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Brazil’s Black Silicon Valley could be an epicenter of innovation in Latin America
Paulo Rogério Nunes
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Paulo is the co-founder of Vale do Dendê (Dende Valley) and AFAR Ventures, a global diversity and inclusion creative and consulting agency that identifies opportunities for multinational brands, corporations and investors in emerging markets.
Tara Sabre Collier
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Contributor
Tara Sabre Collier is an early-stage impact investor with more than 15 years of experience at the intersection of economic development, social entrepreneurship and impact investment. She is a Visiting Fellow of Oxford University where she teaches and writes about impact investing, diversity and equity.
Over the last five years, Brazil has witnessed a startup boom.
The main startups hubs in the country have traditionally been São Paulo and Belo Horizonte, but now a new wave of cities are building their own thriving local startup ecosystems, including Recife with Porto Digital hub and Florianópolis with Acate. More recently, a “Black Silicon Valley” is beginning to take shape in Salvador da Bahia.
While finance and media are typically concentrated in São Paulo and Rio de Janeiro, Salvador, a city of three million in the state of Bahia, is considered one of Brazil’s cultural capitals.
With an 84% Afro-Brazilian population, there are deep, rich and visible roots of Africa in the city’s history, music, cuisine and culture. The state of Bahia is almost the size of France and has 15 million people. Bahia’s creative legacy is quite clear, given that almost all the big Brazilian cultural patrimonies have their roots here, from samba and capoeira to various regional delicacies.
Many people are unaware that Brazil has the largest Black population in any country outside of Africa. Like counterparts in the U.S. and across the Americas, Afro-Brazilians have long struggled for socio-economic equity. As with counterparts in the United States, Brazil’s Black founders have less access to capital.
According to research by professor Marcelo Paixão for the Inter-American Development Bank, Afro-Brazilians are three times more likely to have their credit denied than their white counterparts. Afro-Brazilians also have over twice the poverty rates of white Brazilians and only a handful of Afro-Brazilians have held legislative positions, despite comprising more than 50% of the population. Not to mention, they make up less than 5% of the top level of the top 500 companies. Compared with countries like the United States or the United Kingdom, the racial funding gap is even more stark as more than 50% of Brazil’s population is classified as Afro-Brazilian.
Bahia could be an epicenter of innovation in Latin America
Salvador (Bahia’s capital) is the natural birthplace of Brazil’s Black Silicon Valley, which largely centers around a local ecosystem hub, Vale do Dendê.
Vale do Dendê coordinates with local startups, investors and government agencies to support entrepreneurship and innovation and runs startup acceleration programs specifically focusing on supporting Afro-Brazilian founders. The Vale do Dendê Accelerator organization has already been in the spotlight at international and national publications because of its innovative work in bringing startup and tech education from mainstream to traditionally underserved communities.
In almost three years, the accelerator has supported 90 companies directly that cut across various industries, with high representation from the creative and social impact sectors. Almost all of the companies have achieved double-digit growth and various companies have gone on to raise further funding or corporate backing. One of the first portfolio companies, TrazFavela, a delivery app that focuses on linking customers and goods from traditionally marginalized communities, was supported by the accelerator in 2019. Despite the lockdown, the business grew 230% between the period of March and May after incubation and recently signed an agreement for further support and investment from Google Brasil.
There is a clear recognition of the business case for Afro-Brazilian businesses. Another company supported in the beginning with mentoring by Vale do Dendê is Diaspora Black (which focuses on Black culture in the tourism sectors). It attracted backing from Facebook Brasil and grew 770% in 2020.
The same is true for AfroSaúde, a health tech company focused on low-income communities with a new service to prevent COVID-19 in favelas (urban slums, which incidentally have high Black representation). The app now has more than 1,000 Black health professionals on its platform, creating jobs while addressing a health crisis that had been tremendously racialized.
We’re at the brink of a renaissance here in Bahia
Despite Brazil’s challenging economic situation, large national and global companies and investors are taking notice of this startup boom. Major IT company Qintess has come on board as a major sponsor to help Salvador become the leading Black tech hub in Latin America.
The company announced an investment of around 10 million reais (nearly $2 million USD) over the next five years in Black startups, including a collaboration with Vale do Dendê to train around 2,000 people in tech and accelerate more than 500 startups led by Black founders. Also, in September, Google launched a 5 million reais (around $1 million USD) Black Founders Fund with the support of Vale do Dendê to boost the Afro-Brazilian startup ecosystem.
There is no doubt that the new wave of innovation will come from the emerging markets, and the African Diaspora can play an important role. With the world’s largest African diaspora population in the hemisphere, Brazil can be a major leader on this. Vale do Dendê is keen to build partnerships to make Brazil and Latin America a more representative startup and creative economy ecosystem.
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Join Yext’s Howard Lerman for a live Q&A right now
Today’s the day! This afternoon at 2 p.m. EDT/11 a.m. PDT, Yext CEO Howard Lerman will join TechCrunch for a live chat.
The conversation is part of our continuing Extra Crunch Live series, now in its second season. What are we up to in the second installment of the conversations? The same as before, bringing the most interesting founders and investors ’round for a chat that you can contribute to by bringing your own questions. (Make sure you’re signed up so you can jump right in.)
As we wrote last week, Lerman is not just another public company CEO: His company, Yext, has some old-fashioned history with TechCrunch, having pitched at one of our events back in 2009. It went well, with Yext quickly raising money afterward.
We’ll spend a little bit of time in the past talking about Yext’s history as a startup. I want to know at what stage did Howard begin to consciously prep Yext for an IPO — the company went public in 2017 — and how long until he felt the company was ready? Given that we just came off one of the most active quarters in recent history for technology companies going public, it’s a good time to dig into the matter.
We’ll also get Howard’s take on the public markets in 2020 and whether he was happy with Yext’s IPO timing.
For the early-stage founders in the crowd, we have stuff prepped for you as well. Yext has moved from a business best-known for building a system that helps companies keep their diverse online listings up to date with their most pertinent information, to a search-first company that is leading its customer acquisition cycles with its “Answers” product.
How did the company manage to build the latter while eating off the former, and how has the company balanced its continued development since? What can startups learn from the choices that Yext has made?
And, TechCrunch recently reviewed Howard’s social media posts regarding Black Lives Matter: “As CEO, I will see to it that our company continues to be advocates for equality and justice.” So, how does he view the role of politics inside of tech companies, and what advice does he have for founders who are looking to build a lasting culture?
It’s going to be a great chat. Make sure you’ve signed up for Extra Crunch and I’ll see you in a few hours.
Bring your best questions. Howard is a good chat, so he’ll have something to say if you ask something great. Details after the jump.
Details
Below are links to add the event to your calendar and to save the Zoom link. We’ll share the YouTube link shortly before the discussion:
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Last chance to demo at TC Sessions: Mobility 2020 — package sales end tomorrow
Opportunity alert! We’re just five short days away from TC Sessions: Mobility 2020, a two-day event focused on building the future of transportation. Thousands of attendees from around the world will be looking for the latest technologies and up-and-coming startups. Will they find your up-and-coming startup?
The answer is a resounding yes — if you buy an Early-Stage Startup Exhibitor Package. Join more than 40 other early-stage startups exhibiting in our expo area and plant your company in the path of the influencers who can help drive your business forward. Expand your network and build sustainable relationships that can provide long-lasting benefits.
Deadline alert! Act now because exhibitor package sales end tomorrow, October 2, at 11:59 p.m. (PDT).
Let’s look at just some of the benefits that come from exhibiting at TC Sessions: Mobility. It’s a “Field of Dreams” moment — if you exhibit, they will come. We’re talking media hunting for their next great story, investors who want to pack their portfolio pipeline, founders looking for partnerships, brilliant engineers eager for employment and, of course, potential customers.
Exhibiting lets you present your pitch decks, schedule demos, start conversations and see where they lead. Add it all together and you get invaluable exposure, increased brand recognition and infinite opportunity.
TC Sessions Mobility offers several big benefits. First, networking opportunities that result in concrete partnerships. Second, the chance to learn the latest trends and how mobility will evolve. Third, the opportunity for unknown startups to connect with other mobility companies and build brand awareness. — Karin Maake, senior director of communications at FlashParking.
Want even more exposure? We’ve got you covered. Every exhibiting startup will get five minutes to pitch live in a pitch session. Think of it: You — strutting your stuff in front of influential mobility movers, shakers and startup dream makers from around the world. Warm up your pitching arm, folks. It’s gonna be a wild ride.
TC Sessions: Mobility 2020 takes place October 6-7, but your opportunity to exhibit in the expo comes to a screeching halt tomorrow, October 2 at 11:59 p.m. (PDT). Don’t waste another minute. Secure your Early-Stage Startup Exhibitor Package now and get ready to fast-track opportunity.
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With $18M in new funding, Braintrust says it’s creating a fairer model for freelancers
Braintrust, a network for freelance technical and design talent that launched over the summer, is announcing that it has raised $18 million in new funding.
Co-founder and CEO Adam Jackson has written for TechCrunch about how tech companies need to treat independent contractors with more empathy. He told me via email that the San Francisco-based startup is making that idea a reality by offering a very different approach than existing marketplaces for freelance work.
For one thing, Braintrust only charges the companies doing the hiring — freelancers won’t have to pay to join or to bid on a project, and Braintrust won’t charge a fee on their project payments. In addition, the startup is using a cryptocurrency token that it calls Btrust to reward users who build the network, for example by inviting new customers or vetting freelancers. Apparently, the token will give users a stake in how the network evolves in the future.
“Just imagine if Uber had given all of its drivers some ownership in the company what a different company it would be today,” Jackson said. “Braintrust will be 100% user-owned. Everyone who participates on the platform has skin in the game.”
And for companies, Braintrust is supposed to allow them to tap freelancers for work that they’d normally do in-house. The startup’s clients already include Nestlé, Pacific Life, Deloitte, Porsche, Blue Cross Blue Shield and TaskRabbit.
According to Jackson, most of the talent on the platform consists of career freelancers, but with many people losing their jobs during the COVID-19 pandemic, “we’ve seen an influx of talent coming looking to join the ranks of the freelancers.”
He added that the startup already became profitable after raising its $6 million seed round, so the new funding will allow it to build the core team and also bring in more work.
“We exist to help companies accelerate their product roadmaps and innovation, and this injection of funding will help us do just that,” Jackson said.
The new funding was led by ACME and Blockchange, with participation from new investors Pantera, Multicoin and Variant.
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Daily Crunch: Amazon unveils its own game-streaming platform
Amazon announces a new game service and plenty of hardware upgrades, tech companies team up against app stores and United Airlines tests a program for rapid COVID-19 testing. This is your Daily Crunch for September 24, 2020.
The big story: Amazon unveils its own game-streaming platform
Amazon’s competitor to Google Stadia and Microsoft xCloud is called Luna, and it’s available starting today at an early access price of $5.99 per month. Subscribers will be able to play games across PC, Mac and iOS, with more than 50 games in the library.
The company made the announcement at a virtual press event, where it also revealed a redesigned Echo line (with spherical speakers and swiveling screens), the latest Ring security camera and a new, lower-cost Fire TV Stick Lite.
You can also check out our full roundup of Amazon’s announcements.
The tech giants
App makers band together to fight for App Store changes with new ‘Coalition for App Fairness’ — Thirteen app publishers, including Epic Games, Deezer, Basecamp, Tile, Spotify and others, launched a coalition formalizing their efforts to force app store providers to change their policies or face regulation.
LinkedIn launches Stories, plus Zoom, BlueJeans and Teams video integrations as part of wider redesign — LinkedIn has built its business around recruitment, so this redesign pushes engagement in other ways as it waits for the job economy to pick up.
Facebook gives more details about its efforts against hate speech before Myanmar’s general election — This includes adding Burmese language warning screens to flag information rated false by third-party fact-checkers.
Startups, funding and venture capital
Why isn’t Robinhood a verb yet? — The latest episode of Equity discusses a giant funding round for Robinhood.
Twitter-backed Indian social network ShareChat raises $40 million — Following TikTok’s ban in India, scores of startups have launched short-video apps, but ShareChat has clearly established dominance.
Spotify CEO Daniel Ek pledges $1Bn of his wealth to back deeptech startups from Europe — Ek pointed to machine learning, biotechnology, materials sciences and energy as the sectors he’d like to invest in.
Advice and analysis from Extra Crunch
3 founders on why they pursued alternative startup ownership structures — At Disrupt, we heard about alternative approaches to ensuring that VCs and early founders aren’t the only ones who benefit from startup success.
Coinbase UX teardown: 5 fails and how to fix them — Many of these lessons, including the need to avoid the “Get Started” trap, can be applied to other digital products.
As tech stocks dip, is insurtech startup Root targeting an IPO? — Alex Wilhelm writes that Root’s debut could clarify Lemonade’s IPO and valuation.
(Reminder: Extra Crunch is our subscription membership program, which aims to democratize information about startups. You can sign up here.)
Everything else
United Airlines is making COVID-19 tests available to passengers, powered in part by Color — United is embarking on a new pilot project to see if easy access to COVID-19 testing immediately prior to a flight can help ease freedom of mobility.
Announcing the final agenda for TC Sessions: Mobility 2020 — TechCrunch reporters and editors will interview some of the top leaders in transportation.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.
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Entrepreneurship and investing as social good
Sree Kolli is co-founder of Conduit, a premium investment platform that connects founders with successful operators, family offices and select VCs worldwide.
2020 has been a year of social upheaval. Around the world, society is identifying different problems in our culture and pushing for widespread change. While there are notable steps we can all take, from altering exclusionary company policies to signing action-oriented petitions, the VC and investment world has another, often overlooked option: Investing in change-the-world startups.
Increasingly, angel investors and institutional funds have begun allocating a portion of their funds to startups focused on diversity and social good, whether focused on democratized access to healthcare and education, or larger scale issues like climate change.
Initially, shifting funds to empower social good may seem like a hefty feat, however investors can embrace this mindshift in three simple steps: (1) redistributing stagnant investments; (2) leveraging democratized access to change-making startups; and (3) identifying founders tracking toward success.
Allocating more investments to foster change
Most of the world’s money is tied up in stagnant places. Whether invested in real estate, bonds or other traditional vehicles, this capital typically often shows conservative returns to investors — and has negligible impact on society. The intent isn’t malicious.
Most family offices and private wealth managers strive to minimize losses and these sorts of uniformed portfolios are safe. Even the most seasoned investors should incorporate more variety into their portfolios, determining where they can make profitable investments that yield higher returns while advancing societal good. Investors can take small steps to get more confident in expanding their strategies.
To start, reframe your thinking into seeing the potential opportunity rather than the risk. A good way to do this: Look at how high-risk public equities performed over the last five years and compare it to ventures within tech. Investors will see a significant disparity and the opportunity to make different returns.
The idea is not to put an entire profile in a single venture. Rather, an investor should take a portion of their portfolio in a high-risk investment sector, like public equities or fund structures, and put it in a similar risk profile with a better return. Gradually increasing these increments, starting at 15% and slowly scaling up, can help investors to see outsized returns while making a difference in the process.
A world of passion at your fingertips
For startups of all sizes, democratized access to investors will accelerate the use of capital for social good. Until recently, only the world’s wealthiest people had exposure to premium capital, but crowdfunding and accelerator programs have ushered in new opportunities, forging connections that might not have otherwise been possible.
These avenues have opened new doors for investors and startups. Access to developed networks or innovation hubs like Silicon Valley are no longer make-or-breaks for those looking to raise capital. Extended global opportunity for startups also means investors have more options to find promising ventures that align with their values, regardless of their location.
But while crowdfunding and accelerators have made the world more accessible, they come with sizable challenges. Despite making early-stage investment more obtainable, crowdfunding often does not bring the most valuable investors to the table.
Crowdfunding also inundates platforms with poor-quality deal flow, making it more strenuous for investors to connect with fruitful opportunities. Meanwhile, various accelerators and incubation platforms have emerged, which have advanced global connection, but tend to be quite noisy.
To succeed, entrepreneurs need more than capital. Rather, they need strategic support from experienced investors who can help them make decisions and scale in an impactful way. With a world of ideas at their fingertips, investors should take time to sift through their options and find the ideas that move them the most, prioritizing quality deals and looking toward platforms that curate promising connections.
Empowering entrepreneurs poised for success
Now is the right time to invest in startups. People who innovate during the pandemic have triple the hustle of those who build in safer economies. But while the timing is right, it’s equally important that the fit is right. I’m a big believer in investing in potential: Ambition, unwavering tenacity and empathy are desirable qualities that can help bring game-changing ideas to fruition.
If an investor funds a passionate leader with a strong vision and ability to attract talent, then the groundwork is laid to build something meaningful. When considering the change-makers to invest in, ask: Is this the right person to be building this company? Do they have the ability to attract and lead talent? Is the market big enough, and is there a significant enough problem to build a company around?
If the answer isn’t yes to all of these questions, it’s important to gauge if you can see a theoretical exit, or if the company is pre-seed or Series A, if they have the ability to scale to a decent size.
Despite this, investing in startups, no matter how good their intentions, can scare investors. One way to overcome trepidation is to invest in larger-stage startups that seem less risky and then wade into earlier-stage startups at your own pace. Special purpose acquisition companies (SPACs) are also becoming an interesting investment option.
SPACs are corporations formed for the sole purpose of raising investment capital through an IPO. The proceeds are then used to buy one or more existing companies, an option that could decrease anxiety for risk-averse investors looking to expand their comfort zone.
Any strategy an investor chooses to embrace social good is a step in the right direction. Capital is a tangible way to fuel innovation and bring about impactful change.
Democratized access to startups yields more opportunity for investors to find ventures that align with their values while diversifying their profiles can provide tremendous results. And when that return means disrupting the status quo and empowering societal change? Everyone wins.
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EasySend raises $16M from Intel, more for its no-code approach to automating B2C interfaces
No-code and low-code software have become increasingly popular ways for companies — especially those that don’t count technology as part of their DNA — to bring in more updated IT processes without the heavy lifting needed to build and integrate services from the ground up.
As a mark of that trend, today, a company that has taken this approach to speeding up customer experience is announcing some funding. EasySend, an Israeli startup which has built a no-code platform for insurance companies and other regulated businesses to build out forms and other interfaces to take in customer information and subsequently use AI systems to process it more efficiently, is announcing that it has raised $16 million.
The funding has actually come in two tranches, a $5 million seed round from Vertex Ventures and Menora Insurance that it never disclosed, and another $11 million round that closed more recently, led by Hanaco with participation from Intel Capital. The company is already generating revenue, and did so from the start, enough that it was actually bootstrapped for the first three years of its life.
Tal Daskal, EasySend’s CEO and co-founder, said that the funding being announced today will be used to help it expand into more verticals: up to now its primary target has been insurance companies, although organically it’s picked up customers from a number of other verticals, such as telecoms carriers, banks and more.
The plan will be now to hone in on specifically marketing to and building solutions for the financial services sector, as well as hiring and expanding in Asia, Europe and the US.
Longer term, he said, that another area EasySend might like to look at more in the future is robotic process automation (RPA). RPA, and companies that deal in it like UIPath, Automation Anywhere and Blue Prism, is today focused on the back office, and EasySend’s focus on the “front office” integrates with leaders in that area. But over time, it would make sense for EasySend to cover this in a more holistic way, he added.
Menora was a strategic backer: it’s one of the largest insurance providers in Israel, Daskal said, and it used EasySend to build out better ways for consumers to submit data for claims and apply for insurance.
Intel, he said, is also strategic although how is still being worked out: what’s notable to mention here is that Intel has been building out a huge autonomous driving business in Israel, anchored by MobileEye, and not only will insurance (and overall risk management) play a big part in how that business develops, but longer term you can see how there will be a need for a lot of seamless customer interactions (and form filling) between would-be car owners, operators, and passengers in order for services to operate more efficiently.
“Intel Capital chose to invest in EasySend because of its intelligent and impactful approach to accelerating digital transformation to improve customer experiences,” said Nick Washburn, senior managing director, Intel Capital, in a statement. “EasySend’s no-code platform utilizes AI to digitize thousands of forms quickly and easily, reducing development time from months to days, and transforming customer journeys that have been paper-based, inefficient and frustrating. In today’s world, this is more critical than ever before.”
The rise and persistence of Covid-19 globally has had a big, multi-faceted impact how we all do business, and two of those ways have fed directly into the growth of EasySend.
First, the move to remote working has given organizations a giant fillip to work on digital transformation, refreshing and replacing legacy systems with processes that work faster and rely on newer technologies.
Second, consumers have really reassessed their use of insurance services, specifically health and home policies, respectively to make sure they are better equipped in the event of a Covid-19-precipitated scare, and to make sure that they are adequately covered for how they now use their homes all hours of the day.
EasySend’s platform for building and running interfaces for customer experience fall directly into the kinds of apps and services that are being identified and updated, precisely at a time when its initial target customers, insurers, are seeing a surge in business. It’s that “perfect storm” of circumstances that the startup wouldn’t have wished on the world, but which has definitely helped it along.
While there are a lot of companies on the market today that help organizations automate and run their customer interaction processes, the Daskal said that EasySend’s focus on using AI to process information is what makes the startup more unique, as it can be used not just to run things, but to help improve how things work.
It’s not just about taking in character recognition and organizing data, it’s “understanding the business logic,” he said. “We have a lot of data and we can understand [for example] where customers left the process [when filling out forms]. We can give insights into how to increase the conversion rates.”
It’s that balance of providing tools to do business better today, as well as to focus on how to build more business for tomorrow, that has caught the eye of investors.
“Hanaco is firmly invested in building a digital future. By bridging the gap between manual processes and digitization, EasySend is making this not only possible, but also easy, affordable, and practical,” said Hanaco founding partner Alon Lifshitz, in a statement.
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A meeting room of one’s own: Three VCs discuss breaking out of big firms to start their own gigs
One of the more salient trends in the tech world — arguably the engine that propels it — has been the recurring theme of people who hone talents at bigger companies and then strike out on their own to found their own startups.
(Some, like Max Levchin, even hire entrepreneurial types intentionally to help perpetuate this cycle and get more proactive teams in place.)
It turns out that trend doesn’t just apply to companies, but also to the investors who back them. At Disrupt we talked with three venture capitalists who have followed that path: Making their names and cutting their teeth at major firms, and now building their own “startup” funds on their own steam.
On the macro level, the whole world has been living through a challenging time this year. But as we’ve seen time and again the wheels have continued to turn in the tech world.
IPOs are returning, products are being rolled out, people are buying a lot online and using the internet to stay connected, there has been a lot of M&A and promising startups are getting funded.
Indeed, if entrepreneurs and their innovations are the engine of the tech world, money is the fuel, and that is the opportunity that Dayna Grayson (formerly of NEA, now founder at Construct Capital), Renata Quintini (formerly at Lux Capital, now founder at Renegade Partners) and Lo Toney (formerly GV, now founder at Plexo Capital) have zeroed in to address.
Grayson said that part of the reason for striking out to start Construct Capital with co-founder Rachel Holt was what they saw as an opportunity to create a firm that specifically funded startups tackling the industrial sector:
“Half the U.S. economy’s GDP, half the GDP of this country, hasn’t really been digitized,” she said. “[Firms] haven’t been tech enabled. They’ve been way under invested … The time is now to build with early stage entrepreneurs.”
While Construct is focusing on a sector, Renegade was founded to focus on something else: The stage of development for a startup, and specific the Series B, which the firm refers to as “supercritical,” essential in terms of getting team and strategy right after a startup is no longer just starting out, but before and leading to scaled growth.
“We saw through our boards over and over again companies that figured out how to scale their organizations, put in the processes,” said Quintini, who co-founded Renegade with Roseanne Wincek. “On the people side, they actually went further and captured a lot more market cap and market share faster. Once we saw this opportunity, we could not let it go.”
She compares the current imperative to really focus on how to build and scale companies at the “supercritical” stage to the focus on early stage funding that typified an earlier period in the development of the startup ecosystem 15 years ago. “You could get a million dollars and be in business, a lot more people could, and you had less time to figure out what really resonated with customers,” she said. “That really gave rise to today.”
Toney has taken yet another approach, focusing not on sector, nor stage, but using capital to help germinate a whole new demographic of founders, the premise being that funding a more diverse and inclusive mix of founders is not just good for creating a more level playing field, but also for the good of more well-rounded products that speak to a wider population of users.
“I was having a great time at GV, but I just saw this opportunity as being one that was too hard to resist,” said Toney of founding Plexo, which invests not just in startups but in funds that are following a similar investment principle to his. Investing in both funds and founders is something GV did as well, but the added ability to turn that into investing with a social imperative was important. “To have this byproduct of increasing diversity and inclusion in the ecosystem [is something] I’m super passionate about,” he said.
We are living through a time when the tech world seems to be awash in capital. One of the byproducts of having so many successful tech companies has been limited partners rushing in to back more VCs in hopes of also getting some of the spoils: Many firms are closing funds in record times, oversubscribed and that’s having a knock-on effect not just in terms of startups getting funded, but VCs themselves also multiplying with increasing frequency. All three said that the fact that they all identify as more than just “another new VC”, with specific purposes, also makes it easier for them to get themselves noticed to get involved in good deals.
Grayson said that the challenge of starting a firm in the midst of a global pandemic turned out to be a piece of good fortune in disguise in an industry that thrives on the concept of “disruption” (as we at TechCrunch know all too well … ).
“We were really lucky that we started investing in a COVID world,” she said. “So many things have been up ended. And I think, you know, software adoption and technology adoption have been moved up 10-20 years in industry. [And] the way that we work together really has changed.” She also said that they’ve found themselves almost looking for companies “created in a COVID environment,” which indeed would qualify as a battle-tested business model.
In terms of raising funds themselves, Toney also recalled the period when we saw a real surge of VCs emerging to fund companies at the seed stage and the growth of “solo capitalists” around that.
“I think what’s really interesting about solo capitalists is [how] they take their understanding of operations, and a deep network of other technologists, both from big companies as well as entrepreneurs, and … leverage access to all that deal flow by going out and actually raising capital from other sources, whether that be high net worth individuals or family offices or even institutions,” he said.
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With Goat Capital, Justin Kan and Robin Chan want to keep founding alongside the right teams
Justin Kan and Robin Chan have each been angel investing for more than a decade. They’re starting a new fund together now, though, to stay involved as cofounders of more startups.
Goat Capital is a hybrid incubator versus a pure seed investment firm, Chan explains. It will be writing checks ranging between roughly half a million and $3 million dollars, and it is only planning to raise $40 million — so the checks will be selective.
The offering is that “you’re going to be working with Justin and Robin,” he says, as a direct collaboration to help your company succeed. With $25 million closed already from themselves and several family offices, the fund has begun investing globally with particular interests in digital health, ecommerce, digital entertainment and gaming, robotics and climate change.
The goal is not just about being the Greatest Of All Time, Kan adds. In a startup, you “climb high heights and eat shit to get there. That tenacity is what we want.”
It’s a nod to their own successes and struggles as founders over the years, and what they have seen as investors and advisors to a wide range of companies around the world (Twitter, Xiaomi, Bird, Uber, Square, Ginkgo Bioworks, Scale.ai, Cruise, Razorpay, Xendit, Equipment Share, Wave, Teachable, Semantic Machines, Rippling, Built Robotics, etc.)
Kan was a cofounder of Justin.tv, which became Twitch as well as Socialcam. He later had an on-demand company called Exec and previously a calendar app called Kiko, both of which sold for small amounts. Most recently, he took a big shot at the traditional legal industry with Atrium, a law firm and legal software startup that raised big rounds of funding before shuttering earlier this year.
His prototype for Goat is Alto Pharmacy, a booming digital health unicorn today that the founders started in his living room.
“We do think founders should be treated like athletes, going for gold really hard… the Olympic metaphor,” Kan qualifies about the name. “That means grinding for years — and having to rest, too. I’m very passionate about mental health and wellness as part of the journey.” (More on that here.)
Chan, meanwhile, sold his gaming startup in China to Zynga a decade ago, then helped lead a failed attempt to buy Blackberry before founding Operator, a well-funded ecommerce company that closed a few years ago. During the pandemic, he helped create Operation Masks, a nonprofit that has been providing PPE across the US. He’s also an ongoing advisor to Sleeper, Bird, Expa and Flipboard.
The focus will be fully global now. Chan explains that even though you’re seeing more challenges to building a truly global company these days, there’s more space for local startups to win big.
“There’s the US internet, the China internet, the India internet, the EU internet — in some ways it makes those markets more valuable to win, like traditional media. Broadcast and cable are highly geographic but the franchise value becomes higher because of the regulatory moat.”
Chan, on that note, met Kan back when he was a director at [current TechCrunch owner] Verizon Wireless, when Justin.tv was trying to negotiate for free data. When I asked if they had worked out a deal during a phone interview, Kan said “you [expletive] didn’t.”
But it did lead to other co-investments later on, including Ramp, Workstream and others, and now this fund.
Today, Kan says that the focus on teams will be as flexible as the times. “When we started, the internet was America,” he says. “If you weren’t there, you weren’t a company. It’s been a complete reversal of that. Now teams are international, talent is international, more and more companies are building remote first — although you’d seen that before given the costs of the Bay. We have an entirely remote company in North Carolina, Grammarly in Europe… it’s more and more the norm. Smart founders are going anywhere to find talent.
For the two partners, this new fund will be about staying connected to that certain startup feeling that is elusive for anyone trying to build something great.
“There’s nothing more magical than being in the first step of a special company,” Chan says. “That glimpse of the future. We wouldn’t get the same feeling at the growth stage versus working with small teams or a single founder. I think we have the instinct.”
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3 views on the future of geographic-focused funds
For many investors, the coronavirus has effectively taken geography out of the equation when it comes to vetting new opportunities.
While this dynamic opens up startups to more investment opportunities, venture capital firms that focus on a specific region are in a thornier spot. The competitive advantage they once had when raising — the notion that they’re focused on an area no one else is — is potentially threatened.
Natasha Mascarenhas, Danny Crichton and Alex Wilhelm of the TechCrunch Equity crew discussed the future of geographic-focused funds given the uptick of remote investing:
- Natasha: Early-stage regional funds can win if they remain focused
- Alex: Geo-focused venture funds will be weakened, but won’t die
- Danny: Geo-focused venture funds are dead (and should never have existed)
Natasha: Early-stage regional funds can win if they remain focused
Since 2014, Steve Case and his team have made an annual bus trip across the country to meet startups in emerging startup hubs. Five days, five cities and at least $500,000 of investment dollars given to startups. Case would even offer to fly out promising and hard-to-reach startups to have them join the trip.
The Rise of the Rest fund, with more than $300 million in assets under management, has invested in over 130 startups across 70 cities, including Austin, Chicago, Detroit, Los Angeles, New Orleans and Washington, D.C.
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