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Main article: Sequoia

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Portfolio bloat: a look at what’s happening to thousands of startups going nowhere fast

22:54 | 13 February

Earlier this week, much was made of the e-commerce business Brandless deciding to shutter its doors. Industry observers found its fate particularly interesting, given that Brandless had opened its storefront recently as these things go, in July 2017, and raised so much funding, including $100 million from the SoftBank Vision Fund alone.

Still, Brandless is far from alone in having tried — and failed —  to break away from its many rivals and become the kind of juggernaut that make venture investors money. There are thousands of companies that have raised funding over the last decade that may have looked like bigger opportunities or whose growth has slowed and that are discovering that follow-on dollars are hard to find.

Ravi Viswanathan of NewView Capital (and long of NEA before that) sums up what’s happening out there this way: “Firms and funds are generally coming back to market faster, with bigger funds, and they’e investing a lot more, so you’re seeing portfolio bloat across the industry. But [limited partners, the outfits and people supplying money to venture funds] are investing for you to make money, and that means spending time on the needle movers.”

So what’s a startup that’s no longer an attractive option for further venture investment to do? There are several options, some of which are newer than others.

Some — maybe even most — will eventually decide, like Brandless, to close down the works. This is the least favorable scenario for everyone involved as it means lost jobs, lost dollars, and often an uncertain future for the founders who’ve poured their heart and soul into the company.

Venture capitalists don’t love closing down companies, either, as it  means writing down the holdings in their financial statements to their own investors, something they’d rather put off as long as possible — though external events can also impact the timing. As Uncork Capital founder Jeff Clavier explains it, “We maintain a company’s valuation on our books until we decide to impair it.” But if a venture firm has a “big gain [because another company sold or went public], we might as well take advantage and sell the shares for $1 or forego them altogether,” writing off the investment but also minimizing its overall tax bill in the process.

Others that have grown more self-sufficient might look to buy back their shares from investors at a discount. Joel Gascoigne, the founder of a now six-year-old social media management company called Buffer, outlined his own process for saving up enough money to buy out the company’s main venture investors a couple of years ago.

It’s not easy to pull off. Gascoigne says it took more than a year to persuade the VCs to take the deal he was offering them and their relationship suffered as result. The reason, offers Clavier, is that in a situation like Buffer’s, an “investor has to admit complete defeat, and that’s kind of the last stop on the road.” Unsurprisingly, what Clavier deems a far better approach if possible is to “get out sooner, when there’s more time for a proper exit. The best thing you can do is find a nice home” for the founders, including so they can “move one, get a new gig, join something, rather than toiling away for the next three to five years” on a company that might eventually fail anyway.

At least, in some cases where the investors have essentially written the deal down to zero, they’ll let the founders retain their intellectual property. “It’s worth something to him or her or them,” says Hunter Walk, cofounder of the venture firm Homebrew, “and it’s really not worth anything to the investors and maybe the founder wants to re-start it as a non-venture backed company.” Either way, Walk notes, this “usually occurs when they haven’t raised too much money.” (It’s a different story for those who’ve raised bigger rounds, as VCs need to wring what they can from the company to fulfill their own fiduciary obligations. That mean selling off assets, from office chairs to IP.)

Thankfully, for startups going nowhere fast, there’s also a third option that’s picking up traction: private equity firms that have grown increasingly focused on tech. that of companies selling partly or entirely to private equity firms. The terms might not be ideal, but the founder gets to claim an “exit” while the private equity firm gets to roll up sub-scale properties or bolt a startup onto one of its core assets and re-sell the package to another buyer.

These deals can sometimes be a “bitter pill to swallow” for investors, notes Viswanathan, but the “sooner you do it, the faster you free up resources and show your LPs that you can manage your portfolio.” Other times, he notes, investors can hang on in case the PE firm is able to really fuel the company’s growth. Just last month, for example, Insight Partners, the New York-based private equity and venture firm, paid cash for Armis Security, a five-year-old company whose tech helps businesses secure their connected devices. Though terms of the deal weren’t disclosed, a number of Armis investors rolled their stakes into the new, Insight-controlled company.

A similar situation played out when the 13-year-old web content management company Acquia sold to Vista Equity Partners last fall.

What if such a deal never materializes? Well, there are other alternatives still for startups that are chugging along — just not as quickly as once expected. One is to try debt lenders. Debt is always a gamble, but one that sometimes pays off. Another is to use convertible notes, if one’s investors (or even outsiders) are open to the idea. These notes are structured as debt that convert into equity upon a specific event like a certain date or the closing of a priced investment round.

There’s always the hope, too, that a venture investor will let a bet ride. Jason Lemkin, who has invested as an individual and now as the founder of the SaaStr fund, says he’s open to doing this when he can.  “My view as a founder and investor has evolved over time, but if I think it’s a good team and the company is achieving a few million in revenue and doesn’t need to raise money and has high retention and recurring revenue but is no longer on a venture trajectory, I’ll wait,” says Lemkin, “I”ll wait because things can change.”

It’s true of SaaS startups in particular, he says, “because competitors get acquired, they quit, they take too much money and stumble. And if you’re the last man or woman standing, if you’re still out there fighting, you can win.”

 


0

Twitter-backed ShareChat eyes fantasy sports in India

03:35 | 7 February

The growing market of fantasy sports in India may soon have a new and odd entrant: ShareChat .

The local social networking app, which in August last year raised $100 million in a financing round led by Twitter, has developed a fantasy sports app and has been quietly testing it for six months, two sources familiar with the matter told TechCrunch.

ShareChat’s fantasy sports app, called Jeet11, allows betting on cricket and football matches and has already amassed more than 120,000 registered users, the sources said. The app, or its website, does not disclose its association with ShareChat.

A ShareChat spokesperson confirmed the existence of the app and said the startup was testing the product.

Jeet11 is not available for download on the Google Play Store due to the Android maker’s guidelines on betting apps, so ShareChat has been distributing it through Xiaomi’s GetApps app store and the Jeet11 website, and has been promoting it on Instagram. It is also available as a web app.

Fantasy sports, a quite popular business in many markets, has gained some traction in India in recent years. Dream11, backed by gaming giant Tencent, claimed to have more than 65 million users early last year. It has raised about $100 million to date and is already valued north of $1 billion.

Bangalore-based MPL, which counts Sequoia Capital India as an investor and has raised more than $40 million, appointed Virat Kohli, the captain of the Indian cricket team, as its brand ambassador last year.

In the last two years, scores of startups have emerged to grab a slice of the market, and the vast majority of them are focused on cricket. Cricket is the most popular sport in India, just ask Disney’s Hotstar, which claimed to have more than 100 million daily active users during the cricket season last year.

Or ask Facebook, which unsuccessfully bid $600 million to secure streaming rights of the IPL cricket tournament. It has since grabbed rights to some cricket content and appointed the Hotstar chief as its India head.

So it comes as no surprise that many sports betting apps have signed cricketers as their brand ambassador. Hala-Play has roped in Hardik Pandya and Krunal Pandya, while Chennai-based Fantain Sports has appointed Suresh Raina.

But despite the growing popularity of fantasy sports apps, where users pick players and bet real money on their performances, the niche is still sketchy in many markets that consider it betting. In fact, Twitter itself restricts promotion of fantasy sports services in many markets across the world.

In India, too, several states, including Assam, Arunachal Pradesh, Odisha, Sikkim and Telangana, have banned fantasy sports betting. Jeet11 currently requires users to confirm that they don’t live in any of the restricted states before signing up for the service.

“It doesn’t help matters either that the fantasy sports business’ attempts at legitimacy involve trying to be seen as video games — a cursory glance at a speakers panel for any Indian video game developer event is evidence of this — rather than riding on its own merits,” said Rishi Alwani, a long-time analyst of Indian gaming market and publisher of news outlet the Mako Reactor.

An executive who works at one of the top fantasy sports startups in India, speaking on the condition of anonymity, said that despite handing out cash rewards to thousands of users each day, it is still challenging to retain customers after the conclusion of any popular cricket tournament. “And that’s after you have somehow convinced them to visit your website or download the app,” he said.

For ShareChat, which has been exploring ways to monetize its 60 million-plus users and posted a loss of about $58 million on no revenue in the financial year ending March 31, that’s anything but music to the ears. In recent months, the startup, which serves users in more than a dozen local languages, has been experimenting with ads.

 


0

Company-builder Antler passes $75M raised after investment from Schroders and Ferd

03:05 | 6 February

Antler is a ‘company builder’ which emerged a couple of years ago, running startup generator programs and investing from an early-stage, bringing together a heady mix of technologists, product builders, and operators together with its own technology stack.

Now, plenty of ‘company builders’ have come and gone. It’s a bit like Apocalypse Now: everyone goes in thinking they will come up with the major formula to spit out startups at a prodigious rate and they come out screaming “The Horror! The Horror!”

But Antler appears to have been on an interesting run. It’s so far made more than 120 investments across a wide range of companies, with several going on to raise later-stage funding from the likes of Sequoia, Golden Gate Ventures, East Ventures, Venturra Capital and the Hustle Fund.

Since its launch in Singapore two years ago, Antler now has a presence across New York, London, Singapore, Sydney, Amsterdam, Stockholm, Nairobi and Oslo.

Today, it’s announcing that it’s attracted investment from German investment management company Schroders, investment house FinTech Collective and Ferd, the vehicle used by Johan H. Andresen, the Norwegian industrialist and investor.

This latest investment takes the capital raised by Antler over the past six months to more than $75 million.

These investors join an existing group that includes Facebook co-founder Eduardo Saverin, Canica International and Credit Saison, the third-largest credit card issuer in Japan. The idea here is that these investors get exposure to early-stage companies as they are built.

As with most company builders and accelerators, Antler only takes 1-1.5% of the applicants

Its portfolio includes Sampingan, an on-demand workforce in Indonesia; Xailient, a computer vision technology; Airalo, a global e-sims marketplace and Fusedbone, which enables medical centers to produce bespoke, non-metal implants on-site.

Magnus Grimeland, Antler co-founder and CEO said: “With our support, our founders start refining their ideas and building new and innovative businesses. What is equally important is the deep relationship our founders build with their peers, our advisors and backers. Having accomplished investors like Schroders, Ferd and FinTech Collective on board means we can provide a more valuable network for our startups as they grow their businesses.”

Peter Harrison, Group CEO of Schroders, who will also be joining Antler’s advisory board, said: “We are in a period of unprecedented change. The visibility on venture capital activity and innovation that Antler provides is therefore leading-edge.”

Antler says more than 40% of its portfolio companies have a female co-founder and 78% of these have a female CEO.

 


0

Where top VCs are investing in open source and dev tools (Part 1 of 2)

00:43 | 6 February

The once-polarizing world of open-source software has recently become one of the hotter destinations for VCs.

As the popularity of open source increases among organizations and developers, startups in the space have reached new heights and monstrous valuations.

Over the past several years, we’ve seen surging open-source companies like Databricks reach unicorn status, as well as VCs who cashed out behind a serious number of exits involving open-source and dev tool companies, deals like IBM’s Red Hat acquisition or Elastic’s late-2018 IPO. Last year, the exit spree continued with transactions like F5 Networks’ acquisition of NGINX and a number of high-profile acquisitions from mainstays like Microsoft and GitHub.

Similarly, venture investment in new startups in the space has continued to swell. More investors are taking shots at finding the next big payout, with annual invested capital in open-source and dev tool startups increasing at a roughly 10% compounded annual growth rate (CAGR) over the last five years, according to data from Crunchbase. Furthermore, attractive returns in the space seem to be adding more fuel to the fire, as open-source and dev tool startups saw more than $2 billion invested in the space in 2019 alone, per Crunchbase data.

As we close out another strong year for innovation and venture investing in the sector, we asked 18 of the top open-source-focused VCs who work at firms spanning early to growth stages to share what’s exciting them most and where they see opportunities. For purposes of length and clarity, responses have been edited and split (in no particular order) into part one and part two of this survey. In part one of our survey, we hear from:

 


0

Payments infra startup Finix closes $35M Series B led by Sequoia

15:00 | 4 February

This morning Finix, a software-as-a-service (SaaS) startup selling payments tech to other businesses, announced that it has raised a $35 million Series B. Sequoia led the round, which also saw participation from new investors Activant Capital and Inspired Capital.

Finix did not disclose a new valuation as part of its round, and declined to share any growth metrics regarding its business. Instead, it offered a TAM figure and noted the number of countries in which it currently operates.

The company’s latest round is a doubling of its Series A, a $17.5 million round from July of 2019 led by Bain Capital Ventures; Insight Venture Partners, Aspect Ventures and Visa also took part in that round. Adding to the list, Homebrew invested in the company during its infancy.

Finix has now raised more than $55 million to date, according to the company, inclusive of an October, 2017-era seed investment.

The round

In an interview, Finix’s

told TechCrunch that his company put together its latest round “to scale up the organization,” boosting its product and engineering muscles while also pursuing further international payment support. According to Serna, Finix’s larger clients have asked the company to expand international support, as having “international reach is a really key component for any business.”

Internationalization in the payments space requires many hands, a need that Finix intends to meet by doubling its staff by the end of the year. The company had around 60 staff at year’s end, Serna previously told TechCrunch.

Notably Finix, despite being a player in the payments space, doesn’t think of itself as a payments company. Instead, according to its CEO, Finix self-describes “as a payment infrastructure company.”

That difference is reflected in how the company charges for its service. Instead of charging similarly to, say, Stripe, which takes 2.9% and $0.30 “per successful card charge,” Finix charges its customers a regular software fee, along with a sliding fee depending on the number of payments they process.

Not taking a percentage cut of transactions opens up interesting revenue opportunities for Finix customers. Serna detailed how bringing payment tech via Finix can help some companies grow top line, something that’s quite interesting for other SaaS players:

Historically the distribution of payments has been fairly fragmented and almost bolted on. So there’s a number of software companies like MindBody and Toast, who, historically would just have sort of a revenue share with one of their payment processors. So if you signed up for someone like a MindBody as a yoga studio, you would then go and set up a partnership with FirstData or WorldPay to start accepting payments on that platform. In that model, someone like a MindBody would make a few basis points on every single transaction. By bringing their payments back in-house, and offering a more comprehensive, all in one solution, they can actually take more revenue.

Startups can expand revenue by owning their own payments tech — sometimes substantially. Serna told TechCrunch that Lightspeed said during their IPO process that “they were actually doubling their overall take rate by becoming a payment company.”

How does that work?

The yoga example that Serna mentioned is easy to unpack by way of analogy. Doing so will help us better understand why Finix expects SaaS companies, to pick an example, to bring payment tech “in-house.”

Imagine you own a company called, say WeaveBasket, and that it sells SaaS software to underwater basket weaving instructional studios, helping them manage client booking and the like. You can charge only so much for company’s your software, presenting you with a revenue ceiling; after all, the average underwater basket weaving studio can only generate so much margin with which to pay costs. But if you set up WeaveBasket to help underwater basket weaving studios to also accept payments for classes through your software, you can generate lots more revenue for your SaaS company — WeaveBasket generates revenue from regular software fees, and by taking a cut of its customers’ customer payment flow.

“Vertical SaaS companies are looking at how they can directly embed and bake these payments capabilities into their platform,” Serna told TechCrunch.

All this fits back into the round; Finix is a bet that providing payment technology on a SaaS basis will attract legion uptake by companies of all sorts. As a deck that Finix’s Serna showed TechCrunch a few weeks ago stated, “software companies are becoming payments companies,” and his company wants to be the engine behind that change.

The bet

The payments world is stuffed full of players at different points of the transaction stack, including processors, banks, card networks and payment facilitators like Lightspeed and Stripe. It’s a complex set of relationships. Serna agrees, calling the industry “a blackbox to basically everybody” in a 2019 interview.

Creating simplicity through software is something that has generally done well in the technology world in recent years. Twilio took telephony and boiled it down into APIs. Plaid did the same thing with consumer finance. Finix, it seems, wants to let anyone who takes lots of payments to be able to reduce their relationship load, control costs and perhaps drive more revenue.

The startup now has the capital with which to bring its vision more fully to life, but domestically and abroad. Let’s see how far Finix can get on its new check — and its willingness to take a small risk and share a bit more concerning its business performance in the future.

 


0

Utah tech magnates create new Silicon Slopes Venture Fund to boost startups in the state

17:29 | 3 February

Those looking outside of Silicon Valley as a potential hub for their startup might want to take a gander at Utah — at least that’s the kind of trend the new Silicon Slopes Venture Fund hopes to create.

The newly formed fund, put together by Qualtrics co-founder Ryan Smith, Omniture and Domo founder Josh James and Stance co-founder turned Pelion Venture Partners’ Jeff Kearl, pledges to invest solely in Utah-based startups. The goal? To become every bit as notable as a16z or Sequoia Capital.

Qualtrics co-founder Ryan Smith and Domo and Omniture founder Josh James onstage at the Silicon Slopes Tech Summit.

“I grew up in the Bay Area,” Kearl told TechCrunch of the energy he feels in the state. “This feels like the 1990s in the Bay Area. You can find hundreds of open jobs up and down the Wasatch Front.”

Utah has a reputation as a mostly religious, conservative and sleepy mountain region for outdoors enthusiasts but tech has fast become the leading job sector in the state, with some salaries from companies like Adobe and Qualtrics rivaling those in Silicon Valley. The state recently pledged a push to include at least one computer science course in every high school in the state by 2022 and also just hosted a massive, 25,000 person startup festival called the Silicon Slopes Tech Summit, where it held a Utah state governor’s debate and both Steve Case and Mark Zuckerberg spoke on stage.

It’s unclear how much the fund has set aside for its mission to help Utah become a full-fledged tech ecosystem rivaling Silicon Valley but one would imagine it would have a sizable sum to invest, if, as Smith tells TechCrunch, it is to help Utah’s up-and-coming startups go all the way from seed stage to IPO.

“I want to see companies get even bigger than Qualtrics…and do it in this state,” Smith said. Qualtrics sold to SAP in 2019 for $8 billion, notably the largest private enterprise software deal in tech history.

Silicon Slopes Tech Summit 2020 Gubernatorial Debate

One of the many issues tech hubs around the world face is both the networking capabilities and the ability to invest after the seed stage or Series A. Most startups throughout the globe still find the need to travel and make connections in Silicon Valley to get them through the next step of growth. This has been true for every billion-dollar startup idea in Utah as well so far. Both Smith and James took in Silicon Valley venture for their companies, as did unicorn turned public ed tech startup Pluralsight and the recently rebranded sales platform Xant (formerly InsideSales), before making it big.

However, this new fund represents the kind of push needed to create a strong innovation ecosystem in the future, as Steve Case mentioned on stage at the summit event this last week. “Venture capitalists must look at ‘what’s happening in the Silicon Slopes’ and make sure it ‘is happening other places’,” Utah newspaper Deseret News paraphrased the AOL founder as saying.

Pelion Venture Partners, which operates in both Utah and Southern California, will act as a support to Silicon Slopes Venture Fund, providing organizational overhead. Each partner will still keep their day job and donate most fees to support the ongoing operation of the non-profit tech organization, Silicon Slopes, which runs the annual tech summit of the same moniker. However, the Silicon Slopes Venture Fund will be an independent fund from Pelion, with the sole purpose of investing in deal flow the three partners find through their respective networks within the state.

“I used to hate the term ‘a rising tide lifts all boats’ because I want to be the only boat,” James told TechCrunch. “But I really think it applies here for what we are trying to do [in Utah].”

 


0

Two-year-old Indian edtech startup Doubtnut raises $15M

14:52 | 1 February

Doubtnut, a Gurgaon-based startup that operates an app to help students learn and master concepts from math and science using short videos, has raised $15 million in a new financing round as it looks to serve more people in small cities and towns of the country.

The financing round, Series A, was led by Chinese giant Tencent. Existing investors Omidyar Network India, AET, Japan and Ankit Nagori (founder of fitness startup Cure.Fit), and Sequoia Capital India also participated in the round, the two-year-old startup said.

Doubtnut, part of Sequoia Capital India’s Surge accelerator, has raised $18.5 million to date, and its new financing round valued it at about $50 million, a person familiar with the matter said.

The app allows students from sixth grade to high-school solve and understand math and science problems in local languages. Doubtnut app allows them to take a picture of the problem, and uses machine learning and image recognition to deliver their answers through short-videos.

A student can take a picture of the problem, and share it with Doubtnut through its app, website, or WhatsApp and get a short video that shows the answer and walks them through the procedure to tackle it.

Doubtnut said it has amassed over 13 million monthly active users across its website, app, YouTube, and WhatsApp . More than 85% of Doubtnut users today come from outside of the top 10 cities in India, said Tanushree Nagori, co-founder of Doubtnut. She said that more than half of these students have come online in the last one year.

“Doubtnut is truly democratizing education across India. Our user base reflects the entire demography of India, something which no other education app in the country has come close to achieving,” she said.

The growth of Doubtnut represents the emergence of a wave of startups in India that are tackling local challenges. In the education space alone, a number of players including Byju’s, which is now valued at $8 billion, Unacademy, Vedanutu, and GradeUp have shown impressive growth.

Gaurav Munjal, founder and chief executive of Unacademy, said on Saturday that his startup’s one-year-old premium offering had clocked $30 million in revenue.

 


0

KPCB has already blown through much of the $600 million it raised last year

06:32 | 30 January

Kleiner Perkins, one of the most storied franchises in venture capital, has already invested much of the $600 million it raised last year and is now going back out to the market to raise its 19th fund, according to multiple sources.

The firm, which underwent a significant restructuring over the last two years, went on an investment tear over the course of 2019 as new partners went out to build up a new portfolio for the firm — almost of a whole cloth.

A spokesperson for KPCB declined to comment on the firm’s fundraising plans citing SEC regulations.

The quick turnaround for KPCB is indicative of a broader industry trend, which has investors pulling the trigger on term sheets for new startups in days rather than weeks.

Speaking onstage at the Upfront Summit, an event at the Rose Bowl in Pasadena, Calif. organized by the Los Angeles-based venture firm Upfront Ventures as a showcase for technology and investment talent in Southern California, venture investor Josh Kopelman spoke to the heightened pace of dealmaking at his own firm.

The founder of First Round Ventures said that the average time from first contact with a startup to drawing up a term sheet has collapsed from 90 days in 2004 to 9 days today.

 

“This could also be due to changes in the competitive landscape … and there may be changes with First Round Capital itself,” says one investor. “It may have been once upon a time that they were looking at really early raw stuff… But, today, First Round is not really in the first round anymore. Companies are raising some angel money or Y Combinator money.”

At KPCB, the once-troubled firm has been buoyed by recent exits in companies like Beyond Meat, a deal spearheaded by the firm’s former partner Amol Deshpande (who now serves as the chief executive of Farmers Business Network) and Slack.

And its new partners are clearly angling to make names for themselves.

“KP used to be a small team doing hands-on company building. We’re moving away from being this institution with multiple products and really just focusing on early-stage venture capital,” Kleiner Perkins  partner Ilya Fushman said when the firm announced its last fund.

Kleiner Perkins partner Ilya Fushman

“We went out to market to LPs. We got a lot of interest. We were significantly oversubscribed,” Fushman said of the firm’s raise at the time.

In some ways, it’s likely the kind of rejuvenation that John Doerr was hoping for when he approached Social + Capital’s Chamath Palihapitiya about “acquiring” that upstart firm back in 2015.

At the time, as Fortune reported, Palihapitiya and the other Social + Capital partners, Ted Maidenberg and Mamoon Hamid would have become partners in the venture firm under the terms of the proposed deal.

Instead, Social + Capital walked away, the firm eventually imploded and Hamid joined Kleiner Perkins two years later.

The new Kleiner Perkins is a much more streamlined operation. Gone are the sidecar and thematic funds that were a hallmark of earlier strategies and gone too are the superstars brought in by Mary Meeker to manage Kleiner Perkins’ growth equity investments. Meeker absconded with much of that late stage investment team to form Bond — and subsequently raised hundreds of millions of dollars herself.

Those strategies have been replaced by a clutch of young investors and seasoned Kleiner veterans including Ted Schlein who has long been an expert in enterprise software and security.

“Maybe at this point they think they can raise based on the whole story about Mamoon taking over and a few years from now they won’t be able to raise on that story and will have to raise on the results,” says one investor with knowledge of the industry. “Mamoon is a pretty legit, good investor. But the legacy of the firm is going to be tough to overcome.”

All of these changes are not necessarily sitting well with limited partners.

“LPs are not really happy about what’s going on,” says one investor with knowledge of the venture space. “Everybody thinks valuations are too high since 2011 and people are thinking there’s going to be a recession. LPs think funds are coming back to market too fast and they’re being greedy and there’s not enough vintage diversification but LPs … feel almost obligated that they have to do these things… Investing in Sequoia is like that saying that you don’t get fired for buying IBM .”

 


0

Two Sigma Ventures raises $288 million, complementing its $60 billion hedge fund parent

21:38 | 22 January

Eight years ago, Two Sigma Investments began an experiment in early stage investing.

The hedge fund, focused on data-driven quantitative investing, was well on its way to amassing the $60 billion in assets under management that it currently holds, but wanted more exposure to early stage technology companies, so it created a venture capital arm, Two Sigma Ventures.

At the time, the firm was backed primarily by the hedge fund with a $150 million commitment. Now, eight years and several investments later, the firm has raised $288 million in new funding from outside investors and is pushing to prove out its model, which leverages its parent company’s network of 1,700 data scientists, engineers and industry experts to support development inside its portfolio.

The world is becoming awash in data and there’s continuing advances in the science of computing,” says Two Sigma Ventures co-founder Colin Beirne. “We thought eight years ago when when started, that more and more companies of the future would be tapping into those trends.”

Beirne describes the firm’s investment thesis as being centered on backing data-driven companies across any sector — from consumer technology companies like the social networking monitoring application, Bark, or the high performance, high-end sports wearable company, Whoop.

Alongside Beirne, Two Sigma Ventures is led by three other partners, Dan Abelon, who co-founded SpeedDate and sold it to IAC; Lindsey Gray, who launched and led NYU’s Entrepreneurial Institute; and Villi Iltchev, a former general partner at August Capital.

Recent investments in the firm’s portfolio include Firedome, an endpoint security company; NewtonX, which provides a database of experts; Radar, a location-based data analysis company; and Terray Therapeutics, which uses machine learning for drug discovery.

Other companies in the firm’s portfolio are farther afield. These include the New York-based Amper Music, which uses machine learning to make new music; and Zymergen, which uses machine learning and big data to identify genetic variations useful in pharmaceutical and industrial manufacturing.

Currently, the firm’s portfolio is divided between enterprise investments, consumer-facing deals, and healthcare focused technologies. The biggest bucket is enterprise software companies, which Beirne estimates represents about 65% of the portfolio. He expects the firm to become more active in healthcare investments going forward.

“We really think that the intersection of data and biology is going to change how healthcare is delivered,” Beirne says. “That looks dramatically different a decade from now.”

To seed the market for investments, the firm’s partners have also backed the Allen Institute’s investment fund for artificial intelligence startups.

Together with Sequoia, KPCB, and Madrona, Two Sigma recently invested in a $10 million financing to seed companies that are working with AI. “This is a strategic investment from partner capital,” says Beirne.

Typically startups can expect Two Sigma to invest between $5 million and $10 million with its initial commitment. The firm will commit up to roughly $15 million in its portfolio companies over time.

 


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Capella Space reveals new satellite design for real-time control of high-resolution Earth imaging

16:27 | 21 January

Satellite and Earth observation startup Capella Space has unveiled a new design for its satellite technology, which improves upon its existing testbed hardware platform to deliver high-resolution imaging capable of providing detail at under 0.5 meters (1.6 feet). Its new satellite, cod-named “Sequoia,” will also be able to provide real-time tasking, meaning Capella’s clients will be able to get imaging from these satellites of a desired area basically on demand.

Capella’s satellites are ‘synthetic aperture radar’ (SAR for short) imaging satellites, which mean they’re able to provide 2D images of the Earth’s surface even through cloud cover, or when the area being imaged is on the night side of the planet. SAR imaging resolution is typically much higher than the 0.5-meter range that Capella’s new design will enable – and it’s especially challenging to get that kind of performance from small satellites, which is what Sequoia will be.

The new satellite design is a “direct result of customer feedback,” Capella says, and includes advancements like an improved solar array for faster charging and quicker recycling; better thermals to allow it to image for longer stretches at a time; a much more agile targeting array that means it can switch targets much more quickly in response to customer needs; and a higher bandwidth downlink, meaning it can transfer more data per orbital pass than any other SAR system from a commercial company in its size class.

This upgrade led to Capella Space locking in contracts with major U.S. government clients, including the  U.S. Air Force and the National Reconnaissance Office (NRO). And the tech is ready to fly – it’ll be incorporated into Capella’s next six commercial satellites, which are set to fly starting in March.

 


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