Прогноз погоды

People

John Smith

John Smith, 47

Joined: 28 January 2014

Interests: No data

Jonnathan Coleman

Jonnathan Coleman, 30

Joined: 18 June 2014

About myself: You may say I'm a dreamer

Interests: Snowboarding, Cycling, Beer

Andrey II

Andrey II, 39

Joined: 08 January 2014

Interests: No data

David

David

Joined: 05 August 2014

Interests: No data

David Markham

David Markham, 63

Joined: 13 November 2014

Interests: No data

Michelle Li

Michelle Li, 39

Joined: 13 August 2014

Interests: No data

Max Almenas

Max Almenas, 51

Joined: 10 August 2014

Interests: No data

29Jan

29Jan, 30

Joined: 29 January 2014

Interests: No data

s82 s82

s82 s82, 24

Joined: 16 April 2014

Interests: No data

Wicca

Wicca, 35

Joined: 18 June 2014

Interests: No data

Phebe Paul

Phebe Paul, 25

Joined: 08 September 2014

Interests: No data

Виктор Иванович

Виктор Иванович, 39

Joined: 29 January 2014

About myself: Жизнь удалась!

Interests: Куба и Панама

Alexey Geno

Alexey Geno, 6

Joined: 25 June 2015

About myself: Хай

Interests: Интерес1daasdfasf

Verg Matthews

Verg Matthews, 66

Joined: 25 June 2015

Interests: No data

CHEMICALS 4 WORLD DEVEN DHELARIYA

CHEMICALS 4 WORLD…, 32

Joined: 22 December 2014

Interests: No data



Main article: Column

<< Back Forward >>
Topics from 1 to 10 | in all: 4055

College for the 21st century

01:00 | 21 February

Ryan Craig Contributor

Ryan Craig is managing director of University Ventures.

More posts by this contributor:
  • Hiring has gone Hollywood
  • Education technology meets its limits

When I was in college, one of the iconic Yale experiences was visiting the Yankee Doodle — a greasy spoon at the corner of York and Elm Streets — and taking the Doodle Challenge. The Doodle Challenge involved eating as many burgers as quickly as possible in a single sitting. At the time, the record was 19 burgers in two-and-a-half hours. For my roommate Chris Douvos, 20 burgers became his white whale.

Twenty burgers meant two things: immortality by way of his name on a plaque above the door and also not having to pay for 20 burgers. While Doodle burgers were small, both the buns and patty were soaked in butter before frying (the Doodle was renowned for its fried donut). Douvos trained for months with loaves of bread. On the day, we all headed to the Doodle, supportive of our hero — but also making side bets.

Douvos was going strong at burger No. 8. At burger No. 10 he began to slow. And at burger No. 12, Douvos coughed and a tiny speck of burger flew out of his mouth. We knew his quest was at an end. We paid the bill and enveloped Douvos like a fallen prizefighter, hustling him out of the Doodle and back to school. That was the last Douvos saw of the Doodle for some time, but not the last he saw of those burgers.

College has changed a great deal in the 25 years since Douvos’ failed attempt. For one, we have an urgent crisis of college affordability. Due to skyrocketing tuition, the average student now graduates with $37,000 in student loans. Simultaneously, college graduates are facing a crisis of employability. Graduates face record underemployment as colleges and universities haven’t come close to keeping up with the increasingly technical skills demanded by employers; only 11 percent of employers think higher education is producing graduates with the skills they need.

Why force young people to eat as much post-secondary education as they can in one sitting in order have a shot at a good first job?

The result has been financial calamity for millennials: overall, only 57 percent of borrowers are current on their loan payments; one-third of borrowers who graduated between 2006 and 2011 have already defaulted. Home ownership and new business creation by young adults has plummeted. As Gen Zers reach college age, they’re looking at the example of millennials and contemplating whether a traditional four-year accredited college or university is the optimal path for achieving their primary goal: a good first (and probably digital) job in a growing sector of the economy.

This question is something Douvos would have supported that day at the Doodle. Why force young people to eat as much post-secondary education as they can in one sitting in order have a shot at a good first job?

Faster + cheaper pathways to good first jobs are poised to supplant slow, expensive bachelor’s degrees (particularly from non-selective colleges and universities) in Gen Z’s affections. Gen Z has already been prejudiced against large upfront investments. Why buy a car when you can summon one with an app? Why subscribe to a cable bundle when you can stream individual networks and shows? The sharing economy will not leave the $500 billion higher-education sector unscathed.

Gen Z wants to get its foot on the first rung of a career ladder — a good first job quickly, and without incurring any debt — before deciding what secondary or tertiary post-secondary education pathways to follow in order to bolster cognitive skills, become managers, move on and move up.

We’re seeing the emergence of faster + cheaper alternatives to college in the form of bootcamps that provide last-mile training and lead directly to good digital jobs, as well as income share-based college replacement programs like MissionU. But none yet have the scale to accommodate the large number of 18-year-olds who fear joining the 30 percent of college graduates who say they’d sell an organ to get rid of their student loan debt. How are we likely to get the scale to provide a college alternative for the millions that clearly want one?

Before college became the sole viable pathway to a respectable career, apprenticeships were the norm in many professions. In a head-spinning reversal of the sad status quo, apprenticeships not only don’t charge tuition or require students to take on debt, they pay students. Consequently, lots of people are interested in reinvigorating apprenticeships, including President Trump, who wants to multiply the number of apprentices in the U.S. by a factor of 10.

While few U.S. employers are scrambling to launch their own apprenticeship programs — a big hassle — every employer outsources services. A wide range of IT services are commonly outsourced, as are accounting, payroll, legal, insurance, real estate, sales, customer support, human resources, staffing, consulting, marketing, public relations and design. While mid-size and large companies are likely to have employees in these functions, most also contract with providers for these services.

Service providers like accounting firms, staffing companies and call centers have incredible scale. Staffing itself is a $150 billion industry. Advertising is $200 billion. Call centers employ more than 2 million American workers. While many service providers are accustomed to having their talent poached by clients, few have built a business model around it — until now.

We’re now seeing the emergence of service providers that explicitly serve a dual function: (1) provide business services to clients; and (2) serve as a strategic talent supply partner for entry-level talent.

Techtonic Group is a Boulder-based software development shop that is simultaneously a registered apprenticeship program. Techtonic hires and trains apprentices and, by week five or six, apprentices shadow more experienced software developers. After a few months, apprentices are billing meaningful hours on meaningful client projects.

A year later, Techtonic clients are invited to hire the software apprentices they’ve been working with and whose work they’ve seen, which radically reduces the risk of entry-level hiring. As many of the challenges faced by millennials stem from their inability to land good entry-level jobs with employers like Techtonic’s clients, this model provides an appealing and scalable faster + cheaper pathway.

Successful strategic talent partners will find themselves in the business of operating campuses and will take advantage of this immersive environment.

Becoming a strategic talent supply partner is possible for many service providers. Think of a call center providing a range of customer support and inside sales functions for your firm. You probably have employees in sales and customer service roles, but with a clear division as to what functions are outsourced. What you’re less clear about is how or who to hire for these internal roles, and how much to rely on (lower-cost) entry-level employees as opposed to (higher-cost) employees with experience.

Enter the strategic talent supply partner. Call centers will continue to charge you for providing customer service and sales, but by becoming a strategic talent supply partner to clients, you now also have a second revenue stream: charging a placement fee for hiring the entry-level talent that’s been working for you for the past year or two — talent that is purpose-trained and proven.

Many service providers already have robust recruitment and training functions. Constituting these into a talent supply business will take time, but the rewards are evident in the rapid growth experienced by talent supply pioneers like Revature, which has demonstrated the ability to fulfill orders for hundreds of purpose-trained, proven entry-level software developers for a single client.

In contemplating the emergence faster + cheaper alternatives to college, I’ve been fearful of losing all the fun. As with Douvos and the Doodle, fun is what we remember best from our college years. But as millions of young Americans launch their careers via dual service providers/strategic talent partners, I get a sense that fun won’t be lost.

Strategic talent partners like Techtonic will scale, and their many cohorts of apprentices will need a place to live; Revature already provides housing. So successful strategic talent partners will find themselves in the business of operating campuses and will take advantage of this immersive environment — even if only for a short period of time — to develop and evaluate the soft skills that clients (and future employers) value as highly as technical skills. It wouldn’t surprise me in the slightest if these future apprentices — these 21st century college students — not only land great first and second jobs with no debt (or tuition), but that — after hours — they also find themselves at a local greasy spoon, trying to set a new (faster + cheaper) record of their own.

*University Ventures has investments in MissionU and Revature.

Featured Image: tomertu/Shutterstock (IMAGE HAS BEEN MODIFIED)

 


0

Technological solutions to technology’s problems feature in “How to Fix The Future”

03:45 | 19 February

Larry Downes Contributor

Larry Downes is a senior industry and innovation fellow at Georgetown University's McDonough School of Business. He is the author of several books on the Internet and business.

In this edition of Innovate 2018, Andrew Keen finds himself in the hot seat.

Keen, whose new book, “How to Fix the Future”, was published earlier this month, discusses a moment when it has suddenly become fashionable for tech luminaries to abandon utopianism in favor of its opposite.  The first generation of IPO winners have now become some of tech’s most vocal critic—conveniently of new products and services launched by a younger generation of entrepreneurs.

For example, Tesla’s Elon Musk says that advances in Artificial Intelligence present a “fundamental risk to the existence of civilization.”  Salesforce CEO Marc Benioff believes Facebook ought to be regulated like a tobacco company because social media has become (literally?) carcinogenic.  And Russian zillionaire George Soros last week called Google “a menace to society.”

Eschewing much of the over-the-top luddism that now fills the New York Times (“Silicon Valley is Not Your Friends”), the Guardian (“The Tech Insiders Who Fear a Smartphone Dystopia”), and other mainstream media outlets, Keen proffers practical solutions to a wide range of tech-related woes.  These include persistent public and private surveillance, labor displacement, and fake news.

From experiments in Estonia, Switzerland, Singapore, India and other digital outposts, Keen distills these five tools for fixing the future:

  • Increased regulation, particularly through antitrust law
  • New innovations designed to solve the unintended side-effects of earlier disruptors
  • Targeted philanthropy from tech’s leading moneymakers
  • Modern social safety nets for displaced workers and disenfranchised consumers
  • Educational systems geared for 21st century life

 


0

South Korea aims for startup gold

21:45 | 18 February

Joanna Glasner Contributor

Joanna Glasner is a reporter for Crunchbase.

More posts by this contributor:
  • Not a minimalist? Startups will gladly store, manage and deliver your items
  • The state of the unicorn

Back in 2011, when South Korea won its longshot bid to host the 2018 Winter Olympics, the country wasn’t widely recognized as a destination for ski and snow lovers. It wasn’t considered much of a tech startup hub either.

Fast forward seven years and a lot has changed. For the next 10 days, the eyes of the world will be on the snowy slopes of PyeongChang. Meanwhile, a couple of hours away in Seoul, a burgeoning startup scene is seeing investments multiply, generating exits and even creating a unicorn or two.

While South Korea doesn’t get a perfect score as a startup innovation hub, it has established itself as a serious contender. More than half a billion dollars annually has gone to seed through late-stage funding rounds for the past few years. During that time, at least two companies, e-commerce company Coupang and mobile-focused content and commerce company Yello Mobile, have established multi-billion-dollar valuations.

To provide a broader picture of how South Korea stacks up in terms of attracting startup investment and building scalable companies, Crunchbase News put together a data dive looking at funding totals, significant investments, exits and active investors.

Here are some of our findings.

A fast rise

Venture funding for South Korean startups started to take off in 2014, per Crunchbase data. Previously, venture funding rounds that made it into the database only totaled in the tens of millions of dollars annually. But about four years ago, the numbers started rising dramatically.

In the chart below, we look at the annual totals from 2010 through 2018:

Big, later-stage rounds pushed up the totals. In the past four years, more than two dozen companies have closed financings of $10 million or more, including a few unicorns for substantially larger sums. One of those, Coupang, has raised $1.4 billion from venture and private equity investors to date.

Totals have trended lower in the past couple of years, which may be attributed to fewer giant rounds. For instance, more than half of the 2015 total came from a $1 billion SoftBank investment in Coupang.

Emerging startups

While totals are down some over the past few quarters, South Korean startups have continued to attract attention and big checks from both domestic and overseas investors.

The largest single funding in the past year went to TMON (short for Ticket Monster), which raised $115 million last April at a reported $1.4 billion valuation. This is the second time scaling up with growth funding, as the Seoul-based company already provided an exit to early investors years ago. Coupon site LivingSocial bought the company in 2011, then sold itself to Groupon, which then spun out the Korean company.

After TMON, the next-biggest funding rounds were for travel site Yanolja, which raised $55 million, and Snow, developer of popular selfie apps, which raised $50 million. In the chart below, we look at these and other significant financings from 2017 through today:

The list of top funding recipients includes a mix of startups focused principally on the Korean market and those attracting a broad international user base.

Companies focused on the domestic market find that Korea, with 50 million inhabitants and a highly urbanized, tech-savvy customer base, is big enough to support massively scalable businesses. Those in that camp include TMON and Coupang.

But Korea also has a record of building up major global companies, like Samsung, LG and Hyundai, to name the best known. So it’s not surprising to see companies with global ambitions among the top startups. In recent years, the leading Korean search engine, Naver, in particular, has been successful launching startups with global reach. The firm is a majority owner of the Japan-headquartered messaging app LINE, which went public last year and is valued at nearly $10 billion. Line and Naver are also majority owners of Snow.

It’s also possible to start local and later go global. In this camp is Viva Republica, a developer of a fast-growing mobile payments tool Toss, which got initial traction in Korea and is now setting its sights on expansion abroad.

Playing to win

Korea’s startup scene is attracting a large and diverse collection of investors, including Korea-based funds, corporate VCs, Silicon Valley venture firms and others.

A number of firms are repeat investors. Among the most active are Samsung, Altos Ventures, SoftBank Ventures Korea, Formation 8 (now Formation Group and 8VC), 500 Startups and Anchor Equity Partners.

The total pool of investors is much deeper, however. Crunchbase data shows that more than 150 angel, seed, incubator and VC and corporate venture investors have participated in funding rounds for Korea-based companies over the past five years.

Of course, not all recent bets on promising startups will turn out winners. But all in all, it appears that South Korean entrepreneurs have clearly put together a competitive lineup.

Featured Image: iStockPhoto / Greens87

 


0

A peek inside Alphabet’s investing universe

21:10 | 17 February

Jason Rowley Contributor

Jason Rowley is a venture capital and technology reporter for Crunchbase News.

More posts by this contributor:
  • Raise softly and deliver a big exit
  • Mobile delivers high exit multiples despite broader market slowdown

Chances are high you have heard of Google. You are likely a contributor to one of the 3.5 billion search queries the website processes daily. But unless you’re a venture capitalist, an entrepreneur or a slightly obsessive technology journalist, you may not know that Google — or, more properly, Alphabet, the corporate parent to the search and internet ad giant — is also in the business of investing in startups. And, like most of what Google does, Alphabet invests at scale.

Today we’re going to undertake, if you will forgive the pun, a search of Google’s venture investments, its portfolio’s performance and what the company’s investing activity may say about its plans going forward.

Alphabet was the most active corporate investor in 2017

Taken together, Alphabet is one of the most prolific corporate investors in startups. In 2017, Crunchbase data shows that Alphabet’s three main investing arms — GV (formerly known as Google Ventures), CapitalG and Gradient Ventures — and Google itself invested in 103 deals.

(Crunchbase News contacted Alphabet for this story but did not hear back in time for publication.)

Below, you’ll find a chart comparing Alphabet’s investment activity to other major corporate investors, based on publicly disclosed deals captured in Crunchbase data.

For years, Intel and its venture arm Intel Capital topped the ranks of most active corporate venture investors. But for 2017, Crunchbase data suggests that Alphabet’s primary venture funds unseat the chip manufacturer. With 72 deals struck, Tencent Holdings and its venture affiliates rank second and SoftBank, which has a $100 billion pool of capital to slosh around, comes in third with 64 deals announced in 2017.

The Alphabet investing universe

As we alluded to earlier, Alphabet has a somewhat unusual setup for a corporate investor. Data shows that Alphabet makes the overwhelming majority of its equity investments out of four primary entities:

  • GV, formerly known as Google Ventures, is Alphabet’s most prolific venture fund.
  • Growth equity fund CapitalG invests primarily in late-stage deals.
  • Gradient Ventures, Google’s newest fund, is focused on artificial intelligence deals.
  • Finally, Google itself, has made a number of direct corporate venture investments.

Alphabet and its funds upped their pace of investing too, as the chart below shows:

In 2017, Alphabet’s equity investment deal volume topped historical highs from 2014.

In addition to these equity investment operations, Google operates the Launchpad Accelerator, which grants $50,000 equity-free to startups in Africa, Asia, South America and Eastern Europe. The company also issues grants and makes impact-oriented investments out of an entity called Google.org.

Taken together, here is what the Alphabet investment universe looks like:

The network visualization above shows the connections between Alphabet’s various investing groups and their respective portfolios.1 This graphic depicts 676 connections between six Google investing groups (labeled above in yellow), 570 portfolio organizations and 75 companies that acquired Alphabet-backed portfolio companies.

And, for the most part, there isn’t as much overlap as one may expect. CapitalG and GV only share two portfolio companies. GV invested in the seed round of Gusto, the payroll and HR software platform, and both GV and CapitalG invested in Gusto’s Series B round. GV and CapitalG also invested in Pindrop’s Series C round, although CapitalG led that round. Apart from those two companies, though, Crunchbase data doesn’t suggest any other portfolio overlap between GV and CapitalG.

Google and GV also share some portfolio companies. Google led INVIDI Technologies’ Series D round, in which GV was a mere participant. Google also led the Series A round of popular consumer genetics company 23andMe. Google followed on in the Series B round, in which Google co-founder Sergey Brin was also an investor. GV didn’t invest in 23andMe until its Series C. GV continued its investment all the way through 23andMe’s Series E. Google and GV are also investors in Ripcord, an early-stage company building robots that scan and digitize paper documents.

Shared exits

If there isn’t much overlap between Alphabet’s assorted funds and their investing activity, where is it then? The answer, it seems, may be in the exit data.

A wide range of companies have acquired startups in which one or more of Alphabet’s capital deployment arms invested. Crunchbase data shows that 81 entities have acquired 100 companies in which Google invested. Of those, it seems like Alphabet is its own best customer, as the chart below shows:

All in, Alphabet has acquired seven companies in which it had previously invested. Google itself acquired six companies it previously invested in, and its X unit (formerly known as Google X) acquired Makani Power, a company that developed airborne wind turbines, in which Google had directly invested. Other frequent trading partners with Google are Cisco, which has acquired six Google-backed companies, and Yahoo (now, together with AOL, part of Verizon-controlled Oath) with five acquisitions.

As an aside, Google invested in both SolarCity and Tesla, two companies with ties to Elon Musk. In 2011, Google invested $280 million in SolarCity, a company founded by two cousins of Musk. Google and its co-founders Larry Page and Sergey Brin invested in Tesla’s Series C round alongside Musk, Tesla’s co-founder. Tesla went public in 2010 and completed its acquisition of SolarCity, a $2.6 billion all-stock deal, in 2016.

And as the network visualization above shows, Tesla isn’t the only Alphabet portfolio company to go public. Alphabet funds struck venture deals with 11 other companies that have since gone public, including Baidu, HubSpot, Cloudera, Spero Therapeutics, Lending Club and Zynga.

Deals spanning A to Z

If one had to describe Alphabet funds’ collective portfolio of venture deals in one word, it would be “eclectic.” Unlike many corporate venture portfolios, there doesn’t appear to be a unifying, cohesive theme to Alphabet’s outside investments. The AI-focus of Gradient Ventures aside, Alphabet is just as likely to invest in a homeowners insurance company like Lemonade or a customer support platform like UJET (which Crunchbase News covered recently) as it is to invest in non-dairy milk producer Ripple Foods or African tech recruiting platform Andela.

The diversity of Alphabet’s venture investments echoes the diverse collection of businesses, initiatives and long-shot bets under its corporate umbrella. And just like it’s difficult to predict what kind of new project Alphabet will launch next, it seems that no amount of searching and sifting can say what its venture arms will embrace next.

  1. The network visualization was created using Gephi, an open-source software package used for making network visualizations, and the ForceAtlas2 layout algorithm.
Featured Image: Li-Anne Dias

 


0

The plague of rationalization

00:25 | 16 February

Joseph Flaherty Contributor

Joe Flaherty is director of Content & Community at Founder Collective.

More posts by this contributor:
  • Why the ‘end of the startup era’ could be great for entrepreneurs
  • Invisible unicorns: 35 big companies that started with little or no money

There are many reasons startups fail.

Unfortunately, we just didn’t have enough time and ran out of money.

Unfortunately, the customers just didn’t care enough about our offering.

Unfortunately, the channel just wasn’t economically efficient.

Unfortunately, I had the wrong person running engineering (or marketing, sales, finance etc.).

Unfortunately, we were screwed anyway so we just decided to throw a Hail Mary pass.

Unfortunately, I thought layoffs would ruin morale, so we just burned too much for too long.

Unfortunately, the term sheet fell through at the last minute and we ran out of money.

Unfortunately, we didn’t land the key account that would have saved the business.

Unfortunately, because we had always overcome every previous obstacle, we blindly assumed we’d always overcome the next one.

These are just a small sample of the explanations I’ve heard as an investor, usually immediately after the company runs out of money.

There are times a startup’s fate is beyond its control. Like when a platform tells you they’ve unilaterally decided to take your revenue streams, or a country bans your app. However, outside of a few rare circumstances, the life or death of a startup is mostly in the founder’s hands.

Startups don’t just “run out of money.” Instead, they wait too long to address problems while they had money. Failure doesn’t usually happen “to” startups. It happens when founders rationalize problems until it’s too late and put off dealing with their most profound challenges.

Most of the problems above are present at some point, not just in failures, but also in every successful company. The difference between success or failure is how quickly the startup engages the problem. Attack problems early and the startup will advance. Rationalize that the problems don’t exist and you’ll just be another depressing startup post-mortem.

Why we rationalize

Founders are amazing at bending the world to their will. They succeed partially because they can see what’s possible before most people and have enviable imaginations that can design the future. While this can be a strength, it also can be a great vulnerability.

A successful founder must manage the paradox that they are both inventing the future and that the future is in no way inevitable. Just because a founder wants something to be true, doesn’t mean it will be. And just because the founder has been proven right before (“30 VCs said no to us before we closed our Series A…”), doesn’t mean that founder will be right again (“…therefore we just need to persist through all this rejection to get to our Series B”).

Rationalization is a plague that stands in the way of aggressively removing the barriers that will prevent success.

Founders need to have their eyes to the sky and their feet planted firmly on the ground. They need to at once imagine a future and aggressively study the reality of how the world (customers, employees, recruits, investors) is responding to that vision. Unfortunately, being visionary can easily seduce founders to rationalize away reality.

Identifying rationalization

The best way to detect rationalization is to figure out whether a founder is earnestly searching for answers to problems or is quick to explain away why the problems aren’t important.

Rationalizing founders will use the “Five Whys” to figure out why a negative piece of data doesn’t apply to their startup. The wise founder will try to figure out how to adjust to the learnings.

When introduced to someone with deep domain or functional expertise, the rationalizing founder puts off talking to the person and argues why the person’s input isn’t relevant. The earnest founder eagerly sets up the meeting. That founder may not agree with this person’s perspective, but is openly mining the expert for information. Why did another company in the space make the decision it did? Who are the three best people to talk to about problem X? Good CEOs are always on the hunt for people who may have insights that can help their company overcome barriers.

Rationalizing founders have a tendency to mock a competitor’s approach to a problem — even if that competitor is having much greater success! A truth-focused founder seeks out the competitor’s customers and tries to find out why they are doing so well.

The misaligned incentives of the venture industry also contribute to the likelihood of founder rationalizations. Companies with respectable linear growth stories that want to raise venture capital often rationalize why they need to invest aggressively in their businesses to drive an exponential curve, even when they have limited evidence to support the probability of that curve. By doing so, these founders disregard the data in front of them and start down a path of rationalization that is hard to unwind.

Attack the problems

It’s tempting to blame external factors for the failure of a startup, but success or failure almost always comes down to decisions that the founder makes, or chooses not to. Every startup faces huge challenges on the road to success. The speed with which startups address (and even anticipate) these challenges dictates the outcome. Rationalization is a plague that stands in the way of aggressively removing the barriers that will prevent success. Most founders only realize they were rationalizing when they’ve run out of time and it’s too late.

Featured Image: Igor Normann/Shutterstock

 


0

The sudden death of the website

00:13 | 14 February

Rob LoCascio Contributor

Rob LoCascio is the founder and CEO of LivePerson.

More posts by this contributor:
  • We need a New Deal to address the economic risks of automation
  • The impending bot backlash

You may not know me or even my company, LivePerson, but you’ve certainly used my invention. In 1995, I came up with the technology for those chat windows that pop up on websites. Today, more than 18,000 companies around the world, including big-name brands like T-Mobile, American Express, Citibank and Nike, use our software to communicate with their millions of customers. Unlike most startup founders who saw the birth of the internet in the mid-1990s, I am still CEO of my company.

My longevity in this position gives me a unique perspective on the changes that have happened over the past two decades, and I see one happening right now that will radically transform the internet as we know it.

When we started building websites in the mid-’90s, we had great dreams for e-commerce. We fundamentally thought all brick-and-mortar stores would disappear and everything dot-com would dominate. But e-commerce has failed us miserably. Today, less than 15 percent of commerce occurs through a website or app, and only a handful of brands (think: Amazon, eBay and Netflix) have found success with e-commerce at any real scale. There are two giant structural issues that make websites not work: HTML and Google.

The web was intended to bring humanity’s vast trove of content, previously cataloged in our libraries, to mass audiences through a digital user experience — i.e. the website. In the early years, we were speaking in library terms about “browsing” and “indexing,” and in many ways the core technology of a website, called HTML (Hypertext Markup Language), was designed to display static content — much like library books.

But retail stores aren’t libraries, and the library format can’t be applied to online stores either. Consumers need a way to dynamically answer the questions that enable them to make purchases. In the current model, we’re forced to find and read a series of static pages to get answers — when we tend to buy more if we can build trust over a series of questions and answers instead.

The second problem with the web is Google. When we started to build websites in the ’90s, everyone was trying to design their virtual stores differently. On one hand, this made them interesting and unique; on the other, the lack of industry standards made them hard to navigate — and really hard to “index” into a universal card catalog.

Then Google stepped in around 1998. As Google made it easier to find the world’s information, it also started to dictate the rules through the PageRank algorithm, which forced companies to design their websites in a certain way to be indexed at the top of Google’s search results. But its one-size-fits-all structure ultimately makes it flawed for e-commerce.

Now, almost every website looks the same — and performs poorly. Offline, brands try to make their store experiences unique to differentiate themselves. Online, every website — from Gucci to the Gap — offers the same experience: a top nav, descriptive text, some pictures and a handful of other elements arranged similarly. Google’s rules have sucked the life out of unique online experiences. Of course, as e-commerce has suffered, Google has become more powerful, and it continues to disintermediate the consumer from the brand by imposing a terrible e-commerce experience.

I am going to make a bold prediction: In 2018, we will see the first major brand shut down its website.

There also is a hidden knock-on effect of bad website design. As much as 90 percent of calls placed to a company’s contact center originate from its website. The journey looks like this: Consumers visit a website to get answers, become confused and have to call. This has become an epidemic, as contact centers field 268 billion calls per year at a cost of $1.6 trillion.

To put that in perspective, global advertising spend is $500 billion, meaning the cost of customer care — these billions of phone calls — is three times more than a company’s marketing expenses. More importantly, they create another bad consumer experience. How many times have we been put on hold by a company when it can’t handle the volume of incoming queries? Websites and apps have, in fact, created more phone calls — at increased cost — and upended digital’s promise to make our lives easier.

There is something innate to our psychology in getting our questions answered through a conversation that instills the confidence in us to spend money. This is why there is so much chatter about bots and AI right now. They tap into an inner understanding about the way things get done in the real world: through conversations. The media are putting too much focus on bots and AI destroying jobs. Instead, we should explore how they will make our lives easier in the wake of the web’s massive shortfalls.

As I have discovered the truth about e-commerce, in some ways it made me feel a sense of failure from what my hopes and dreams were when I started in the industry. I have a lot of hope now that what I call “conversational commerce” — interactions via messaging, voice (Alexa and so on) and bots — will finally deliver on the promise of powering digital commerce at the scale we all dreamt about.

I am going to make a bold prediction based on my work with 18,000 companies and bringing conversational commerce to life: In 2018, we will see the first major brand shut down its website. The brand will shift how it connects with consumers — to conversations, with a combination of bots and humans, through a messaging front end like SMS or Facebook. We are already working with several large brands to make this a reality.

When the first website ends, the dominoes will fall fast. This will have a positive impact on most companies in transforming how they conduct e-commerce and provide customer care. For Google, however, this will be devastating.

Featured Image: cako74/Getty Images

 


0

Startups are (still) making weird name choices

19:00 | 10 February

Joanna Glasner Contributor

Joanna Glasner is a reporter for Crunchbase.

More posts by this contributor:
  • Not a minimalist? Startups will gladly store, manage and deliver your items
  • The state of the unicorn

If the latest seed-funded startups have their way, this is what your future will look like.

You’ll find your mortgage through a company named Morty, refill your contact lenses with Waldo and get your cannabis news from Herb. (Which is not to be confused with Bud, the startup that handles your banking.)

Later, you can use Cake Technologies to pay the bar tab, cover fertility treatments with Carrot Fertility and get your workers’ compensation through Pie Insurance.

Afterward, rent your neighbor’s stuff with Fat Lama, manage your cloud services with LunchBadger and network your way to a better career with Purple Squirrel.

Notice any patterns here? Yes, first names, foods and animals have been quite popular lately with founders choosing startup names.

Those are a few of the top naming trends Crunchbase News identified in our latest perusal of seed-stage startups. The project involved parsing through names of more than 1,000 startups that raised seed rounds of $200,000 and up in the past nine months.

This data crunch was an update (see our methodology section below) to a prior overview of the often bizarre naming trends that startups follow. At that time, we found top trends included putting AI into your name, using popular first names and employing creative misspellings of common words.

Most of these things are still popular in startup naming, but some more than others. Adding AI at the end of a name, for instance, is still common, but seems to be waning some. Creative misspellings are still getting done, but less frequently.

Meanwhile, other naming styles are getting more fashionable. Below, we take a look at what’s hot now and what might be in vogue next.

First names and nerdy names

The first-name trend seems to be intensifying, diversifying and creeping into more sectors. Last year, we started noticing a proliferation of chatbot startups using first names. More recently, the first-name trend has pervaded insurance, cannabis, fintech and a whole lot of other spaces.

First names that startups are using are getting nerdier and less common. Morty, for example, is commonly short for Mortimer, which peaked in popularity in the 1880s. It was most recently ranked No. 12,982 on the list of most common baby names. Then there’s Fritz, a learning software developer with a name that also hit its peak in the late 1800s. Last year it ranked No. 4,732.

Another mini-trend that we’d like to see expand is the use of startup names based on textures.

This is a stark contrast with the chatbot crowd. They tended to go with popular monikers, like Ava, Aiden and Riley, that rank high on the latest baby name lists. Some of the more offbeat names, however, do tie into their sectors. Herb has been used as slang for marijuana. Morty, for instance, shares a first syllable with mortgage.

It’s also noteworthy that many startups go with single-word names. This is a shift from the old school practice of combining a first name with another word, as in well-known brands like Trader Joe’s and Sam’s Club.

Food names

Startups also like naming themselves after foods lately. Of course, this isn’t an entirely new phenomenon, and it has worked well before. Apple named itself after a fruit and later became the world’s most valuable technology company.

It should be noted that the food names we refer to here are for companies that, like Apple, have nothing to do with the food industry. Carrot Fertility, which raised $3.6 million in seed funding last fall, for example, offers insurance policies for employers to help cover costs of workers’ fertility treatments. MoBagel is a data science startup. Parsley Health provides primary care. The list goes on.

One of the nice things about naming yourself after a food is that these are general purpose nouns that don’t seem to raise a lot of copyright issues. Vegetables and baked goods aren’t going to sue you for misappropriating their names.

Animal names

Animal names are also good from a trademark perspective. Plus, with an animal name you can also create a cute logo featuring the creature.

Those may be some of the reasons why animal names are also in vogue lately with startups developing both consumer-facing and backend technologies. The formula is also pretty straightforward: pick an animal and then add another descriptive word.

There are plenty of textures out there that don’t have a funded startup associated with them, including spongy, slimy, gelatinous, puffy, gloppy, stringy, pasty, hairy and fluffy.

Of course, for most of the animal-monikered startups, mascots have nothing to do with the underlying businesses. MortgageHippo obviously doesn’t expect hippopotamuses to use its mortgage tool, and Purple Squirrel doesn’t cater to furry-tailed job seekers.

That said, we do worry about the animal kingdom theme getting a bit overused. For instance, MortgageHippo and Hippo Insurance were both funded in the past couple of years.

Other mini-trends we saw and liked

Another interesting trend is that many startups hopping on the fashionable name bandwagon are in the insurance sector. We’ve seen a huge spike in insurance startup funding over the past couple of years, with many upstarts looking to re-architect the industry to appeal to millennial consumers. They have names like Oscar, Lemonade and The Zebra.

Much of this activity is being bankrolled by the largest insurance companies, most of which are a century old and tend to have dull names that sound like, well, insurance companies. So don’t be surprised if the trendy new insurer is actually part-owned by the old boring one your parents complained about.

Another mini-trend that we’d like to see expand is the use of startup names based on textures. In the past year, both Fuzzy and Mush raised good-sized seed rounds.

It’s not too late to get in on this trend, either. An analysis of Crunchbase funding archives reveals there are plenty of textures out there that don’t have a funded startup associated with them, including spongy, slimy, gelatinous, puffy, gloppy, stringy, pasty, hairy and fluffy, to name a few.

Methodology

We altered the methodology for this naming piece since the last one. Previously, we looked at startups based on founding date. This time, we looked based on closed seed rounds of $200,000 or more in the past year for companies founded in 2015 or later.

Featured Image: Li-Anne Dias

 


0

Understanding the Mendoza Line for SaaS growth

00:00 | 10 February

Rory O’Driscoll Contributor

Rory O’Driscoll is a partner at Scale Venture Partners.

More posts by this contributor:
  • Tech Valuations In 2016: The End Of The Line For Sloppy Growth

“How fast do I need to be growing to be interesting to a venture investor?”

This is a question we get asked all the time by CEOs, and we realize “it depends” is not the most actionable answer to give. Instead, we have come up with a simple model that allows us to give a clear numerical answer to this question.

The model allows us to identify, at every stage in the life of a SaaS company, a growth rate, below which that company is not on a clear, venture-backable trajectory. We call the graph of those growth rates the Mendoza Line for Growth. For non-baseball fans, the Mendoza Line is a baseball term for the batting average below which a hitter is not worth hiring for Major League Baseball.

We admit to the massive simplifications of this Mendoza Line model, and recognize several ways to poke holes in the analysis, but we believe that, as for all decision heuristics, the gain in simplification is worth the sacrifice in precision.

The Mendoza line is based on just two assertions.

The first is that most venture investors prefer to invest in companies that have at least the chance to become standalone public companies (which is not to say most achieve this objective). Looking at the realistic low bar of what it takes to be a public company, this implies being at run rate revenue (ARR) of $100 million at the time of IPO, while still growing at 25 percent or greater in the following year.

The second is that most of the time, growth rates only decline, but do so in a way that is on average fairly predictable. For a best-in-class SaaS company, the growth rate for any given year is between 80 percent and 85 percent of the growth rate of that same company in the prior year. We refer to this as growth persistence (and this assumption holds true from about a $10 million run rate on). Based on our most recent estimates, we use a growth persistence estimate of 82 percent in this article.

Using just those two assumptions, look at the chart below, which shows the trajectory of two $10 million ARR run rate software companies.

Company A grew last year at 120 percent, from $4.5 million to $10 million in ARR. The projection for growth rate next year is just under 100 percent (98 percent, reflecting the assumption of 82 percent growth persistence). The company is nearly doubling at a $10 million run rate, and if the growth rate continues its steady decline per the growth persistence math, in five years it will be at $133 million ARR run rate, still growing with a forward growth rate of 36 percent. Company A is on a path to go public.

Company B grew last year at 94 percent, from $5.2 million to $10 million, and plans to grow this coming year at 77 percent, again, reflecting the same growth persistence calculation. It will take this company six years to cross $100 million in ARR, at which point the company has a forward growth rate of just 23 percent. This is right at, or just below, the threshold at which a software company can go public, so Company B at a $10 million revenue run rate and a forward growth rate of 77 percent is on the Mendoza Line.

The calculation can be repeated for each revenue level because the growth rate required for  escape velocity at $50 million is obviously different (and lower) than the growth rate required at $10 million. The numbers can then be shown in a simple graph as seen below.

The table below shows the same data in numeric form, which is sometimes easier.

Is this analysis a universal truth?

This is a heuristic, not a law of physics. In other words, it is rule of thumb that works well on average, recognizing there are exceptions. For a quick visual illustration of how useful this rule is, look at the graph below, which shows the Mendoza Line in green. The individual dots represent the revenue and forward growth rates of 21 successful SaaS IPOs for the years before IPO, when they were private and below $100 million in revenue. The clear majority of the points are above the line, which emphasizes the fact that successful IPOs exhibit a growth trajectory while private that is above the Mendoza Line. It is also worth noting there are even fewer points below the $100 million in ARR line at the time of IPO. This says that growth must be there before an IPO is possible.

Diagnosis is not death — change is possible

The good news is that trajectories can change so that a company that is below the Mendoza Line at $40 million can reverse trajectory and be compelling at $80 million. But it is not easy.

We work with a lot of companies to improve their go-to-market (GTM) models. It is amazing how small changes in key variables such as churn and sales efficiency can lift growth rates by the crucial 5 percent to 10 percent at $10 million that makes all the difference in a world of compounding growth. Sometimes it is as simple as the application of capital in what had been a capital-starved business; more often it requires a retooling of the GTM model to make it work.

As an example, we invested in ExactTarget when it was doing $90 million in revenue with a forward growth rate of 38 percent. The company was attempting to go public, but in early 2009 amid the financial crisis, a sub-scale IPO was not on the cards. Instead, the company raised venture capital and then, led by CEO Scott Dorsey, went on to retool the GTM model to focus more on enterprise customers and add additional products beyond email. One year later the company had raised its growth rate to >50 percent, implying growth persistence above 100 percent, and went public at a $200 million run rate in an extremely successful IPO before being acquired by Salesforce for $2.5 billion.

We were lucky enough to see a similar story at Box, which was at a $6.6 million run rate growing at 110 percent when we invested — in retrospect, very close to the Mendoza Line. CEO Aaron Levie had complete clarity on what he needed to do to accelerate, which was relentlessly add enterprise features to the product and hire enterprise software sales reps. It took capital (a lot of capital!), but two years later it was at $30 million and growing at 140 percent, well above the Mendoza Line and locked on a trajectory that has taken them to $500 million.

Diagnosis is thus clearly not death, but insanity is repeating the past and expecting the outcome to be different. Change is hard. Of 44 public companies over five years, only 30 percent of them had one year of growth re-acceleration (growth persistence greater than 100 percent) and only 10 percent had two or more years of growth re-acceleration. In our private portfolio, the story is the same. Only 35 percent had at least one year of growth re-acceleration, but less than 10 percent of them have been able to show two or more years of growth re-acceleration.

What this shows is that your current growth rate, times an estimate of growth persistence, is your most likely future. To change that future, to raise that trajectory, requires an active act of will to overcome the inertia that all businesses face. It may mean new executives, new products or changing business models.

Mendoza Line is implicitly understood

It is very typical for participants in a market to “know” a rule of thumb long before anyone writes it down. In 20-plus years of venture I have not heard anyone call out this concept explicitly, but investors know it in their gut. It manifests itself in situations where some companies’ financings get done fast, at high valuations and with very clean terms. There are other deals that get done, but slowly and often with structure, all devised to ensure a minimum return in the absence of that clear IPO trajectory.

The chatter is often about the team, the process and the investors, but under the surface is the reality that markets are efficient, and there is a step function of value difference between a company that has escape velocity versus one that does not.

There really is a Mendoza Line for growth.

Jeremy Kaufmann contributed to this article.

Featured Image: bjonesphotography/Shutterstock (IMAGE HAS BEEN MODIFIED)

 


0

What’s needed to unlock the real power of blockchain and distributed apps

00:00 | 9 February

Andy Vitus Contributor

Andy Vitus is a partner at Scale Venture Partners.

More posts by this contributor:
  • You’re doing DevOps wrong
  • The California Drought And Standards Of IoT

There’s been a lot of hand-wringing about the future of blockchain lately.

With cryptocurrency prices reaching all-time highs and total market capitalization topping $800 billion recently, everyone wants to know if we’re witnessing the second coming of the internet or the craziest bubble of all time. If you ask me, it’s a bit of both.

Today, we have blockchain projects raising hundreds of millions of dollars with little more than a whitepaper — no product, no traction, just an idea and some technical specifications. You don’t need to be in venture capital to understand this level of speculation is unsustainable. At the same time, however, we saw much the same in the early stages of the internet, and look where we are today.

I think the cryptocurrency insanity we’re seeing right now is overshadowing a lot of the potential of the underlying architecture and technology. Market speculation aside, when I look at blockchain today, I see a very exciting technology that stands to dramatically reshape our increasingly digital world.

But that doesn’t mean it will happen overnight. When CryptoKitties, a seemingly useless game for breeding, buying and selling virtual cats, can bring the world’s most promising blockchain network to a standstill, it’s clear we still have a long way to go before this technology is ready for major, real world applications.

To get there, creative and enterprising developers must overcome three major limitations that exist at the very core of blockchain: brutal latency, high compute costs and limited storage. Until then, the hundreds of billions in investment dollars flowing into cryptocurrencies like Bitcoin, Ethereum, Litecoin and others will remain little more than speculative bets. What’s more, if blockchain technology doesn’t soon catch up with investor exuberance, a major market correction is all too likely.

Brutally low latency

One of blockchain’s greatest innovations is the way it decentralizes trust by taking a consensus-based approach to verifying transactions of every kind. While this creates massive value, it also comes at a massive cost: latency — and lots of it.

That’s because when transactions are posted to the blockchain, all nodes on the network are involved in verifying and recording them. It’s a slow and redundant process that demands a great deal of processing power. It also runs counter to everything we have come to expect from software systems and the general internet. While the entire infrastructure of the internet is bending toward real time, blockchain is inherently slow.

You don’t need to be in venture capital to understand this level of speculation is unsustainable.

If blockchain is ever going to achieve widespread adoption, it needs to get a lot faster. Redundancy might be a key feature, but low latency will always be considered a bug now that we’ve all been conditioned to expect real-time interactions with technology.

High cost to compute

It’s a great irony that right at the very moment everyone is talking about unlocking parallelization and writing multi-threaded and hyper-efficient code, we suddenly have to figure out how to write efficient single-threaded code again.

This goes back to the distributed nature of blockchain’s architecture and the consensus mechanisms that verify activity on the blockchain. In this environment, the infinite parallel execution that comes from every node on the network computing every transaction means that compute costs are extremely high. In other words, there is very little excess compute power available to the network, making it an exceptionally scarce (and therefore expensive) resource.

It’s a fascinating challenge. Programmers today are used to having access to cheap and virtually unlimited processing power. Not so with blockchain.

Today, we’re seeing all this effort to relearn how to write extremely efficient software. But efficient code will only get us so far. For blockchain to gain widespread adoption, processing power will need to get much cheaper.

Adding more computers does not solve the problem; quite the opposite. The more computers on the network, the more nodes required to sync with the latest transaction history.

Highly limited storage

Similar to the way processing power on blockchain is limited and expensive, the same goes for storage.

On the blockchain, storage comes in blocks, and there’s only so much data that can fit into any given block. What’s more, the number of blocks that can be created is limited. Both of these are a consequence of every block needing to be verified and synced across every node on the network. As noted earlier, this places major limitations on processing speed and power.

It also raises important questions about how to monetize storage. With cloud platforms, you pay a monthly or annual fee for up to an infinite amount of storage. It’s all yours — as long as you keep paying. When the subscription expires, you can renew or lose access to your files (i.e. the files are deleted).

With blockchain, this model breaks down completely. Blockchain databases store the data indefinitely; it begs the question: How can you possibly go about pricing it? The data storage costs must be paid up front and they must cover not just that month but all months and years to come.

What’s the time value of data? It’s yet another open question in desperate need of a creative solution.

Alex Ma contributed to this article.

 


0

An inside look into a venture negotiation

00:00 | 7 February

Even after thousands of published articles about venture trends, hundreds of public pitch decks and numerous investor-penned “why we backed X company” memos, the actual negotiation of venture rounds remains unnecessarily murky. First-time entrepreneurs who have never fundraised are often at a loss for mapping the business values they hold to specific terms during a negotiation. Moreover, many wonder what terms even come up for discussion and why VCs and entrepreneurs may care about a particular term, but barely mention another.

So we (Auren Hoffman, a 6x repeat entrepreneur, founder and CEO of SafeGraph and angel investor in dozens of companies, and Alex Rosen, a longtime investor and founding partner of Ridge Ventures) decided to provide a deeper look into a specific financing round with perspectives from both sides of the table. What were the dynamics and the terms discussed, and which ones evolved into points of negotiation? We hope this serves as a helpful case study for aspiring founders.

In any dynamic of this kind, it’s important to set the context. SafeGraph recently raised a $16 million Series A from Ridge Ventures and individual investors. At the time of financing, the company already had a few customers and a compelling product vision. We were acquaintances who knew each other for more than a decade but who had never worked together directly. Auren knew entrepreneurs that Alex had backed, and Alex knew investors who had backed Auren, so there was evidence of character and track record on both sides. Both of us came into the discussion with deep relevant experience: SafeGraph is Auren’s sixth company and Alex has invested in four dozen companies, including several other data-intensive businesses.

Auren was seeking a fairly untraditional Series A investment structure, and he knew that Alex and his partners at Ridge Ventures had a reputation for flexibility.

Here’s how each of us saw the process, what we cared about and how we closed the deal.

The pitch and initial thoughts

Alex: Auren reached out and we scheduled a time for him to come to our offices within a week. I liked the company idea immediately. I also liked the fact that SafeGraph already had a few paying customers. We provided a term sheet within 24 hours of Auren presenting to us, which is fairly unusual. Also unusual was the length of the term sheet (about three pages). I wouldn’t have thought that important 15 years ago, but simplicity and speed have become more significant over time. Also, we didn’t put a deadline on the term sheet. We operate with the understanding that if a term sheet is going to be presented we’re still going to invest, whether that’s in one week or six. The fundamentals won’t change in that time and that’s what matters most.

Auren: We really appreciated how Ridge Ventures moved quickly and remained flexible. They got our business immediately due to their extensive experience with data businesses.

Ownership

Alex: I cared that we invest at a fair price and that we had meaningful ownership of the company. That does not mean we wanted a huge percentage — we’re talking under the “typical” 20 percent. We knew that Auren wanted to maintain a meaningful amount of control over his company, which was fine with us since were betting on him.

Auren: The fact that Alex and Ridge were flexible on ownership percentage was a big point in his favor. Given that we wanted to sell into a wide variety of verticals, it was important for us to bring a large number of strategic individuals who could introduce us to target customers. We were doing an untraditional investment in that we were looking to add 100 individuals as investors in the A round. In fact, some VCs balked at the idea because it impacted their percentage of ownership. Alex’s flexibility opened the door to us both courting those individual investors while also having a VC partner.

Valuation

Alex: A number of factors contributed to what I felt was a high starting valuation: SafeGraph is in an interesting space, Auren is a highly successful repeat founder, they had attracted paying customers very quickly and the company was in a similar space as previous businesses Auren had built, so we knew he understood it well. I have learned over the years that an extra 20 percent in valuation will not matter in a bad investment, but it can make a difference in being a good one. We also knew there was a lot of enthusiasm from other investors.

Auren: Valuation was actually of low importance to me. That’s something that may surprise other founders, but my goal is always for our investors to do super well and valuation is not that important with that in mind. I’m happy to give up a few percentage points for a better long-term outcome. One thing I do care about in the term sheet is the clause around legal fees. Lower legal fees tend to speed up a transaction dramatically.

Alex: The most important part of these negotiations is that neither party felt squeezed by the other, which can erode trust or make it feel like the other party is being greedy. Funny enough, the valuation probably ended up higher than where both Auren and I thought it would be.

Investment size

Alex: We wanted to invest in the range of $3 million-$6 million, which is our sweet spot given the size of our fund and the ownership range we like to have.

Auren: We wanted to raise about $16 million in equity, leaving a lot of room for individuals. This resulted in $5.5 million from Ridge, $2 million from me and $8.5 million from individuals. There were no major disagreements here, but there was a lot of interest, so we did unfortunately have to cut some individuals from the round.

Option pool & liquidation preference

Alex: At some level, the option pool is a valuation issue, and at another, a future ownership issue (issuance of options dilutes investor ownership, which you cannot buy back). We believe making the Series A as simple a structure as possible, so we proposed 1x non-participating preference, which is the most common.

Auren: We were aligned on liquidation preference and the option pool.

Board members

Alex: We typically take a board seat with our investments, though sometimes we come on just as a formal observer. As the only institutional investor in this round, we definitely wanted a board seat. Typically, the VC firm has the right to designate the board seat to whomever they want.

Auren: We expected to give one investor board seat, and wanted that seat to be specifically occupied by Alex. So, in this case, we pushed for an extra provision that should Alex be unable to serve, his successor needs to have “reasonable” approval from common shareholders.

Approval rights

Alex: When I started as an investor, approval rights on corporate transactions, big and small, were a big deal. These days, I think flexibility and working with the right entrepreneur, at a fair price, is much more important than ultimate control.

Auren: We are aiming to build a multibillion-dollar company that will hopefully eventually go public, so we did not negotiate hard on approval rights.

Information rights

Alex: Here’s a surprise: Not all startup founders and CEOs deliver annual and quarterly financial statements and annual budgets. This is super important to us for information transparency, and we actually like to have that in the term sheet.

Auren: Alex had no idea how organized we are on this one! No arguments here.

Pro-rata rights

Alex: It’s not just customary, but really important to have pro-rata rights on future issuance of stock. At Ridge, we like having the option for “overallotment rights” so we can maintain our ownership levels at later stages of financing.

Auren: I’m more than happy to have the existing investors maintain their ownership. Again, I want to see our early investors do well; they backed us early, after all.

Hopefully this serves as a useful case study for other founders and investors. We’d like to see more entrepreneurs and VCs document the terms and aspects of fundraising they care about (or dislike) most, leading to greater transparency, better experiences and faster learning within the industry.

Featured Image: venimo/Shutterstock

 


0
<< Back Forward >>
Topics from 1 to 10 | in all: 4055

Site search


Last comments

Evolve Foundation launches a $100 million fund to find startups working to relieve human suffering
Peter Short
Money will give hope
Peter Short

Boeing will build DARPA’s XS-1 experimental spaceplane
Peter Short
Great
Peter Short

Is a “robot tax” really an “innovation penalty”?
Peter Short
It need to be taxed also any organic substance ie food than is used as a calorie transfer needs tax…
Peter Short

Twitter Is Testing A Dedicated GIF Button On Mobile
Peter Short
Sounds great Facebook got a button a few years ago
Then it disappeared Twitter needs a bottom maybe…
Peter Short

Apple’s Next iPhone Rumored To Debut On September 9th
Peter Short
Looks like a nice cycle of a round year;)
Peter Short

AncestryDNA And Google’s Calico Team Up To Study Genetic Longevity
Peter Short
I'm still fascinated by DNA though I favour pure chemistry what could be
Offered is for future gen…
Peter Short

U.K. Push For Better Broadband For Startups
Verg Matthews
There has to an email option icon to send to the clowns in MTNL ... the govt of India's service pro…
Verg Matthews

CrunchWeek: Apple Makes Music, Oculus Aims For Mainstream, Twitter CEO Shakeup
Peter Short
Noted Google maybe grooming Twitter as a partner in Social Media but with whistle blowing coming to…
Peter Short

CrunchWeek: Apple Makes Music, Oculus Aims For Mainstream, Twitter CEO Shakeup
Peter Short
Noted Google maybe grooming Twitter as a partner in Social Media but with whistle blowing coming to…
Peter Short

An Interview With Shaquille O’Neal: Businessman, Investor And Video Game Star
Anna K
Shaquilee is a mogul! I see him the Gold bond commercials and think that he's doing something right…
Anna K