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Explosion snags $6M on $120M valuation to expand machine learning platform
Explosion, a company that has combined an open source machine learning library with a set of commercial developer tools, announced a $6 million Series A today on a $120 million valuation. The round was led by SignalFire, and the company reported that today’s investment represents 5% of its value.
Oana Olteanu from SignalFire will be joining the board under the terms of the deal, which includes warrants of $12 million in additional investment at the same price.
“Fundamentally, Explosion is a software company and we build developer tools for AI and machine learning and natural language processing. So our goal is to make developers more productive and more focused on their natural language processing, so basically understanding large volumes of text, and training machine learning models to help with that and automate some processes,” company co-founder and CEO Ines Montani told me.
The company started in 2016 when Montani met her co-founder, Matthew Honnibal in Berlin where he was working on the spaCy open source machine learning library. Since then, that open source project has been downloaded over 40 million times.
In 2017, they added Prodigy, a commercial product for generating data for the machine learning model. “Machine learning is code plus data, so to really get the most out of the technologies you almost always want to train your models and build custom systems because what’s really most valuable are problems that are super specific to you and your business and what you’re trying to find out, and so we saw that the area of creating training data, training these machine learning models, was something that people didn’t pay very much attention to at all,” she said.
The next step is a product called Prodigy Teams, which is a big reason the company is taking on this investment. “Prodigy Teams is [a hosted service that] adds user management and collaboration features to Prodigy, and you can run it in the cloud without compromising on what people love most about Prodigy, which is the data privacy, so no data ever needs to get seen by our servers,” she said. They do this by letting the data sit on the customer’s private cluster in a private cloud, and then use Prodigy Team’s management features in the public cloud service.
Today, they have 500 companies using Prodigy including Microsoft and Bayer in addition to the huge community of millions of open source users. They’ve built all this with just six early employees, a number that has grown to 17 recently (they hope to reach 20 by year’s end).
She believes if you’re thinking too much about diversity in your hiring process, you probably have a problem already. “If you go into hiring and you’re thinking like, oh, how can I make sure that the way I’m hiring is diverse, I think that already shows that there’s maybe a problem,” she said.
“If you have a company, and it’s 50 dudes in their 20s, it’s not surprising that you might have problems attracting people who are not white dudes in their 20s. But in our case, our strategy is to hire good people and good people are often very diverse people, and again if you play by the [startup] playbook, you could be limited in a lot of other ways.”
She said that they have never seen themselves as a traditional startup following some conventional playbook. “We didn’t raise any investment money [until now]. We grew the team organically, and we focused on being profitable and independent [before we got outside investment],” she said.
But more than the money, Montani says that they needed to find an investor that would understand and support the open source side of the business, even while they got capital to expand all parts of the company. “Open source is a community of users, customers and employees. They are real people, and [they are not] pawns in [some] startup game, and it’s not a game. It’s real, and these are real people,” she said.
“They deserve more than just my eyeballs and grand promises. […] And so it’s very important that even if we’re selling a small stake in our company for some capital [to build our next] product [that open source remains at] the core of our company and that’s something we don’t want to compromise on,” Montani said.
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Mint’s first PM raises millions for Monarch, an Accel-backed money management platform
Monarch, a subscription-based platform that aims to help consumers “plan and manage” their financial lives, has raised $4.8 million in seed funding.
Accel led the round, which also included participation from SignalFire, and brings the Mountain View-based yet fully distributed startup’s total funding since its 2019 inception to $5.5 million.
Co-founder and CEO Val Agostino was the first product manager on the original team that built Mint.com. There, he said, he saw firsthand that Americans with a greater understanding of financial matters “needed software solutions that went beyond just tracking and budgeting.”
“They needed help planning their financial future and understanding the tradeoffs between competing financial priorities,” he said.
Monarch aims to help people address those needs with software it says “makes it easy” for people to outline their financial goals and then create a detailed, forward-looking plan toward achieving them.
“We then help customers track their progress against their plan and automatically course correct as their financial situation changes, which it always does,” Agostino said.
Monarch came out of private beta in early 2021 with apps for web, iOS and Android, and is priced at $9.99 per month or $89.99 per year. The startup intentionally opted to not be ad-supported or sell customers’ financial data.
These approaches are “misaligned with users’ financial interests,” Agostino said.
“We felt that a subscription business model would best support that ethos and align our users’ interests with our own,” he added. Since launching publicly, Monarch has been growing its paid subscriber base by about 9% per week.
Image Credits: Monarch
Monarch launched during the pandemic, the uncertainty of which carried over into people’s financial lives, believes Agostino.
“As a result, we saw a lot of people make use of Monarch’s forecasting features to compare different ‘what if ‘scenarios such as switching jobs or moving to a different city or state,” he said.
Earlier this month, TechCrunch reported on a company with a similar mission, BodesWell, teaming up with American Express on a financial planning tool for its cardholders. Agostino said that Monarch is similar to BodesWell in that both startups help customers map a financial plan and future.
“The difference is that Monarch also has a full suite of PFM tools, such as budgeting, reporting and investment analysis,” he said. “The benefit to the consumer is that because Monarch is connected to your entire financial picture, we can help you actually stay on track with your financial plan and/or update the plan in real time if needed.”
Accel’s Daniel Levine said that until he came across Monarch, he was “somehow still a Mint customer despite its obsolescence.”
Over the past decade, the landscape for financial products has expanded dramatically, with more people having brokerage and crypto accounts, for example, Levine said.
In his view, Monarch stands out for a couple of reasons. For one, it’s a subscription product.
“One thing I always hated about Mint was when it would suggest the objectively wrong credit card for me,” Levine said. “It has all of my transaction data, it should tell me the card with the best rewards for me. Monarch is set up to never compromise what’s best for the user in favor of advertising.”
Secondly, Monarch’s aim is to serve as the infrastructure for its customers. To do that, it needs to monitor all of someone’s finances.
“They need to track checking, credit cards, brokerage, real estate and crypto,” he said. “Monarch is committed to doing that. It’s an incredibly painful problem and even though Monarch is a new entrant in the space, I think they’ve clearly separated themselves on that dimension.”
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Flymachine raises $21 million to build a virtual concerts platform for a post-pandemic world
As concerts and live events return to the physical world stateside, many in the tech industry have wondered whether some of the pandemic-era opportunities around virtualizing these events are lost for the time being.
San Francisco-based Flymachine is aiming to seek out the holy grail of the digital music industry, finding a way to capture some of the magic of live concerts and performances in a livestreamed setting. The startup hopes that pandemic-era consumer habits around video chat socialization combined with an industry in need of digital diversification can push their flavor of virtual concerts into the lives of music fans.
The startup’s ambitions aren’t cheap, Flymachine tells TechCrunch it has raised $21 million in investor funding to bankroll its plans. The funding has been led by Greycroft Partners and SignalFire, with additional participation from Primary Venture Partners, Contour Venture Partners, Red Sea Ventures and Silicon Valley Bank.
The virtual concert industry didn’t have as big of a lockdown moment as some hoped for. Spotify experimented with virtual events. Meanwhile, startups like Wave raised huge bouts of VC funding to turn real performers into digital avatars in a bid to create more digital-native concerts. And while some smaller artists embraced shows over Zoom or worked with startups like Oda, which created live concert subscriptions, there were few mainstream hits among bigger acts.
To make Flymachine’s brand of virtual concerts a thing, the startup isn’t trying to convert potential in-person attendees of a show into virtual participants, instead hoping to create an attractive experience for the folks who would normally have to skip the show. Whether those virtual attendees were too far from a venue, couldn’t get a babysitter for the night or just aren’t jazzed about a mosh pit scene anymore, Flymachine is hoping there are enough potential attendees on the bubble to sustain the startup as they try to blur the lines between “a night in and a night out,” CEO Andrew Dreskin says.
The startup’s strategy centers on building up partnerships with name brand concert venues around the U.S. — Bowery Ballroom in New York City, Bimbo’s 365 Club in San Francisco, The Crocodile in Seattle, Marathon Music Works in Nashville and Teragram Ballroom in Los Angeles, among them — and livestreaming some of the shows at those venues to at-home audiences. Flymachine’s team has deep roots in the music industry; Dreskin founded Ticketfly (acquired by Pandora) while co-founder Rick Farman is also the co-founder of Superfly, which puts on the Bonnaroo and Outside Lands music festivals.
Image Credits: Flymachine
In terms of actual experience — and I had the chance to experience one of the shows (pictured above) before writing this — Flymachine has done their best to recreate the experience of shouting over the tunes to talk with your buddies nearby. In Flymachine’s world this is attending the show in a “private room” with your other friends livestreaming in video chat bubbles from their homes. It’s well done and doesn’t distract too much from the actual concert, but you can adjust the sound levels of your friends and the music when the time calls for it.
Flymachine’s platform launch earlier this year, arriving as many Americans have been vaccinated and many concert-goers are preparing to return to normal, might have been considered a bit late to the moment, but the founding team sees a long-term opportunity that COVID only further highlighted.
“We weren’t in a mad dash to get the product out the door while people were sequestered in their homes because we knew this would be part of the fabric of society going forward,” Dreskin tells TechCrunch.
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TestBox launches with $2.7M seed to make it easier to test software before buying
When companies are considering buying a particular software service, they typically want to test it in their own environments, a process that can be surprisingly challenging. TestBox, a new startup, wants to change that by providing a fully working package with pre-populated data to give the team a way to test and collaborate on the product before making a buying decision.
Today the company announced it was making the product widely available; they also announced a $2.7 million seed round from SignalFire and Firstminute Capital along with several other investors and industry angels.
Company co-founder Sam Senior says he and his co-founder Peter Holland recognized that it was challenging for companies buying software to test it in a realistic way. “So TestBox is the very first time that companies are going to be able to test drive multiple pieces of enterprise software with an insanely easy-to-use live environment that’s uniquely configured to them with guided walk-throughs to make it really easy for them to get up to speed,” Senior explained.
He says that until now, even with free versions or free testing periods, it was hard to test and collaborate in that kind of environment with key stakeholders in the company. TestBox comes pre-populated with data generated by GPT-3 OpenAI to test how the software behaves and lets participants grade different features on a simple star rating system and provide comments as needed. All the feedback is recorded in a “notebook,” giving the company a central place to gather all the data.
What’s more, it puts the company buying the software more in control of the process instead of being driven by the vendor, which is typically the case. “Actually, now [the customer gets to] be the one who defines the experience, making them lead the process, while making it collaborative, and giving them more confidence [in their decision],” he said.
For now, the company plans to concentrate on customer support software and is working with Zendesk, HubSpot and Freshdesk, but has plans to expand and add partners over time. It has been talking with Salesforce about adding Service Cloud and hopes to have them in some form on the platform later this year. It also plans to expand into other verticals over time, like CRM, martech and IT help desks.
Senior is a former Bain consultant who worked with companies buying enterprise software, and saw the issues firsthand that they faced when it came to testing software before buying. He quit his job last summer, and began by talking to 70 customers, vendors and experts to get a real sense of what they were looking for in a solution.
He then teamed up with Holland and built the first version of the software before raising their seed money last October. The company began hiring in February and has eight employees at this point, but he wants to keep it pretty lean through the early stage of the company’s development.
Even at this early stage, the company is already taking a diverse approach to hiring. “Already when we have been working with recruiting firms, we’ve been saying that they need to split the pipeline as much as they can, and that’s been something we have spent a long, long time on. […] We spent actually six months with an open role on the front end because we are looking to build more diversity in our team as quickly as possible,” he said.
He reports that the company has a fairly equitable gender and ethnic split to this point, and holds monthly events to raise awareness internally about different groups, letting employees lead the way when it makes sense.
At least for now, he’s planning on running the company in a distributed manner, but acknowledges that as it gets bigger, he may have to look at having a centralized office as a home base.
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After 200% ARR growth in 2020, CourseKey raises $9M to digitize trade schools
When the COVID-19 pandemic hit and forced educational institutions to go virtual, many were scrambling to develop online or blended curriculums.
That struggle was particularly challenging for trade schools, many of which were not designed to teach online and were mostly paper-driven.
CourseKey, a San Diego-based trade school management SaaS startup, was in a unique position. Demand surged and its ARR grew by 200% in 2020. And now, the company has raised $9 million in a Series B led by SignalFire, with participation from existing backer Builders VC to help it continue its momentum.
Founded in 2015 by Luke Sophinos and Fadee Kannah, CourseKey’s B2B platform is designed to work with organizations that teach some of our most essential workers — from automotive mechanics to electricians to plumbers to nurses, phlebotomists and dental assistants.
CourseKey founders Luke Sophinos (left) and Fadee Kannah (right). Image Credits: Luke Sophinos/Fadee Kannah
The goal is to help those organizations boost revenue by improving student retention and graduation rates, helping them maintain regulatory compliance and generally streamline processes.
“Things really took off last year when the coronavirus hit,” Sophinos said. “So many schools had to adopt a digital arsenal. We saw a massive acceleration trend that was already going to happen. Every industry had been eaten. We just found a space that wasn’t yet.”
CourseKey currently works with more than 200 career colleges, including the Paul Mitchell School and the Institute for Business & Technology, among others. More than 100,000 students use its software.
For Sophinos and Kannah, founding CourseKey was more than just a business opportunity. Kannah, who had fled Iraq as a refugee, saw family members going through trade schools that were lacking technology infrastructure and modern software tools. He architected the CourseKey platform.
Sophinos, frustrated by his own college experience, applied for The Thiel Fellowship — a program that supports students in company building instead of university attending. However, he recognized that not everyone who doesn’t want to go to traditional college has that option.
“While looking at alternatives, our early team began recognizing a market that we felt no one was paying attention to. It was occupied by our friends and by our family members,” Sophinos said. “It was a space that, for some odd reason, was largely being left out of the education conversation.”
In 2017, the founding team (Sophinos, Kannah, Ryan Vanshur, Marc Barron, Michael Woo, Fadi George and Luan Nguyen) partnered with a large vocational education provider to build and launch what Sophinos describes as “the world’s first trade school management system.”
“We focused on automating daily classroom procedures like attendance and grading, enhancing the student experience through communication tools, helping to identify at-risk students, and simplifying compliance,” he said. “We also visualized data for retention purposes.”
CourseKey also does things like track skill attainment, run evaluations and exams and integrate third-party tools.
Image Credits: CourseKey
The startup’s goal with its new capital is to scale the platform to serve “every trade school in the country” with the mission of changing the narrative that four-year college is the “only option.” It also plans to add new features and capabilities, largely based on customer requests. CourseKey also plans to nearly double its current headcount of just over 50 employees to nearly 100 over the next two years.
“This is a massive market and massive business opportunity,” Sophinos said.
CourseKey has an impressive list of supporters beyond SignalFire and Builders. Steve Altman, former vice chairman and president of Qualcomm, led its $3.5 million seed round, which also included participation from Larry Rosenberger, former FICO CEO. Dennis Yang, former CEO of edtech giant Udemy, and Altman now serve on its board.
SignalFire Managing Director Wayne Hu, who also took a seat on the startup’s board with the new round, said his firm recognized that vocational schools and their administrators, instructors and students “suffer from a lack of purpose-built software.”
“Student Information Systems and Learning Management Systems are optimized for traditional K-12 schools and university workflow, but vocational schools are stuck relying on pen and paper or trying to shoe-horn in solutions that aren’t built for them,” Hu wrote in a blog post.
CourseKey, in SignalFire’s view, is reimagining a new education operating system built specifically for experiential, hands-on learning models, which continues to evolve with hybrid/distance learning.
Hu also pointed out that since many of the jobs that vocational schools are preparing people for “have life or death consequences,” they are highly regulated.
“Not only does CourseKey improve trade school business KPIs, it serves as insurance against this existential risk,” he added.
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E-commerce optimization startup Tradeswell raises $15.5M
After launching in October, Tradeswell is announcing today that it has raised $15.5 million in Series A funding.
Co-founder and CEO Paul Palmieri previously led digital ad company Millennial Media (now owned by TechCrunch’s parent company Verizon Media), and he said the e-commerce market today is similar to the online ad market when he was leading Millennial — ready for more optimization and automation.
Tradeswell focuses on six components of e-commerce businesses — marketing, retail, inventory, logistics, forecasting, lifetime value and financials — with the key goal of allowing those businesses to improve their net margins, rather than simply driving more clicks or purchases. The platform can fully automate some processes, such as buying online ads.
To illustrate what it can accomplish, Tradeswell pointed to the work it did with a personal care brand on Amazon Prime Day, with total sales doubling versus the previous Prime Day and profits increasing 67%.
The startup has now raised a total of $18.8 million. The Series A was led by SignalFire, which also led Tradeswell’s seed round, while Construct Capital, Allen & Company and The Emerson Group also participated.
“With the explosion of ecommerce over the past year, Tradeswell is perfectly positioned to help brands manage the complexity of online sales across an ever-increasing number of platforms and marketplaces,” said SignalFire founder and CEO Chris Farmer in a statement. “Paul and his team bring together a unique blend of experience in data, marketing and logistics to address the challenges of today and a rapidly evolving market in the years ahead with a central command center to optimize profitable growth.”
Palmieri said the new funding will allow Tradeswell to continue investing in the product, which will also mean building more integrations so that more types of data become “more liquid,” which in turn means that the platform can “make much more real-time decisions.”
When Tradeswell launched publicly last fall, it already had 100 customers, and Palmieri told me that number has subsequently grown past 150. Nor does he expect the consumer shift in e-commerce to disappear once the pandemic ends.
“Some of it probably goes back to the way it was, some of it stays online,” he said. “I do think it’s important to point out there’s something in the middle — that something is this notion of high convenience, that is semi-brick-and-mortar with [elements of e-commerce], whether that’s mobile ordering or something like an Instacart.”
Naturally, he sees Tradeswell as the key platform to help businesses navigate that shift.
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That dreadful VPN might finally be dead thanks to Twingate, a new startup built by Dropbox alums
VPNs, or virtual private networks, are a mainstay of corporate network security (and also consumers trying to stream Netflix while pretending to be from other countries). VPNs create an encrypted channel between your device (a laptop or a smartphone) and a company’s servers. All of your internet traffic gets routed through the company’s IT infrastructure, and it’s almost as if you are physically located inside your company’s offices.
Despite its ubiquity though, there are significant flaws with a VPN’s architecture. Corporate networks and VPNs were designed assuming that most workers would be physically located in an office most of the time, and the exceptional device would use a VPN. As the pandemic has made abundantly clear, fewer and fewer people work in a physical office with a desktop computer attached to ethernet. That means the vast majority of devices are now outside the corporate perimeter.
Worse, VPNs can have massive performance problems. By routing all traffic through one destination, VPNs not only add latency to your internet experience, they also transmit all of your non-work traffic through your corporate servers as well. From a security perspective, VPNs also assume that once a device joins, it’s reasonably safe and secure. VPNs don’t actively check network requests to make sure that every device is only accessing the resources that it should.
Twingate is fighting directly to defeat VPNs in the workplace with an entirely new architecture that assumes zero trust, works as a mesh and can segregate work and non-work internet traffic to protect both companies and employees. In short, it may dramatically improve the way hundreds of millions of people work globally.
It’s a bold vision from an ambitious trio of founders. CEO Tony Huie spent five years at Dropbox, heading up international and new market expansion in his final role at the file-sharing juggernaut. He’s most recently been a partner at venture capital firm SignalFire . Chief Product Office Alex Marshall was a product manager at Dropbox before leading product at lab management program Quartzy. Finally, CTO Lior Rozner was most recently at Rakuten, and before that Microsoft.
Twingate founders Alex Marshall, Tony Huie and Lior Rozner. Photo via Twingate.
The startup was founded in 2019, and is announcing today the public launch of its product, as well as its Series A funding of $17 million from WndrCo, 8VC, SignalFire and Green Bay Ventures. Dropbox’s two founders, Drew Houston and Arash Ferdowsi, also invested.
The idea for Twingate came from Huie’s experience at Dropbox, where he watched its adoption in the enterprise and saw firsthand how collaboration was changing with the rise of the cloud. “While I was there, I was still just fascinated by this notion of the changing nature of work and how organizations are going to get effectively re-architected for this new reality,” Huie said. He iterated on a variety of projects at SignalFire, eventually settling on improving corporate networks.
So what does Twingate ultimately do? For corporate IT professionals, it allows them to connect an employee’s device into the corporate network much more flexibly than a VPN. For instance, individual services or applications on a device could be set up to securely connect with different servers or data centers. So your Slack application can connect directly to Slack, your JIRA site can connect directly to JIRA’s servers, all without the typical round-trip to a central hub that a VPN requires.
That flexibility offers two main benefits. First, internet performance should be faster, since traffic is going directly where it needs to rather than bouncing through several relays between an end-user device and the server. Twingate also says that it offers “congestion” technology that can adapt its routing to changing internet conditions to actively increase performance.
More importantly, Twingate allows corporate IT staff to carefully calibrate security policies at the network layer to ensure that individual network requests make sense in context. For instance, if you are a salesperson in the field and suddenly start trying to access your company’s code server, Twingate can identify that request as highly unusual and outright block it.
“It takes this notion of edge computing and distributed computing [and] we’ve basically taken those concepts and we’ve built that into the software we run on our users’ devices,” Huie explained.
All of that customization and flexibility should be a huge win for IT staff, who get more granular controls to increase performance and safety, while also making the experience better for employees, particularly in a remote world where people in, say, Montana might be very far from an East Coast VPN server.
Twingate is designed to be easy to onboard new customers according to Huie, although that is almost certainly dependent on the diversity of end users within the corporate network and the number of services to which each user has access. Twingate integrates with popular single sign-on providers.
“Our fundamental thesis is that you have to balance usability, both for end users and admins, with bulletproof technology and security,” Huie said. With $17 million in the bank and a newly debuted product, the future is bright (and not for VPNs).
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Transposit scores $35M to build data-driven runbooks for faster disaster recovery
Transposit is a company built by engineers to help engineers, and one big way to help them is to get systems up and running faster when things go wrong — as they always will at some point. Transposit has come up with a way to build runbooks for faster disaster recovery, while using data to update them in an automated fashion.
Today, the company announced a $35 million Series B investment led by Altimeter Capital, with participation from existing investors Sutter Hill Ventures, SignalFire and Unusual Ventures. Today’s investment brings the total raised to $50.4 million, according to the company.
Company CEO Divanny Lamas and CTO and founder Tina Huang see technology issues as less an engineering problem and more as a human problem, because it’s humans who have to clean up the messes when things go wrong. Huang says forgetting the human side of things is where she thinks technology has gone astray.
“We know that the real superpower of the product is that we focus on the human and the user side of things. And as a result, we’re building an engineering culture that I think is somewhat differentiated,” Huang told TechCrunch.
Transposit is a platform that at its core helps manage APIs, connections to other programs, so it starts with a basic understanding of how various underlying technologies work together inside a company. This is essential for a tool that is trying to help engineers in a moment of panic figure out how to get back to a working state.
When it comes to disaster recovery, there are essentially two pieces: getting the systems working again, then figuring out what happened. For the first piece, the company is building data-driven runbooks. By being data-driven, they aren’t static documents. Instead, the underlying machine learning algorithms can look at how the engineers recovered and adjust accordingly.
Image Credits: Transposit
“We realized that no one was focusing on what we realize is the root problem here, which is how do I have access to the right set of data to make it easier to reconstruct that timeline, and understand what happened? We took those two pieces together, this notion that runbooks are a critical piece of how you spread knowledge and spread process, and this other piece, which is the data, is critical,” Huang said.
Today the company has 26 employees, including Huang and Lamas, who Huang brought on board from Splunk last year to be CEO. The company is somewhat unique having two women running the organization, and they are trying to build a diverse workforce as they build their company to 50 people in the next 12 months.
The current make-up is 47% female engineers, and the goal is to remain diverse as they build the company, something that Lamas admits is challenging to do. “I wish I had a magic answer, or that Tina had a magic answer. The reality is that we’re just very demanding on recruiters. And we are very insistent that we have a diverse pipeline of candidates, and are constantly looking at our numbers and looking at how we’re doing,” Lamas said.
She says being diverse actually makes it easier to recruit good candidates. “People want to work at diverse companies. And so it gives us a real edge from a kind of culture perspective, and we find that we get really amazing candidates that are just tired of the status quo. They’re tired of the old way of doing things and they want to work in a company that reflects the world that they want to live in,” she said.
The company, which launched in 2016, took a few years to build the first piece, the underlying API platform. This year it added the disaster recovery piece on top of that platform, and has been running its beta since the beginning of the summer. They hope to add additional beta customers before making it generally available later this year.
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Karat launches a credit card for online creators
Karat is a new startup promising to build better banking products for the creators who make a living on YouTube, Instagram, Twitch and other online platforms. Today it’s unveiling its first product — the Karat Black Card.
The startup, which was part of accelerator Y Combinator’s Winter 2020 batch, is also announcing that it has raised $4.6 million in seed funding from Twitch co-founder Kevin Lin, SignalFire, YC, CRV and Coatue.
Co-founder and co-CEO Eric Wei knows the creator world well, thanks to his time as product manager for Instagram Live. (His co-founder Will Kim was previously an investor with seed fund Lucky Capital.) Wei told me that although many creators have significant incomes, banks rarely understand their business or offer them good terms when they need capital.
“Traditional banks care a lot about FICO [credit scores],” he said. “A lot of YouTubers, when they’re blowing up, they don’t have time to think: Let me make sure my FICO is awesome as well.”
At the same time, he argued that creators have become suspicious of potentially scammy financial offers, to the point that if you were to attend a pre-COVID VidCon and tried to give out $3,000, “The good creators will not take it, even if you tell them there are no strings behind it.”
Karat co-founders Will Kim and Eric Wei
With the Karat Black Card, the startup is giving creators a credit card that they can use for their business-related expenses. When creators are approved, they receive a $250 bonus that can be applied to any future purchases of electronics or equipment. The card also comes with custom designs, 2% to 5% cash back on purchases and it even offers advances on sponsorship payments.
Underlying it, Wei said Karat has developed an underwriting model that works for creators. Instead of looking at credit scores, Karat focuses on the size of a creator’s following, their current revenue and whether or not they’re “business savvy.”
“It’s not just the number of followers you have, but what platforms,” Wei added. “I would rather have 100,000 subscribers on YouTube than 1 million on TikTok, because on TikTok, it’s all algorithmically driven.”
Karat has already provided the card to an initial group of creators, including TheRussianBadger, TierZoo and Nas Daily. Wei said the model is working so far, with no defaults.
For now, the card is aimed at professional, full-time creators who have at least 100,000 followers. Wei estimated that that’s a potential customer base of 1 million creators. Eventually, he wants to provide those creators with more than a black card.
“We’re building a vertical financial and biz ops experience,” he said. “People in earlier stages, we do want to get to them eventually, but only after we feel like we’ve developed enough of an underwriting model.”
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Candidate Labs wants to be a modern talent agency for techies
In the first few minutes of pitching his new company, Candidate Labs, Jonathan Downey admitted that he’s operating in a market that is “done to death”: recruitment technology. But Downey, whose previous startup Airware shut down after burning $118 million, remains optimistic because of a little company named Zoom.
“There were lots and lots of videoconferencing companies and yet everybody’s experience was really bad,” he said. “It just took [Zoom] coming along and getting just a few more things right that totally transformed” videoconferencing.
Zoom lesson in mind, Candidate Labs launched today as a modern talent agency, after operating in stealth for the past seven months. The company also announced today that it has raised $5 million in seed funding. Investors in the round include SignalFire, Leah Solivan of Fuel Capital, BoxGroup, Lattice CEO Jack Altman and the founders of Opendoor, Eric Wu and Ian Wong.
Candidate Labs connects a data platform with 100 million professionals to its database of 60,000 jobs. Then it creates short lists of talent recommendations that clients can then screen and interview.
Jonathan Downey, CEO and co-founder of Candidate Labs (Image Credits: Candidate Labs)
Its competitive edge is not in its access to data, but rather the technology it lays atop it. Downey said that Candidate Labs uses “human in the loop” machine learning, similar to Stitch Fix, which combines data and human judgement to better recommend style guides.
Candidate Labs leverages a big data set to get a product that is quality, not quantity. Using machine learning, Candidate Labs might extract a 25-person candidate list to help companies fill a singular role. Then a seasoned recruiter will look over the list to see the quality of the candidates, pull in personal judgement and create a final list. Once a client sees the list, Candidate Labs will see who it chooses to interview and then digest that feedback. Over time, humans and machines will get better at recommendations.
In an industry like recruitment, which has a lot of messy and unstructured data, human in the loop machine learning makes sense. There needs to be a two-pronged approach to hiring people, one that speeds up the bits that are purely logistical, but gives room for humans to make a correction if needed.
Candidate Labs’ big sell is that it connects sales and marketing professionals to jobs at a fraction of the time of normal recruitment tools. In over half of cases to date, Candidate Labs has introduced employers to candidates that are eventually hired within seven days. More than 50% of the talent it has placed has been diverse talent, according to Downey.
Leah Solivan, a general partner of Fuel Capital, invested in Candidate Labs in mid-2019 and said Candidate Labs’ launch compass is at a “critical inflection point for talent within the startup ecosystem.”
“During the best of times, candidates tend to rely largely on limited insights and a handful of network referrals to make a critical life decision with long-term consequences,” she said. “Their next role.”
Downey is a customer of his COO and co-founder, Michael Zhang, who founded custom menswear service Trumaker .
“Candidate Labs is a recruiting firm that we wish we had been able to work with in building our own companies,” Downey said.
Along with the financing, Candidate Labs is announcing a job search tool. Sales and marketing professionals, among the most impacted by pandemic-related job losses, can use search filters to look for job openings. In early April, a ton of new tools were launched to help support those without jobs secure their next gig.
According to Downey, the tool will help Candidate Labs work directly with people within what is now a saturated job market.
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