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Investors are doubling down on Southeast Asia’s digital economy
Southeast Asian tech companies are drawing the attention of investors around the world. In 2020, startups in the region raised over $8.2 billion, about four times more than they did in 2015. This trend continued in 2021, with regional M&A hitting a record high of $124.8 billion in the first half of 2021, up 83% from a year earlier.
This begs the question: Who exactly is investing in Southeast Asia?
Let’s explore the three key types of investors pouring money into and driving the growth of Southeast Asia’s tech ecosystem.
Over 229 family offices have been registered in Singapore since 2020, with total assets under management of an estimated $20 billion.
Big tech
Southeast Asia has become an attractive market for U.S. and Chinese tech firms. Internet penetration here stands at 70%, higher than the global average, and digital adoption in the region remains nascent — it wasn’t until the pandemic that adoption of digital services such as e-wallets and online shopping took off.
China’s tech giants Tencent and Alibaba were among the first to support early e-commerce growth in Southeast Asia with investments in Sea Limited and Lazada, and have since expanded their footprint into other internet verticals. Alibaba has backed Akulaku, M-Pay (eMonkey), DANA, Wave Money and Mynt (GCash), while Tencent has invested in Voyager Innovations (PayMaya), SHAREit, iflix, Ookbee and Sanook.
U.S. tech firms have also recently entered the scene. In June 2020, Gojek closed a $3 billion Series F round from Google, Facebook, Tencent and Visa. Google, together with Singapore’s Temasek Holdings, invested some $350 million in Tokopedia in October. Meanwhile, Microsoft invested an undisclosed amount in Grab in 2018 and has invested $100 million in Indonesian e-commerce firm Bukalapak.
Venture capitalists
In Q1 2021, Southeast Asian startups raised $6 billion, according to DealStreetAsia, positioning 2021 as another record year for VC investment in the region.
The region is also rising in prominence as a destination for investment capital relative to the rest of Asia. Regional VC investment grew 5.2 times to $8.2 billion in 2020 from $1.6 billion in 2015, as we can see in the table below.
Image Credits: Jungle VC
Southeast Asia also has many opportunities for VC investment relative to its market size. From 2015 to 2020, China saw VC investment of nearly $300 per person; for Southeast Asia — despite a recent investment boom — this metric sits at just $47.50 per person, or just a sixth of that in China. This implies a substantial opportunity for investments to develop the region’s digital economy.
The region’s rising population and growth prospects are higher due to China’s population growth challenges, alongside the latter’s higher digital economy market saturation and maturity.
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Affinity, a relationship intelligence company, raises $80M to help close deals
Relationships ultimately close deals, but long-term relationships come with a lot of baggage, i.e. email interactions, documents and meetings.
Affinity wants to take what Ray Zhou, co-founder and CEO, refers to as “data exhaust,” all of those daily interactions and communications, and apply machine learning analysis and provide insights on who in the organization has the best chance of getting that initial meeting and closing the deal.
Today, the company announced $80 million in Series C funding, led by Menlo Ventures, which was joined by Advance Venture Partners, Sprints Capital, Pear Ventures, Sway Ventures, MassMutual Ventures, Teamworthy and ECT Capital Partners’ Brian N. Sheth. The new funding gives the company $120 million in total funding since it was founded in 2014.
Affinity, based in San Francisco, is focused on industries like investment banking, private equity, venture capital, consulting and real estate, where Zhou told TechCrunch there aren’t customer relationship management systems or networking platforms that cater to the specific needs of the long-term relationship.
Stanford grads Zhou and co-founder Shubham Goel started the company after recognizing that while there was software for transactional relationships, there wasn’t a good option for the relationship journeys.
He cites data that show up to 90% of company profiles and contact information living in traditional CRM systems are incomplete or out of date. This comes as market researcher Gartner reported the global CRM software market grew 12.6% to $69 billion in 2020.
“It is almost bigger than sales,” Zhou said. “Our worldview is that relationships are the biggest industries in the world. Some would disagree, but relationships are an asset class, they are a currency that separates the winners from the losers.”
Instead, Affinity created “a new breed of CRM,” Zhou said, that automates the inputting of that data constantly and adds information, like revenue, staff size and funding from proprietary data sources, to assign a score to a potential opportunity and increase the chances of closing a deal.
Affinity people profile. Image Credits: Affinity
He intends to use the new funding to expand sales, marketing and engineering to support new products and customers. The company has 125 employees currently; Zhou expects to be over 200 by next year.
To date, the company’s platform has analyzed over 18 trillion emails and 213 million calendar events and currently drives over 500,000 new introductions and tracks 450,000 deals per month. It also has more than 1,700 customers in 70 countries, boasting a list that includes Bain Capital Ventures, Kleiner Perkins, SoftBank Group, Nike, Qualcomm and Twilio.
Tyler Sosin, partner at Menlo Ventures, said he met Zhou and Goel at a time when the firm was looking into CRM companies, but it wasn’t until years later that Affinity came up again when Menlo itself wanted to work with a more modern platform.
As a user of Affinity himself, Sosin said the platform gives him the data he cares about and “removes the manual drudgery of entry and friction in the process.” Affinity also built a product that was intuitive to navigate.
“We have always had an interest in getting CRMs to the next generation, and Affinity is defining itself in a new category of relationship intelligence and just crushing it in the private capital markets,” he said. “They are scaling at an impressive growth rate and solving a hard problem that we don’t see many other companies in the space doing.”
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Indonesia-focused Intudo Ventures closes $115M third fund
Intudo Ventures, the “Indonesia-only” investment firm, announced today it has closed its third fund, totaling $115 million. Called Intudo Ventures Fund III, it was raised in less than three months and oversubscribed.
Fund III’s limited partners include Black Kite Investments, the family office of Singaporean businessman Koh Bon Hwee; Wasson Enterprises, the family office of former Walgreens Boots Alliance chief executive officer Greg Wasson; and PIDC, the investment arm of Taiwan-based retail conglomerate Uni-President Enterprises Corp. Other LPs include more than 30 Indonesian families and their conglomerates; over 20 leading global funds and managing partners; and more than 10 founders of tech unicorns.
Intudo founding partners Patrick Yip and Eddy Chan launched the firm in June 2017 as the first Indonesia-only venture capital firm, with a debut fund of $10 million. At first, many people were dubious that a country-specific fund focused on early-stage Indonesian companies would take off, especially since Yip and Chan wanted to build a small portfolio and work closely with startups.
Then in 2019, Intudo closed its $50 million second fund with LPs including Founders Fund, which Chan said helped validate its mission. Portfolio companies from its first two funds include Pintu, TaniHub Group and Gredu.
At the beginning, “when we said we were going to raise $10 million, we got laughed out of the room by many managers, but four years into it, we’re running roughly $200 million dollars,” he told TechCrunch. “It shows that for the right markets, hyperlocal is the way to go.”
For its third fund, Intudo intends to invest in about 12 to 14 startups, in sectors like agriculture, B2B and enterprise, education, finance and insurance, healthcare and logistics. Initial check sizes will range from $1 million to $10 million. Leading early-stage and Series A rounds will continue to be Intudo’s core focus, but it also plans to invest in Series B and C rounds for companies from its first two funds.
Unlike many funds that have a handful of anchor investors, all of Intudo’s limited partners are capped at 10% of the total fund size so it can maintain its independent investment thesis and ensure all LPs are treated equally.
“I think 10% is a nice number, where it signals to the founder that we are doing what’s best for their company and not for one special interest group,” said Chan.
The firm will look for companies with competitive moats, like strong intellectual property or deep tech. It also looks for companies that operate in heavily-regulated sectors that are difficult for competitors to enter.
Chan pointed to crypto-exchange Pintu as a good example of Intudo’s investment thesis.
“Everyone was like, you invested in this because it’s trendy, but you have to understand that we met the founder when Bitcoin had dropped down to $6,000. When we gave him the term sheet, six months later in March 2019, Bitcoin was at $3,000,” he said. “The moral of the story is we knew the founder was legit and we were able to pick up all the best talent because you can’t go to a lot of major unicorns to work on crypto.”
Many of Intudo’s portfolio founders are pulkam kampung, or Indonesians who have studied and worked overseas, but returned to launch companies, and it runs a program called Pulkam S.E.A. Turtle Fellowship to mentor aspiring founders. One-third of the deals from Intudo’s first two funds were sourced from universities and the tech community in the United States.
Intudo works closely with founders after signing checks. For example, all of its companies have made a commercial deal sourced through the firm’s network before receiving an investment. Its country-specific approach is also an advantage during the pandemic, because Intudo can continue to hold in-person meetings with founders on an almost weekly basis.
“The founder community has obviously gone through a tough time this year and last year due to COVID,” said Yip. “A lot of these founders needed to make course adjustments and corrections to their business plans. I think our role as an in-market, involved investor has been even more enhanced. A lot of the companies that have gone under, they did not have an in-country partner from the get-go.”
He added, “I think our involved approach and having a concentrated portfolio is something that is appreciated by the founder community as well, so that’s definitely something we intend to rinse and repeat going into Fund III.”
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Extra Crunch roundup: Options pool rules, voice tech hurdles, keeping employees engaged
“In today’s cash-rich environment, options are more valuable than cash,” says Allen Miller, a principal at Oak HC/FT. “In turn, managing your option pool may be the most effective action you can take to ensure you can recruit and retain talent.”
In an article squarely aimed at early-stage founders, Miller shares best practices for protecting your option pool, lists the mistakes many founders make and offers multiple tips for course-correcting “if you made mistakes early on.”
As we’re just returning from the Labor Day holiday, today’s newsletter is quite brief. We have much more planned for this week, so thanks very much for reading.
Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist
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To commercialize, voice tech must first solve its ‘cocktail party problem’
Image Credits: Karnet / Getty Images
Voice and speech recognition is expected to be a $26.8 billion global market by 2025, but there’s still a long way to go before voice can be fully commercialized.
Developers are deploying natural language processing and conversational AI to overcome current limitations, but “solving these problems requires voice tech to meet the human standard for voice and match the complexities of the human auditory system.”
How engaged are your employees?
Image Credits: katleho Seisa (opens in a new window) / Getty Images
According to a recent survey, more than 70% of workers are actively hunting for a new job or are giving the matter serious consideration.
In a startup environment, employee development takes a back seat to priorities like scaling growth. As a result, few managers have any experience or interest in helping employees acquire new skills or advance their careers.
Don’t wait to be blindsided: Put an action plan in place to assess employee engagement. Remember, seven out of the next 10 people you see on a video call might be polishing their resumes.
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Extra Crunch roundup: Toast and Freshworks S-1s, pre-pitch tips, flexible funding lessons
The digital transformation currently sweeping society has likely reached your favorite local restaurant.
Since 2013, Boston-based Toast has offered bars and eateries a software platform that lets them manage orders, payments and deliveries.
Over the last year, its customers have processed more than $38 billion in gross payment volume, so Alex Wilhelm analyzed the company’s S-1 for The Exchange with great interest.
“Toast was last valued at just under $5 billion when it last raised, per Crunchbase data,” he writes. “And folks are saying that it could be worth $20 billion in its debut. Does that square with the numbers?”
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Airbnb, DoorDash and Coinbase each debuted at past Y Combinator Demo Days; as of this writing, they employ a combined 10,000 people.
Today and tomorrow, TechCrunch reporters will cover the proceedings at YC’s Summer 20201 Demo Day. In addition to writing up founder pitches, they’ll also rank their favorites.
Even remotely, I can feel a palpable sense of excitement radiating from our team — anything can happen at YC Demo Day, so sign up for Extra Crunch to follow the action.
Thanks very much for reading; I hope you have an excellent week.
Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist
How Amazon EC2 grew from a notion into a foundational element of cloud computing
Image Credits: Ron Miller/TechCrunch
In August 2006, AWS activated its EC2 cloud-based virtual computer, a milestone in the cloud infrastructure giant’s development.
“You really can’t overstate what Amazon was able to accomplish,” writes enterprise reporter Ron Miller.
In the 15 years since, EC2 has enabled clients of any size to test and run their own applications on AWS’ virtual machines.
To learn more about a fundamental technological shift that “would help fuel a whole generation of startups,” Ron interviewed EC2 VP Dave Brown, who built and led the Amazon EC2 Frontend team.
3 ways to become a better manager in the work-from-home era
Image Credits: Jasmin Merdan (opens in a new window)/ Getty Images
Most managers agree that OKRs foster transparency and accountability, but running a team effectively has different challenges when workers are attending all-hands meetings from their kitchen tables.
Instead of just discussing key metrics before board meetings or performance reviews, make them part of the day-to-day culture, recommends Jeremy Epstein, Gtmhub’s CMO.
“Strengthen your team by creating authentic workplace transparency using numbers as a universal language and providing meaning behind your team’s work.”
The pre-pitch: 7 ways to build relationships with VCs
Image Credits: Getty Images under an Andrii Yalanskyi (opens in a new window) license
Many founders must overcome a few emotional hurdles before they’re comfortable pitching a potential investor face-to-face.
To alleviate that pressure, Unicorn Capital founder Evan Fisher recommends that entrepreneurs use pre-pitch meetings to build and strengthen relationships before asking for a check:
“This is the ‘we actually aren’t looking for money; we just want to be friends for now’ pitch that gets you on an investor’s radar so that when it’s time to raise your next round, they’ll be far more likely to answer the phone because they actually know who you are.”
Pre-pitches are good for more than curing the jitters: These conversations help founders get a better sense of how VCs think and sometimes lead to serendipitous outcomes.
“Investors are opportunists by necessity,” says Fisher, “so if they like the cut of your business’s jib, you never know — the FOMO might start kicking hard.”
Lessons from COVID: Flexible funding is a must for alternative lenders
Image Credits: MirageC (opens in a new window) / Getty Images
FischerJordan’s Deeba Goyal and Archita Bhandari break down the pandemic’s impact on alternative lenders, specifically what they had to do to survive the crisis, taking a look at smaller lenders including Credibly, Kabbage, Kapitus and BlueVine.
“Only those who were able to find a way through the complexities of their existing capital sources were able to maintain their performance, and the rest were left to perish or find new funding avenues,” they write.
Inside Freshworks’ IPO filing
Image Credits: Nigel Sussman (opens in a new window)
Customer engagement software company Freshworks’ S-1 filing depicts a company that’s experiencing accelerating revenue growth, “a great sign for the health of its business,” reports Alex Wilhelm in this morning’s The Exchange.
“Most companies see their growth rates decline as they scale, as larger denominators make growth in percentage terms more difficult.”
Studying the company’s SEC filing, he found that “Freshworks isn’t a company where we need to cut it lots of slack, as we might with an adjusted EBITDA number. It is going public ready for Big Kid metrics.”
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Foreign investors have a bigger role to play in growing Latin America’s startup ecosystem
There has been significant hype around Latin America’s startup success. For good reason, too: Startups have raised $9.3 billion in just the first half of 2021, almost double the amount in all of 2020, and mega-rounds are a growing trend.
But while the industry hails the rise of the region’s ecosystem and its growing fleet of unicorns, Latin America’s startup story has a far longer past. And it’s one we should keep in mind as entrepreneurs and investors around the world forge the region’s future.
People often ask me: How are consumers different in Brazil? How does the Peruvian market behave compared to the United States? These questions don’t really see each country for its inherent value, but instead gear people up to expect the unexpected from a historically economically disadvantaged region.
In fact, the evolution of business shares far more similarities across countries than we might expect. Latin America’s market has evolved over a very long time — as long as Silicon Valley and any other hub. This region has a global outlook, spectacular universities, a diverse population and an army of entrepreneurs.
It’s important for investors outside of Latin America to get involved in fundraising at earlier stages, when founders need extra support from everyone around.
That’s why the unicorns and megadeals should come as no surprise: They’re the natural evolution of the ecosystem, of more capital generating more success after years of hard work.
As Latin America has grown, competition has grown even more intense in the United States. VCs have more money than ever, and it’s getting increasingly expensive to invest in North America. So they’re looking to diversify their investments with high-potential opportunities abroad. Big funds are now dedicating resources to exclusively targeting Latin America, from SoftBank creating a region-specific fund, to Sequoia saying it will pay more attention to the region.
These incoming investors must bring more than money to ensure that entrepreneurship continues to grow in a healthy manner, rather than set it off balance. Investors should bring a local strategy that makes them an asset to Latin America’s startup ecosystem.
Investors should look for younger markets
Most Latin American companies reaching unicorn status and going public now were started around 2012. This is not very different from the timeline of businesses in other markets such as the United States. For instance, e-commerce giant MercadoLibre launched in Argentina around the time eBay was emerging.
What this tells us is that foreign investors would do well to keep a sharp eye on emerging opportunities beyond heavily covered markets like Brazil and Mexico. There is a huge opportunity to do what local investors did in Brazil and Mexico years ago, and play a significant role in the next chapter of countries with blossoming markets like Colombia, Peru or Uruguay.
U.S. investors remain shy
The amount of VC capital being funneled into Latin American startups has surged since 2017, with angel investment close behind. However, much of this investment comes from local and regional investors. Every top university in Brazil has a pool of angels. Investors in the Andean region cover Peru, Chile and Colombia. If today’s ecosystem is flourishing, it’s largely because native investors are lighting the spark.
Meanwhile, U.S. investor presence at the early stages is still low and risk averse. It’s much harder for a pre-seed or seed startup to get foreign investor interest than when they’ve already reached Series A or B. Investors also tend to come in on an ad hoc basis or as outliers brought about by a mutual contact. Foreign investors are the exception, not the rule.
It’s important for investors outside of Latin America to get involved in fundraising at earlier stages, when founders need extra support from everyone around. Investors should be pursuing a long-term strategy that will bring more consistency to the local ecosystem as a whole.
Money is not enough, investors should bring dedicated resources
Your contribution as an investor is largely about the resources you can offer. That’s especially challenging for a foreigner who has less of an understanding of the local industry and lacks a network and people on the ground.
While investors may say their your regular value offering is enough — network and U.S. customers — in truth, this won’t necessarily be of much use. Your hiring network might not be ideal for a Latin American company, and your thorough understanding of the U.S. market might not reflect developments in Latin America.
Remember that the region has a plethora of VC organizations who have worked with local startups over the course of a decade. Latin America is a very welcoming and open market, and local investors and accelerators will happily work with foreign investors, including in deal-sharing opportunities.
It’s crucial to create incentives within the ecosystem, which — like in the United States — largely means matching founders with unique opportunities. In North America, this often happens organically, because people are on the ground and actively engaged with what’s happening in the region, from networking events, to awards, and grants and partnership opportunities.
To create this in Latin America, foreign investors need to dedicate a team and money to their regional commitments. They will have to understand the local industry and be available to mentor founders with diverse perspectives.
In my experience helping EA, Pinterest and Facebook land in Latin America, we always had someone on the ground or working remotely but fully dedicated to the region. We had people focused on localizing the product, and we had research teams studying similarities and differences in user behavior. That’s how corporations land their products; it’s how VCs should land their money.
Only disrupt when it adds value
The idea is for foreign investors to strike a balance locally while creating disruptions when it helps startups look outward rather than attempting to overhaul steady, positive internal growth. That can mean encouraging companies to incorporate in the United States to make it easier for investors from anywhere to invest or preparing the company to go global. Local investors can help investors new to the region understand the balance of things that should or shouldn’t be disrupted.
Don’t be surprised when Latin America’s apparent “boom” starts happening in other emerging markets like Africa and Asia. This isn’t about a secret hack coming in from the outside. It’s just about creating the right environment for local talent to flourish and ensuring it maintains healthy growth.
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Extra Crunch roundup: Pre-pitch tactics, Warby Parker S-1, Israel’s fintech ecosystem
Forget what you’ve heard: There are many shortcuts to success.
Tapping into someone else’s experience is a tried-and-true method, which is why two-time Y Combinator participant Chris Morton wrote a guest post for Extra Crunch with advice for founders hoping to be accepted by the famed accelerator.
Morton, who has also reviewed thousands of YC applications, shares his thoughts on when to submit an application, what to do if you miss the deadline and whether you’ll need to relocate if accepted.
“Remember that your application should be good enough to get an interview, not win a prize,” says Morton. “Go back to work instead of spending more time perfecting an application.”
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Image Credits: Robert Katai under a license.
In an interview with reporter Anna Heim, Romania-based marketer Robert Katai discussed some of the methods he uses to help clients refine their content and branding strategies.
“Today, content creation is free — everybody can do it. The hard part is how you distribute and amplify that.”
Katai also shared his impressions of Romania’s startup ecosystem, suggestions for maintaining top-of-mind status with customers, and reinforced the often-overlooked need to continually repurpose content to grab mindshare.
Like our other growth marketing interviews, there’s no paywall.
Thanks very much for reading Extra Crunch this week! I hope you have a fantastic weekend.
Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist
Why global investors are flocking to back Latin American startups
Image Credits: Bryce Durbin / TechCrunch
Latin America’s increasingly dynamic venture capital scene has been making headlines of late. To learn more about why investors are so enthusiastic, senior reporter Mary Ann Azevedo spoke to several who are actively engaged with the region:
- Shu Nyatta, managing partner, SoftBank
- Ethan Choi, partner, Accel
- Julie Ruvolo, director of venture capital, LAVCA
- Bill Cilluffo, partner, QED Investors
- Ana Cristina Gadala-Maria, principal, QED Investors
- Ross Darwin, principal, Owl Ventures
“I am not surprised by all the activity,” Mary Ann writes. “However, I am a bit taken aback by the sheer number of rounds, the caliber of firms leading them and the sky-high valuations.
“It seems that the region is finally, and deservedly, being taken seriously. This is likely just the beginning.”
Corporate venture capital follows the same trend as other VC markets: Up
Image Credits: Nigel Sussman (opens in a new window)
Corporations are not remaining on the sidelines of the fiery 2021 venture capital game, Alex Wilhelm and Anna Heim note in The Exchange.
After parsing data from CB Insights and Stryber and chatting with a handful of investors, Alex and Anna concluded that the corporate venture capital market looks a lot like other VC markets.
“Perhaps this should not be a surprise,” they write. “We’ve seen non-venture funds flow into the later stages of startup land, pushing VCs toward earlier-stage and more venture-y deals. Why would CVCs be immune to the same trend?”
Ramp and Brex draw diverging market plans with M&A strategies
Image Credits: Bryan Mullennix (opens in a new window) / Getty Images
Corporate spending management startup Brex raised a $300 million Series C and acquired Buyer just a week after rival Brex announced it had acquired Israeli fintech Weav.
Ryan Lawler and Alex Wilhelm dug into the Ramp-Brex rivalry, and what those acquisitions say about their diverging strategies.
“From a high level, all of the recent deal-making in corporate cards and spend management shows that it’s not enough to just help companies track what employees are expensing these days,” they write.
“As the market matures and feature sets begin to converge, the players are seeking to differentiate themselves from the competition.”
Boston’s startup market is more than setting records in scorching start to year
Image Credits: Nigel Sussman (opens in a new window)
Alex Wilhelm and Anna Heim interviewed VCs and corralled data to present a detailed picture of Boston’s startup funding scene.
“Boston is benefiting from larger structural changes to at least the U.S. venture capital market, helping close historical gaps in its startup funding market and access funds that previously might have skipped the region,” they write.
“And local university density isn’t hurting the city’s cause, either, boosting its ability to form new companies during a period of rich investment access.”
Europe’s quick-commerce startups are overhyped: Lessons from China
Image Credits: Andrew Holt (opens in a new window) / Getty Images
Half of the companies offering instant grocery delivery in Europe were founded last year as the pandemic reshaped most aspects of our existence.
To date, they’ve raised about $2 billion, but Picus Capital’s Alexander Kremer says startup lessons from China suggest that “instant delivery is not the magic bullet to crack the dominance” of old-school grocery players.
“If the performance of online grocery platforms in China (a market five to seven years ahead of Europe in terms of online retail) is anything to go by, a range of B2C business models would be more likely to displace the traditional grocery retailers.”
D2C specs purveyor Warby Parker files to go public
Image Credits: Nigel Sussman (opens in a new window)
For The Exchange, Alex Wilhelm examines the S-1 filing from Warby Parker, “a consumer hardware company with two main sales channels, largely attractive economics, falling losses and rising adjusted profitability. You could even argue that it handled the pandemic well, despite COVID-19’s negative impact on its operations.”
But how are its growth prospects?
Dear Sophie: Can I still get a green card through marriage if I’m divorcing?
Image Credits: Bryce Durbin/TechCrunch
Dear Sophie,
I received a conditional green card after my wife and I got married in 2019. Recently, we have made the difficult decision to end our marriage. I want to continue living and working in the United States.
Is it still possible for me to complete my green card based on my marriage through the I-751 process or do I need to do something else, like ask my employer to sponsor me for a work visa?
— Better to Have Loved and Lost
Using AI to reboot brand-client relationships
Image Credits: Getty Images under an alashi (opens in a new window)license.
Marketing automation can help boost key metrics, but it can also be a disservice to brands by perpetually devaluing goods and services, ShareThis’ Michael Gorman writes in a guest column.
Companies with a narrow focus on driving conversions are missing the bigger picture: AI can help create richer experiences that identify consumer actions and intent while also improving customer experiences.
“We live in a world rich with data, and insights are growing more vibrant every day,” he writes.
Israel’s maturing fintech ecosystem may soon create global disruptors
Image Credits: Thitima Thongkham (opens in a new window) / Getty Images
Fintech startups based in Israel raised more than $1.8 billion in 2019, but in Q1 2021, companies in the category raised $1.1 billion.
Facilitating a wide range of services, more than a dozen fintech unicorns have already emerged in a country that has a population slightly smaller than Los Angeles County, many of them started by entrepreneurs who lacked financial backgrounds.
“So what is it about Israeli-founded fintech startups that stand out from their scaling neighbors across the pond?” asks Flint Capital’s Tel Aviv-based investor, Adi Levanon.
Forbes jumps into hot media liquidity summer with a SPAC combo
Image Credits: Nigel Sussman (opens in a new window)
For The Exchange, Alex Wilhelm takes stock of Forbes’ SPAC combination during a week when POLITICO was snatched up for more than $1 billion by Axel Springer and just a few months after BuzzFeed went public via a blank-check company.
“Is it the most exciting debut? No,” he writes.
“But it does highlight that with enough sheer gumption, one can take a magazine business into the digital age and keep aggregate revenue growing. That’s worth something.”
Are B2B SaaS marketers getting it wrong?
Image Credits: mevans (opens in a new window) / Getty Images
Technical jargon is one of the most annoying aspects of technology marketing.
Sadly, it tends to perpetuate itself: Marketers are terrified of making a wrong move, so they tend to copy what everyone else is doing.
If you want to attract customers and drive higher conversions, cut the jargon.
“Do everything you can to be immediately understood and you’ll have a much better chance of cutting through the noise and pushing clear and persuasive benefits in a way no prospect can resist,” advises Konrad Sanders, CEO of The Creative Copywriter.
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The pre-pitch: 7 ways to build relationships with VCs
Most founders fall into an extremely common trap: Just because you produced outstanding results for the last round of investors doesn’t mean new investors will believe you. This new cohort hasn’t seen that performance firsthand, and they have no reason to trust you yet.
As a founder approaching your next round, it’s common to wonder, “How do I get this new group of investors to trust that I will perform?”
In our experience, founders who fundraise successfully are great at building relationships, and they usually deliver what we call “the pre-pitch.” This is the “we actually aren’t looking for money; we just want to be friends for now” pitch that gets you on an investor’s radar so that when it’s time to raise your next round, they’ll be far more likely to answer the phone because they actually know who you are.
But the concept of the pre-pitch goes deeper than just having potential investors be aware of your existence. Building relationships with potential future investors requires you to think less like a founder and more like a marketer — much of the relationship heavy lifting comes long before it’s time to ask for a capital commitment.
If an investor has made a deal in your space, there’s a good chance they know an earlier-round investor who could potentially be a good fit for you today.
There’s a host of advantages to the pre-pitch approach:
- Good practice: You’re not asking for money. Instead, you’re offering a sneak peek. Since your relationship-builder pre-pitch doesn’t have millions on the line, you’ll invariably be less anxious, which leads to better relationships. Remember: If it’s not a good fit, who cares?
- Candid feedback: When you’re not asking for money, you’re more likely to receive honest feedback that you might not get in a high-stakes environment.
- Set the baseline: You should go over where you’re currently at, why it’s actually not time to raise capital quite yet (the inverse of “Why Now”), and what you still have to accomplish until the time is right.
- Performance-based trust: Put your performance where your mouth is by showing your potential investor where you are today and what you expect to do in the short term. Later on, you can prove to them that you achieved what you said you would.
7 ways to build relationships with VCs
Now you’re probably wondering, “What the heck do I say to build a good relationship with that next-round investor?” Here are a few notes on how to approach the pre-pitch:
Seek the relationship, not the money
Acknowledge you’re early, but mention that you think it could potentially be a good fit later on. State it up front that you’re seeking a relationship and want to find out if you could eventually be a good fit for one another. Don’t sneak in an ask; let the relationship blossom organically.
Here’s an example: “We’re actually not raising yet, and we’re probably too early for you. But I think this is something you might be very interested in, and thought it made sense to reach out, open up a relationship and see if there might be a fit.”
Don’t waste time
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The SEC and the DOJ just charged this startup founder with fraud, saying he lied to Tiger and others
Today, both the U.S. Department of Justice and the Securities and Exchange Commission charged Manish Lachwani, co-founder of mobile app testing company HeadSpin, with fraud. The SEC says he violated antifraud provisions, and the civil penalties it’s seeking include a permanent injunction, a conduct-based injunction, and to bar him for serving as a corporate executive or board member.
The DOJ, which arrested Lachwani earlier, has accused him of one count of wire fraud and one count of securities fraud, and the associated penalties if he’s found guilty are more harsh, including, for wire fraud, a maximum sentence of 20 years in prison and a fine of $250,000. If he’s found guilty of securities fraud, he faces a maximum sentence of 20 years in prison and a fine of $5,000,000.
Both the the SEC and the DOJ say Lachwani — who led the six-year-old company as CEO until May of last year — defrauded investors out of $80 million by falsely claiming that HeadSpin had “achieved strong and consistent growth in acquiring customers and generating revenue” when he was pitching its Series C round to potential backers.
By the SEC’s telling, his fabrications were designed to help secure the round at a so-called unicorn valuation. That apparent plan worked, too, with Palo Alto-based HeadSpin attracting coverage in Forbes in February of last year after Dell Technologies Capital, Iconiq Capital and Tiger Global provided the company with $60 million in Series C funding at a $1.16 billion valuation. Forbes reported at the time that the valuation was double the valuation investors assigned HeadSpin when it closed its Series B round in October 2018.
The SEC also says that Lachwani was looking to enrich himself, saying he did so “by selling $2.5 million of his HeadSpin shares in a fundraising round during which he made misrepresentations to an existing HeadSpin investor.” (It isn’t clear from its complaint whether the SEC is referring to the Series C or an earlier round.)
The two federal complaints suggest that Lachwani’s alleged scheming to inflate HeadSpin’s valuation dates back to “at least 2018,” and the DOJ says it picked up momentum when the company was fundraising in late 2019.
More specifically, the DOJ complaint alleges that “in materials and presentations to potential investors, Lachwani reported false revenue and overstated key financial metrics of the company … he maintained control over operations, sales, and record-keeping, including invoicing, and he was the final decision-maker on what revenue was booked and included in the company’s financial records.”
In the investigation that led to the DOJ’s charges, the FBI discovered “multiple examples” of Lachwani “instructing employees to include revenue from potential customers that inquired but did not engage HeadSpin, from past customers who no longer did business with HeadSpin, and from existing customers whose business was far less than the reported revenue,” says the department.
How far off were these collective calculations? The complaint says that ultimately, Lachwani “provided investors false information that overstated HeadSpin’s annual recurring revenue … by approximately $51 million to $55 million.”
According to the complaint, Lachwani’s fraud unraveled after the company’s board of directors conducted an internal investigation and revised HeadSpin’s valuation down from $1.1 billion to $300 million. Indeed, in August of last year, The Information reported that the company was planning to lower the value of its Series C stock by nearly 80%.
The outlet reported at the time that Lachwani had already been replaced by another executive. That person, according to LinkedIn, is Rajeev Butani, who joined HeadSpin as its chief sales officer early last year.
Nikesh Arora, a former SoftBank president and the current CEO and chairman of Palo Alto Networks, helped lead the internal review as a then-director on the board of HeadSpin, said The Information.
The SEC says its investigation is continuing. The DOJ similarly notes in its announcement that “a complaint merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.”
Either way, the outlook doesn’t look very promising right now for Lachwani, who, according to Forbes, previously sold a mobile cloud business to Google and wound up co-founding HeadSpin after Yahoo co-founder Jerry Yang introduced him to Brien Colwell, a former Palantir and Quora engineer who was working at the time on a different startup.
Colwell remains with HeadSpin as its CTO. He has not been named in either the SEC or the DOJ’s complaints relating to HeadSpin.
The company itself, which says it has been cooperating with the government’s investigation, was also not charged.
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ICON lands $207M Series B to construct more 3D-printed homes after seeing 400% YoY revenue growth
Creating single-family homes for the homeless using 3D printing robotics. Developing construction systems to create infrastructure and habitats on the moon, and eventually Mars, with NASA. Delivering what is believed to be the largest 3D-printed structure in North America — a barracks for Texas Military Department.
These are just some of the things that Austin, Texas-based construction tech startup ICON has been working on.
And today, the company is adding a massive $207 million Series B raise to its list of accomplishments.
I’ve been covering ICON since its $9 million seed round in October of 2018, so seeing the company reach this milestone less than three years later is kind of cool.
Norwest Venture Partners led the startup’s Series B round, which also included participation from 8VC, Bjarke Ingels Group (BIG), BOND, Citi Crosstimbers, Ensemble, Fifth Wall, LENx, Moderne Ventures and Oakhouse Partners. The financing brings ICON’s total equity raised to $266 million. The company declined to reveal its valuation.
ICON was founded in late 2017 and launched during SXSW in March 2018 with the first permitted 3D-printed home in the U.S. That 350-square-foot house took about 48 hours (at 25% speed) to print. ICON purposely chose concrete as a material because, as co-founder and CEO Jason Ballard put it, “It’s one of the most resilient materials on Earth.”
Since then, the startup says it has delivered more than two dozen 3D-printed homes and structures across the U.S. and Mexico. More than half of those homes have been for the homeless or those in chronic poverty. For example, in 2020, ICON delivered 3D-printed homes in Mexico with nonprofit partner New Story. It also completed a series of homes serving the chronically homeless in Austin, Texas, with nonprofit Mobile Loaves & Fishes.
The startup broke into the mainstream housing market in early 2021 with what it said were the first 3D-printed homes for sale in the U.S. for developer 3Strands in Austin, Texas. Two of the four homes are under contract. The remaining two homes will hit the market on August 31.
And recently, ICON revealed its “next generation” Vulcan construction system and debuted its new Exploration Series of homes. The first home in the series, “House Zero,” was optimized and designed specifically for 3D printing.
For some context, ICON says its proprietary Vulcan technology produces “resilient, energy-efficient” homes faster than conventional construction methods and with less waste and more design freedom. The company’s new Vulcan construction system, according to Ballard, can 3D print homes and structures up to 3,000 square feet, is 1.5x larger and 2x faster than its previous Vulcan 3D printers.
From the company’s early days, Ballard has maintained ICON is motivated by the global housing crisis and lack of solutions to address it. Using 3D printers, robotics and advanced materials, he believes, is one way to tackle the lack of affordable housing, a problem that is only getting worse across the country and in Austin.
ICON’s list of future plans include the delivery of social, disaster relief and more mainstream housing, Ballard said, in addition to developing construction systems to create infrastructure and habitats on the moon, and eventually Mars, with NASA.
ICON also has two ongoing projects with NASA. Recently, Mars Dune Alpha was just announced by NASA, ICON and BIG – and ICON so far has finished printing the wall system and is onto the roof now. Also, NASA is recruiting for crewed missions to begin nextfFall to live in the first simulated Martian habitat 3D printed by ICON.
Project Olympus represents ICON’s effort to develop a space-based construction system for future exploration of the Moon and “to imagine humanity’s home on another world.”
“Our goal is to have ICON tech on the Moon in the next decade,” Ballard said.
When asked, Ballard said the most significant thing that has happened since the company’s $35 million Series A last August has been the “the radical increase in demand for 3D-printed homes and structures.”
“That single metric represents a lot for us,” Ballard told TechCrunch. “People have to want these houses.”
To tackle the housing shortage, the world needs to increase supply, decrease cost, increase speed, increase resiliency, increase sustainability… all without compromising quality and beauty, he added.
“Perhaps there are a few approaches that can do some of those things, but only construction scale 3D printing holds the potential to do all of those things,” he said.
ICON has seen impressive financial growth, with 400% revenue growth nearly every year since inception, according to Ballard. It’s also tripled its team in the past, year and now has more than 100 employees. It expects to double in size within the next year.
Image Credits: Co-founders with next-gen Vulcan Construction System / ICON
The series B funds will go toward more construction of 3D-printed homes, “rapid scaling and R&D,” further space-based tech advancements and creating “a lasting societal impact on housing issues,” Ballard said.
“We have already stood up early-stage manufacturing and are in the process of upgrading and accelerating those efforts in order to meet demand for more 3D-printed houses even as we close the round,” Ballard said. “In the next five years, we believe we will be delivering thousands of homes per year and on our way to tens of thousands of homes per year.”
Norwest Venture Partners Managing Partner Jeff Crowe, who is joining ICON’s board as part of the financing, said his firm believes that ICON’s 3D printing construction technology will “massively impact the housing shortage in the U.S. and around the globe.”
It is “enormously difficult” to bring together the advanced robotics, materials science and software to develop a robust 3D printing construction technology in the first place, Crowe said.
“It is still harder to develop the technology in a way that can produce hundreds and thousands of beautiful, affordable, comfortable, energy efficient homes in varying geographies with reliability and predictability — not just one or two demonstration units in a controlled setting,” he wrote via e-mail. “ICON has done all that, and…has all the elements to be a breakout, generational success.”
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