most recently said to be valued at $3.3 billion following that billion-dollar round, which was led by Naspers and included new backers Tencent and Uber investor Coatue.
Lalamove, a Hong Kong-based on-demand logistics startup, is the latest venture-backed business to enter the unicorn club with the close of a $300 million Series D round this week. The latest round is split into two, with Hillhouse Capital leading the “D1” tranche and Sequoia China heading up the “D2” portion. New backers Eastern Bell Venture Capital and PV Capital and returning investors ShunWei Capital, Xiang He Capital and MindWorks Ventures also participated.
Longtime investor Keith Rabois is joining Founders Fund as a general partner. Here’s more from TechCrunch’s Connie Loizos: “The move is wholly unsurprising in ways, though the timing seems to suggest that another big fund from Founders Fund is around the corner, as the firm is also bringing aboard a new principal at the same time — Delian Asparouhov — and firms tend to bulk up as they’re meeting with investors. It’s also kind of time, as these things go. Founders Fund closed its last flagship fund with $1.3 billion in 2016.”
If you enjoy this newsletter, be sure to check out TechCrunch’s venture capital-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and I discuss Pinterest’s IPO, DoorDash’s big round and SoftBank’s upset LPs.
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Distinguished VCs back wholesale marketplace Faire with $100M at a $535M valuation
A slew of venture capitalists known for high-profile exits — Kirsten Green of Forerunner Ventures, Keith Rabois of Khosla Ventures, Alfred Lin of Sequoia Capital and Alex Taussig of Lightspeed Venture Partners — have invested in Faire (formerly known as Indigo Fair), a 2-year-old wholesale marketplace for artisanal products.
A quick glance at Faire suggests it’s a combination of Pinterest and Etsy, complete with trendy, pastel stationery, soap, baby products and more, all made by independent artisans and sold to retailers. Faire has today announced a $100 million fundraise across two financing rounds: a $40 million Series B led by Taussig at Lightspeed and a $60 million Series C led by Y Combinator’s Continuity fund. New investors Founders Fund, the venture firm founded by Peter Thiel, and DST Global also participated. The business has previously brought in a total of $16 million.
The latest financing values Faire at $535 million, according to a source familiar with the deal.
If you’re feeling a little bit of déjà vu, that’s because a similar startup also raised a sizeable round of venture capital funding, announced today. That’s Minted . The 10-year-old company, best known for its wide assortment of wedding invitations and stationery, raised $208 million led by Permira, with participation from T. Rowe Price. Though Minted is first and foremost a consumer-facing marketplace, it plans to double down on its wholesale business with its latest infusion of capital, setting it up to be among Faire’s biggest competitors.
Like Minted, Faire leverages artificial intelligence and predictive analytics to forecast which products will fly off its virtual shelves in order to to source and manage inventory as efficiently as possible. The approach appears to be working; Faire says it has 15,000 retailers actively purchasing from its platform, including Walgreens, Walmart, Sephora and Nordstrom — a 3,140 percent year-over-year increase. It’s completed 2,000 orders to date, garnering $100 million in run rate sales, and has expanded its community of artists 445 percent YoY, to 2,000.
The company, headquartered in San Francisco, with offices in Ontario and Waterloo, was founded by three former Square employees: chief executive officer Max Rhodes, who was product manager on a variety of strategic initiatives, including Square Capital and Square Cash; chief information officer Daniele Perito, who led risk and security for Square Cash; and chief technology officer Marcelo Cortes, a former engineering lead for Square Cash.
“Our mission at Faire is to empower entrepreneurs to chase their dreams,” Rhodes wrote in a blog post this morning. “We believe entrepreneurship is a calling. Starting a business provides a level of autonomy and fulfillment that’s become difficult to find for many elsewhere in the economy. With this in mind, we built Faire to help entrepreneurs on both sides of our marketplace succeed.”
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Even raises $40M to transform the working class to the savings class
The working class of the United States doesn’t get many breaks these days. It’s not just a function of low pay and long hours, but also the incredible uncertainty of income and expenses that makes surviving week-to-week so challenging. One in five Americans have a negative net wealth, even in an economy where the unemployment rate is the lowest in almost two decades. Banks, meanwhile, are actively dissuading the working class from banking with them, creating a permanent class of unbanked and underbanked citizens.
For Jon Schlossberg, CEO and co-founder of Even.com, improving the plight of ordinary Americans and their finances is a deeply personal and professional mission. And now that mission has a huge new bucket of capital behind it, with Keith Rabois of Khosla Ventures leading a $40 million Series B round into the Oakland-based startup. Rabois is a return investor, having previously backed the company in its late 2014 seed round. With this latest round of capital, Even.com has now raised $50.5 million.
When Even.com first launched its eponymous app, the goal was to offer income smoothing for workers, helping them avoid usurious payday loans to make ends meet. Since that first launch several years ago, Schlossberg and his team learned that the only way to improve the finances for the working class is to help them budget better — ending the need for loans in the first place. “To do anything with your life, unless you are just born to the right family, you need to spend your money wisely, but we never teach you how to do that,” Schlossberg explained to me.
Last year, Even.com announced that it had stopped evening through its Pay Protection product. Instead, Schlossberg said that Even.com has evolved and wanted to “build a new kind of financial institution with products that fit your life.” It still has a feature it brands as Instapay, which allows users to request their earned pay in advance of their payday.
But Even.com is increasingly focused on improving the quality of its intelligent budgeting feature. Using artificial intelligence models honed over the past few years, the company now gives users of its Even app an “Okay to spend” figure that helps them think through their cash flow. By giving a predictive figure rather than a checking account balance, Even can help its users avoid sudden surprise expenses that can trigger the kind of financial death spiral that has become a familiar story in America. The company will also soon launch an automatic savings feature similar to Digit or Acorns that helps people build up regular savings.
Even’s Okay to spend feature gives insight into future cash flows before it is too late
While the company offers an increasingly comprehensive suite of financial tools, it has decided to avoid charging users specific use fees, opting instead for a subscription model. Schlossberg explained that “We are a mission-oriented company, but talk is cheap and where the rubber hits the road, it’s how you make money.” Even is free for users participating through partner employers, or $2.99 a month for individuals without a sponsor.
The company’s highest expense feature is Instapay due to underwriting, and so the company makes higher profits when fewer of its customers need access to payday credit. In other words, the better that its users budget, the fewer loans it will underwrite, and the more money the company makes. We are “directly incentivized to help people with their financial health,” Schlossberg noted.
Even has proven attractive to corporate customers, including Walmart, which partnered with the startup last December to offer its service to all 1.4 million employees at the retailer. Since the launch of that partnership, more than 200,000 Walmart employees regularly use the app, according to Even, and the typical active user checks their Okay to spend balance four times a week. A majority of active users have also taken out an Instapay through Even.
More interestingly, salaried employees at Walmart used the app slightly more than hourly workers, proving that just having a guaranteed income isn’t necessarily a panacea to financial trouble for many American households.
Even.com’s Series B round is all about expansion and growth for the company. Even intends to open an East Coast office this year, and intends to expand its product further into the Fortune 500 with partnerships similar to its Walmart deal. The company currently has 37 employees. In addition to Khosla, the startup raised funding from Valar Ventures, Allen & Company, Harrison Metal, SV Angel, Silicon Valley Bank and others.
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Homebase raises $6 million to make hourly work easier to manage for local businesses
From rising rents to online competitors, local stores and restaurants face enough challenges outside of their own doors that basic stuff like scheduling employees’ shifts and breaks should feel easy. But that process is still, too often, a mess of paperwork and data entry. A startup called Homebase has raised $6 million to make hourly work much easier to manage for every business on… Read More
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How To Hire When Everyone Wants To Found Their Own Startup
Back before founding a company was cool, it was a lot easier to get a lot of smart people in a room. Rock stars were hireable because they weren’t forging their own paths. That led to powerhouse teams like the “PayPal Mafia” seen below. Keith Rabois’ Homebuying Startup OpenDoor Raises $9.95M From Everyone
Well.
It seems like a lot of Valley investors want to see the process of buying homes become a lot more efficient.
After Khosla Ventures VC and former Square COO Keith Rabois teased that he was working on a project to make buying homes as simple as clicking a few buttons, a horde of Valley angels and VCs started circling. Read More
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