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Main article: Venture Capital

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Corporate venture investment climbs higher throughout 2018

21:00 | 22 September

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

Many corporations are pinning their futures on their venture investment portfolios. If you can’t beat startups at the innovation game, go into business with them as financial partners.

Though many technology companies have robust venture investment initiatives—Alphabet’s venture funding universe and Intel Capital’s prolific approach to startup investment come to mind—other corporations are just now doubling down on venture investments.

Over the past several months, several big corporations committed additional capital to corporate investments. For example, defense firm Lockheed Martin added an additional $200 million to its in-house venture group back in June. Duck-represented insurance firm Aflac just bumped its corporate venture fund from $100 million to $250 million, and Cigna lust launched a $250 million fund of its own. This is to say nothing of financial vehicles like SoftBank’s truly enormous Vision Fund, into which the Japanese telecom giant invested $28 billion of its own capital.

And 2018 is on track to set a record for U.S. corporate involvement in venture deals. We come to this conclusion after analyzing corporate venture investment patterns of the top 100 publicly traded, U.S.-based companies (as ranked by market capitalizations at time of writing). The chart below shows that investing activity, broken out by stage, for each year since 2007.

A few things stick out in this chart.

The number of rounds these big corporations invest in is on track to set a new record in 2018. Keep in mind that there’s a little over one full quarter left in the year. And although the holidays tend to bring a modest slowdown in venture activity over time, there’s probably sufficient momentum to break prior records.

The other thing to note is that our subset of corporate investors have, over time, made more investments in seed and early-stage companies. In 2018 to date, seed and early-stage rounds account for over 60 percent of corporate venture deal flow, which may creep up as more rounds get reported. (There’s a documented reporting lag in angel, seed, and Series A deals in particular.) This is in line with the past couple of years.

Finally, we can view this chart as a kind of microcosm for blue-chip corporate risk attitudes over the past decade. It’s possible to see the fear and uncertainty of the 2008 financial crisis causing a pullback in risk capital investment.

Even though the crisis started in 2008, the stock market didn’t bottom out until 2009. You can see that bottom reflected in the low point of corporate venture investment activity. The economic recovery that followed, bolstered by cheap interest rates that ultimately yielded the slightly bloated and strung-out market for both public and private investors? We’re in the thick of it now.

Whereas most traditional venture firms are beholden to their limited partners, that investor base is often spread rather thinly between different pension funds, endowments, funds-of-funds, and high-net-worth family offices. With rare exception, corporate venture firms have just one investor: the corporation itself.

More often than not, that results in corporate venture investments being directionally aligned with corporate strategy. But corporations also invest in startups for the same reason garden-variety venture capitalists and angels do: to own a piece of the future.

A note on data

Our goal here was to develop as full a picture as possible of a corporation’s investing activity, which isn’t as straightforward as it sounds.

We started with a somewhat constrained dataset: the top 100 U.S.-based publicly traded companies, ranked by market capitalization at time of writing. We then traversed through each corporation’s network of sub-organizations as represented in Crunchbase data. This allowed us to collect not just the direct investments made by a given corporation, but investments made by its in-house venture funds and other subsidiaries as well.

It’s a similar method to what we did when investigating Alphabet’s investing universe. Using Alphabet as an example, we were able to capture its direct investments, plus the investments associated with its sub-organizations, and their sub-organizations in turn. Except instead of doing that for just one company, we did it for a list of 100.

This is by no means a perfect approach. It’s possible that corporations have venture arms listed in Crunchbase, but for one reason or another, the venture arm isn’t listed as a sub-organization of its corporate parent. Additionally, since most of the corporations on this list have a global presence despite being based in the United States, it’s likely that some of them make investments in foreign markets that don’t get reported.

 


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Mithril Capital Management, cofounded by Ajay Royan and Peter Thiel, is leaving the Bay Area

00:04 | 22 September

From its glass-lined offices in San Francisco’s leafy Presidio national park, six-year-old Mithril Capital Management has happily flown under the radar. Now it’s leaving altogether and relocating its team to Austin, a spot that has “enough critical mass of a technical culture, an artisanal culture, an artistic culture, and [is] not necessarily looking to Silicon Valley for validation,” says firm cofounder Ajay Royan.

The move isn’t a complete surprise. Royan, who cofounded the growth-stage investment firm in 2012 with renowned investor Peter Thiel, hasn’t done much in the way of public relations outside of announcing MIthril’s existence. Thiel and Royan — who’d previously been a managing director at Clarium Capital Management, Thiel’s hedge fund — largely travel in social circles outside of Silicon Valley. More important, the firm has always prided itself on finding startups that don’t fit the typical ideal of a Silicon Valley startup, too.

One of its newest bets, for example, is a nine-year-old dental robotics company in Miami, Fla. that says it performs implant surgery faster and more effectively, which is a surprisingly big market. More than 500,000 now receive implants each year.  “It was a hidden team, because it’s in Miami, and it was a field that was under invested in,” says Royan, noting that one of the few breakthrough companies in the dental world in recent years, Invisalign, which makes an alternative to braces, caters to a much younger demographic.

Even still, Mithril’s departure is interesting taken as a data point in a series of them that suggest that Silicon Valley may be losing some of its appeal for a variety of reasons. One of these is so-called groupthink, which had already driven Thiel to make Los Angeles his primary home. An even bigger factor: the unprecedentedly high cost of living. As The Economist reportedly in a recent story about the Bay Area’s narrowing lead over other tech hubs,  a median-priced home in the region costs $940,000, which is four-and-a-half times the American average. “It’s hard to imagine doing another startup in Silicon Valley; I don’t think I would,” said Jeremy Stoppelman, who cofounded the search and reviews site Yelp, took it public in 2012, and continues to lead the San Francisco-based company, to The Economist. Bay Area venture capitalists at TechCrunch’s recent Disrupt event also underscored the possibility that a shift is afoot.

Late last week, to learn more about Mithril’s move out of California and to get a general sense of how the firm is faring, we sat down with Royan at the space the firm will formally vacate next year, when its lease expires. We talked for several hours; some outtakes from that conversation, lightly edited for length, follow.

TC: You and I haven’t sat down together in years. When did you start thinking about re-locating the firm?

AR: In 2016. I started seeing a lot more correlation in the companies that we were seeing; they were looking more similar to each other than before, and the volume was going up as well. So to put that in context, 2017 was our largest volume in the pipeline, meaning the number of companies coming through the system. And it was also the year that we did the least number of investments. We made one investment, in Neocis [the aforementioned dental robotics company].

TC: You don’t think this owes to a lack of imagination by founders but rather serious flaws in the overarching way that startups get funded. 

AR: The problem is what I call time horizon compression. So a pension fund is supposed to invest on a 30-year time horizon, but if you look at the internal incentives, the bonuses are paid on an annual basis [and the investors making investing decisions on behalf of that pension] are evaluated every six months or every quarter. So you shouldn’t be surprised when people do really short-term things.

There are very short-term versions of investing in the private markets, as well. It’s the 15th AI company, or the 23rd big data company, or the 256th online-to-offline services company. A lot of the people making these investments are very smart. The question is: why are they funding these companies? And why are people starting them? I would suggest it’s because both are under tremendous time pressure, and pressure not to take real risk. If you’re really smart, and you’re told that you’ve got to make returns tomorrow and you can’t take a lot of risk, then you do a me-too company and you look for momentum funding and you try to get out as quickly as possible. It’s a perfectly rational response to bad incentives, and that’s part of what we started to see a lot of in Silicon Valley. I think you have a lot of it going on right now.

TC: It feels like the “getting out” part has become a problem. The IPO market has picked up, but it’s not exactly vibrant. Do you buy the argument that going public limits what a team can do because of public shareholder expectations?

AR: I think that’s fake. Private investors are maybe even more demanding than public investors, because we have material amounts invested generally. Certainly, we do at Mithril. When it comes to governance at our companies, it’s pretty tough, and we get a lot of insight into their activities. It’s not like a public board, where you get a quarterly meeting and a pretty presentation and then people go home.

I do think it’s risk budget and time horizon, bottom line. So the ability to take risks in ways that are not supported by historical models would be: if it goes well, people are happy; if it goes south, the public markets I don’t think will forgive you.

TC: What about Amazon, which went out early, lost money for years, was hammered by analysts, yet is now flirting with a $1 trillion market cap? 

AR: Amazon is like the sovereign exception that proves the rule. It’s like [Jeff Bezos] was structured to basically not care both in terms of governance, or he cared in the way that was actually constructive to building Amazon, which is, ‘I’m just going to keep reinvesting all my profits into things that I think are important, and you all can just wait,’ right? And not a lot of people have the intestinal fortitude to do that or the governance structure to sustain it.

TC: You’ve made some big bets on companies that have been around a while, including the surveillance technology company Palantir, which I recall is one of your biggest bets. How patient are your own investors?

AR: Palantir is still doing extremely well as a company. What’s interesting is 80 percent of our capital in [our first of three funds] is concentrated in, like, 10 companies. Our two biggest investments were Palantir and [the antibody discovery platform] Adimab [in New Hampshire], and I’d argue that Adamab is even bigger than Palantir. We actually helped them not go public in 2014 when they were thinking about it.

TC: How, and why was it better for the company to stay private? 

AR: Adimab was founded in 2007, so it was already seven years old when we encountered them. And I was looking for a company that would be not a drug company but instead [akin to] a technology company in biotech, and Adimab is that. The’ve built a custom-designed yeast whose DNA was redesigned based on the inputs from a multi-year study of about 120 human beings, I think at Harvard, where they assessed the immune responses of the humans to various diseases, then encoded what they understood about the human immune system into the yeast. So the yeast essentially are humanized proxies for the immune system.

TC: Which means . . . .

AR: You can attack the yeast with disease, and the antibodies the yeast produces are essentially human antibodies. Think of it as a biological computer that responds to disease vectors. We now have a database of 10 billion antibodies that we can use to figure out how best to interrogate the yeast for the next generation of diseases that needed an immunotherapy solution.

TC: Is the company profitable?

AR: It is. They don’t need any new money. We’ve just begun a program to help them restructure their cap table so they can take out early investors.

TC: An 11-year-old company. What about employees who are waiting to cash out?

AR: They want more stock, so we’ve created the equivalent of stock options that are tied to value creation.

A lot of biotech companies go public very early on. If Adimab had, they would have been under tremendous pressure to actually build a drug company. People would have said, ‘Hey, if you’re discovering all these antibodies and they’re empowering other people’s drugs, why don’t you just make your own drug?” But the founder, Tillman Gerngross, who’s also the head of bioengineering at Dartmouth, he doesn’t want to be in the position of having to sell or be under tremendous pressure [to create a drug company] when he thinks the full impact of what Adimab is building won’t be realized for another decade.

TC: In Austin, you’ll be closer to this company and some of your other portfolio companies. But are you really certain you want to leave sunny California?

AR: The cost of trying is what I’m worried about [here]. It’s that simple. That applies to people who are starting jobs in someone’s company, or trying to start a company themselves. If it’s expensive for the company to take risk, it’s going be expensive for you to take risk inside the company, which means your career will take a different path than than otherwise

After [I was an] undergrad at Yale, New York was a natural place to go, but I never worked there. It just felt like a place that was externally very pressurized. You had to conform to the external pressures that dictated your daily life. Your rent was $4,000 to $6,000 a month for craziness for like a walk-up in Hell’s Kitchen. Social structures were fairly set, like, you had to go to the Hamptons in the summer or something. There were these weird things that felt very dictated and you had to fit and you had to climb the pyramid schemes that people had established for you. Otherwise, you were out.

What made [Silicon Valley] really attractive was it was a one giant incubator as a society, with a lot of pay-it-forward forward culture and a low cost of trying. Now I’m worried about all three of those.

I’m not saying that just by moving, that gets fixed. That’s facile. But if you conclude that this is an issue that you need to think through, and try to find thoughtful ways to get around, you have to enlist every ally you can. And one of those allies might be reducing unidirectional environmental noise, and having more voices that you can listen to and being exposed to more lived experiences that are varied. . . It builds your capacity for empathy, and I think that’s important for good investing and being a good founder.

TC: What are your early impressions of Austin?

AJ: It’s a great town. Everyone’s been super friendly. I get to wear my cowboy boots. You can actually do a four-hour tour of food trucks without running out of food trucks. Also, most of the people I’ve met are registered Democrats and like, half of them own really nice guns. And these are not considered contradictory at all.

 


0

VCs say Silicon Valley isn’t the gold mine it used to be

00:01 | 22 September

In the days leading up to TechCrunch Disrupt SF 2018, The Economist published the cover story, ‘Why Startups Are Leaving Silicon Valley.’

The author outlined reasons why the Valley has “peaked.” Venture capital investors are deploying capital outside the Bay Area more than ever before. High-profile entrepreneurs and investors, Peter Thiel, for example, have left. Rising rents are making it impossible for new blood to make a living, let alone build businesses. And according to a recent survey, 46 percent of Bay Area residents want to get the hell out, an increase from 34 percent two years ago.

Needless to say, the future of Silicon Valley was top of mind on stage at Disrupt.

“It’s hard to make a difference in San Francisco as a single entrepreneur,” said J.D. Vance, the author of ‘Hillbilly Elegy’ and a managing partner at Revolution’s Rise of the Rest Fund, which backs seed-stage companies based outside Silicon Valley. “It’s not as a hard to make a difference as a successful entrepreneur in Columbus, Ohio.”

In conversation with Vance, Revolution CEO Steve Case said he’s noticed a “mega-trend” emerging. Founders from cities like Pittsburgh, Detroit or Portland are opting to stay in their hometowns instead of moving to U.S. innovation hubs like San Francisco.

“The sense that you have to be here or you can’t play is going to start diminishing.”

“We are seeing the beginnings of a slowing of what has been a brain drain the last 20 years,” Case said. “It’s not just watching where the capital flows, it’s watching where the talent flows. And the sense that you have to be here or you can’t play is going to start diminishing.”

J.D. Vance says that most entrepreneurs don't need to move to Silicon Valley.

Here's why.

pic.twitter.com/0mFPeTuHLe

— TechCrunch (@TechCrunch)

Farewell, San Francisco

“It’s too expensive to live here,” said Aileen Lee, the founder of seed-stage VC firm Cowboy Ventures, amid a conversation with leading venture capitalists Spark Capital general partner Megan Quinn and Benchmark general partner Sarah Tavel .

“I know that there are a lot of people in the Bay Area that are trying to work on that problem and I hope that they are successful,” Lee added. “It’s an amazing place to live and we’ve made it really challenging for people to live here and not worry about making ends meet.”

One of Cowboy’s portfolio companies opted to relocate from Silicon Valley to Colorado when it came time to scale their business. That kind of move would’ve historically been seen as a failure. Today, it may be a sign of strong business acumen.

Quinn said that of all 28 of Spark’s growth-stage portfolio companies, Raleigh, North Carolina-based Pendo has the easiest time recruiting folks locally and from the Bay Area.

She advises her Bay Area-based late-stage companies to open a second office outside of the Valley where lower-cost talent is available.

“We often say go to [flySFO.com], draw a three-hour circle around San Francisco where they have direct flights, find a city that has a university and open up a second office as quickly as possible,” Quinn said.

Still, all three firms invest in a lot of companies based in San Francisco. Of Benchmark’s 10 most recent investments, for example, eight were based in SF, according to Crunchbase.

“I used to believe really strongly if you wanted to build a multi-billion dollar company you had to be based here,” Tavel said. “I’ve stopped giving that soap speech.”

Aileen Lee (Cowboy Ventures), Megan Quinn (Spark Capital), and Sarah Tavel (Benchmark Capital) on whether or not Silicon Valley is on the wane for investors

pic.twitter.com/SOpn7p0eNQ

— TechCrunch (@TechCrunch)

Underestimated talent

A lot of Bay Area VCs have been blind to the droves of tech talent located outside the region. Believe it or not, there are great engineers in America’s small- and medium-sized markets too.

At Disrupt, Backstage Capital founder Arlan Hamilton announced the firm would launch an accelerator to further amplify companies led by underestimated founders. The program will have cohorts based in four cities; San Francisco was noticeably absent from that list.

Instead, the firm, which invests in underrepresented founders and recently raised a $36 million fund, will work with companies in Philadelphia, Los Angeles, London and one more city, which will be determined by a public vote. Aniyia Williams, the founder of Tinsel and Black & Brown Founders, will spearhead the Philadelphia effort.

“For us, it’s about closing that wealth gap to address inequity in tech,” Williams said. “There needs to be more active participation from everyone.”

Hamilton added that for her, the tech talent in LA and London is undeniable.

“There is a lot of money and a lot of investors … it reminds me of three years ago in Silicon Valley,” Hamilton said.

Silicon Valley vs. China

Silicon Valley’s demise may not be just as a result of increased costs of living or investors overlooking talent in other geographies. It may be because of heightened competition abroad.

Doug Leone, an early- and growth-stage investor at Sequoia Capital, said at Disrupt that he’s noticed a very different work ethic in China.

Chinese entrepreneurs, he explained, are more ruthless than their American counterparts and they’re putting in a whole lot more hours.

Doug Leone of Sequoia Capital says founders in the US and China both want to change the world, but Chinese founders are a little more desperate (and you see it in the crazy work ethic they have).

pic.twitter.com/dPxsRTbJoq

— TechCrunch (@TechCrunch)

“I’ve had dinner in China until after 10 p.m. and people go to work after 10 p.m.,” Leone recalled.

“We don’t see that in the U.S. I’m not saying the U.S. founders oughta do that but those are the differences. They are similar in character. They are similar in dreams. They are similar in how they want to change the world. They are ultra-driven … The Chinese founders have a half other gear because I think they are a little more desperate.”

Much of this, however, has been said before and still, somehow, Silicon Valley remained the place to be for investors and startup entrepreneurs.

The reality is, those engaged in tech culture are always anxiously awaiting for the bubble to pop, the market to crash and for “peak Valley” to finally arrive.

Maybe, just maybe, Silicon Valley is forever.

Here’s more of our coverage of Disrupt 2018.

 


0

Eight Roads Ventures targets Southeast Asia deals

11:24 | 21 September

Eight Roads Ventures, the investment arm of financial giant Fidelity International, is moving into Southeast Asia where it sees the potential to plug the later stage investment gap.

The firm has funds across the world including the U.S, China and Europe, and it has invested nearly $6 billion in deals over the past decade. The firm has been active lately — it launched a new $375 million fund for Europe and Israeli earlier this year — and now it has opened an office in Singapore, where its managing partner for Asia, Raj Dugar, has relocated to from India.

The firm said it plans to make early-growth and growth stage investments of up to $30 million, predominantly around Series B, Series C and Series D deals. The focus of those checks will be startups in the technology, healthcare, consumer and financial services spaces. Already, it has three investments across Southeast Asia — including virtual credit card startup Akulaku, Eywa Pharma and fintech company Silot.

There’s a huge amount of optimism around technology and startups in Southeast Asia, where there’s an emerging middle-class and access to the internet is growing. A report from Google and Singapore sovereign fund Temasek forecasted that the region’s ‘online economy’ will grow to reach more than $200 billion. It was estimated to have hit $49.5 billion in 2017, up from $30.8 million the previous year.

Despite a growing market, investment has focused on early stages. A number of VC firms have launched newer and larger funds that cover Series B deals — including Openspace Ventures and Golden Gate Ventures — but there remains a gap further down the funding line and Eight Roads could be a firm that can help fill it.

“Southeast Asia has several early-stage and late-stage funds that cater well to the start-ups and more mature companies. The growth-stage companies, looking at raising Series B/C/D rounds have had limited access to capital given the lack of global funds operating in the region. We see phenomenal opportunity in this segment, and look forward to helping entrepreneurs as they scale their business, providing access to our global network of expertise and contacts,” Eightroad’s Dugar said in a statement.

 


0

Jamie Burke to explain why you should still bet on the blockchain at Disrupt Berlin

10:27 | 20 September

Now that your cousin doesn’t ask you questions about bitcoin anymore, is it the end of all things blockchain? Maybe it just means that it’s time to think about innovating at the protocol level and come up with new use cases. That’s why I’m excited to announce that Outlier Ventures CEO and founder Jamie Burke will join us at TechCrunch Disrupt Berlin.

Burke bet on the blockchain industry quite early as he set up Outlier Ventures back in 2013. The firm’s investment strategy is much more interesting than your average investment thesis.

According to Burke, blockchain is key when it comes to decentralization. At some point, the web and the internet became too centralized. Most people now spend their time on social networks and other walled gardens.

This isn’t the first centralization wave. Web portals and AOL’s navigator have more or less disappeared. But the same thing seems to be happening with Facebook, Twitter, YouTube and other platforms — they can’t moderate everything even though they algorithmically promote the wrong things.

And it all comes down to trust. Tech CEOs have attracted so much power that they can control your mood or your opinion by tweaking a couple of settings. By building deep tech projects on top of some sort of blockchain, those projects become decentralized. A small group of tech CEOs can’t decide for everyone.

And this applies to IoT, AI and robotics startups. These startups will need a strong set of moral rules. And the best way to build this language is by building a decentralized infrastructure layer.

If you think those are fascinating questions that we should talk about today (and not in ten years), then you should come to Disrupt Berlin to listen to Jamie Burke .

Buy your ticket to Disrupt Berlin to listen to this discussion and many others. The conference will take place on November 29-30.

In addition to fireside chats and panels, like this one, new startups will participate in the Startup Battlefield Europe to win the highly coveted Battlefield cup.


Jamie Burke

CEO and Founder, Outlier Ventures

Jamie is CEO of Outlier Ventures, Europe's first blockchain venture capital firm, set up in 2013. Since then he has pioneered the convergence thesis that views blockchain as foundational to Deep Tech like AI, AR / VR, IoT and 3D printing scaling securely and eventually converging. As a global thought leader, he assists startups and corporations on the space with an emphasis on AI, Industry 4.0, Smart Cities & Mobility.

 


0

India’s Livspace raises $70M for its one-stop-shop for interior design

05:46 | 20 September

Livspace, an India-based startup that helps consumers manage home renovations and interior design, has pulled in a $70 million Series C deal that’s led by Goldman Sachs and TPG Growth.

Existing investors Jungle Ventures, Bessemer Venture Partners, and Helion Ventures also took part in the round, which takes Livspace total funding to date to around $97 million. The deal follows Goldman’s involvement in fintech startup Jumo’s recent $52 million round, while TPG Growth recently hired former Twitter Asia head Shailesh Rao to lead its business in India and Southeast Asia.

Livspace was founded by former Googler Anuj Srivastava and Ramakant Sharma, who has spent time with Myntra and Jungle Ventures among others, in 2015. The business aims to be a one-stop-shop for home interior design — whether that be renovations or new home design. That makes it an e-commerce business that integrates multiple pieces of the interior ecosystem: consumers, designers and the supply chain.

For that reason, Livspace is an inherently local business. Interior designers need to be local to customers and supply chain partners need to have the capacity to ship to a location, too, but Livspace actually goes beyond that by mapping buildings in a city to enable virtual mockups and 3D models to be rendered to help show a consumer a compelling preview of what their home could look like. The company also operates brick and mortar ‘Design Centers’ where consumers can touch and see materials and furniture, while the centers also operate as a location for designers and consumers to meet up if needed.

The company is currently present in seven cities in India. With this money in the bank, the plan is to expand to reach 13 cities in India by the end of next year but it’s ambitions go beyond its founders’ home country.

In an interview with TechCrunch, Srivastava said that he sees an opportunity to grow the business not just in Asia but also western markets where, to date, there are no integrated solutions such as Livspace.

“The industry has suffered from chaos,” he said. “There’s little to no aggregation on supply and demand, and there is significant opportunity for tech-based platform to unite consumers, agents and the supply chain market.

“We have focused so far on doing one market really, really, well,” he added. “We wanted to make sure you can knock it out of the park first.”

So far so good. Livspace says it is on track to reach $100 million in annualized gross revenue by March 2019. Srivastava said it has outfitted 5,000-6,000 houses so far with 1,200-1,500 projects in its system at any one time.

Consumers, of course, shop around for deals and the completion rate of projects is at around one-third, Srivastava said, with an average of about $15,000 per consumer. Of that, the take rate for Livspace is around 40 percent with seven percent for the designer. The company claims to have around 25,000 designers on the platform but less than 10 percent of all applicants are approved to ensure quality and expertise.

Through Livspace, Srivastava claims designers can massively boost their income, typically by around 2X. He argues that is not only because the rates earned are higher, but also because average project time is reduced from multiple-months to just 12-14 weeks. That means designers can also operate more efficiently.

Financially, Srivastava said he believes the business model itself can scale and that there is clear “path to profitability” particularly if the company can expand internationally.

“We started monetizing in India but we have our eyes set on every single other similar market in the planet. We’ll get there in time,” he said.

 


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Entrepreneurs: It’s time to put corporate VCs back on your short list

00:00 | 20 September

Gil Beyda Contributor
Gil Beyda is a partner at Comcast Ventures.

The startup media is awash with stories of corporate venture capital prioritizing their own interests over those of their portfolio. While acknowledging that some of these stories may have a basis in truth, it’s critical to recognize there is much more to the story.

It’s time the whole story is told.

The truth is that not all corporate venture capital firms are the same. And in fact, some have a strategic advantage because they have access to proprietary insights from dozens of markets and technologies that are simply unavailable to other venture capital firms. Further, corporate venture capital firms can create synergies between portfolio companies and their parent companies to help accelerate business, an opportunity unavailable to most venture capital firms.

Choosing between strategically focused and financially focused corporate venture capital

There are two types of corporate venture capital, and it’s essential to understand the difference between them. The first type, strategically focused corporate venture capital, provides significant benefits to all parties if done well. These firms can help accelerate portfolio companies with revenue, market/customer insights and technology/roadmap development.

The second type is financially focused corporate venture capital. These firms are run like typical venture firms and are primarily driven to maximize financial returns, and the firm’s partners are rewarded for making profitable investments. These firms make investment decisions just like every other non-corporate venture firm, based on team, market, competition, product, traction, capital efficiency, exit potential, etc.

Once an investment is made, financially focused corporate venture capital firms often take board seats and work to add value in all the same ways other venture firms do, with strategy, product, go-to-market, hiring, financials, etc. Because the financially focused corporate venture partners are financially aligned with their portfolio companies, they are just as motivated as any other venture firm.

Not all corporate venture capital firms are the same.

Now, the upshot. In many cases, a financially focused corporate venture capital firm can be a better partner for some companies. Not only does the firm provide all the typical value-add of a typical venture firm — smart partners, large networks, etc. — they also provide something that other firms can’t provide: proprietary insights.

Financially focused corporate venture firms have a close working relationship with their corporate parent, which allows them access to technology, industry operators and visionaries, giving them proprietary insights to which normal venture firms simply don’t have access. These proprietary insights give financially focused corporate venture capital partners the ability to see the market and technology landscape in a different, more informed, way.

The bottom line is that financially focused corporate venture capital firms have all the benefits of a typical venture firm plus exclusive proprietary insights — without the potential downside of strategically driven corporate venture capital firms.

The truth about corporate venture capital and competition with the parent company

One obvious objection to corporate venture capital is that these firms are unlikely to invest in companies that compete with its parent or may put it out of business. These cases are so rare that it is barely worth mentioning, but I will explore them here. Comcast and NBCUniversal are large companies doing business across a wide variety of sectors. It is unlikely that any one startup would put them out of business. In my 10 years in venture, I haven’t found one yet.

But what about startups that are competitive with Comcast or NBCUniversal? I have seen thousands of startups over the years and have only come across a handful that are competitive with Comcast or NBCUniversal. In those cases, even though I would not have ever communicated confidential information to my parent, I quickly passed so as not to give even the smallest impression of impropriety. In some cases, the competitive startup and our parent see a benefit to making the investment and learning from and partnering with each other, but this is done transparently.

By the way, most venture capital firms restrict themselves from investing in companies that are competitive with their portfolio. However, there are some venture capital firms that take a more “survival of the fittest” approach and encourage making many investments in a hot space without concern for competition.

Corporate venture capital at work in the real world

To illustrate the advantages of working with a financially focused corporate venture capital firm, let’s look at a real example — my investment in blockchain. Comcast is looking at using blockchain technology to allow users to create a unique digital identity and associate it with IoT devices in the home to control access to those devices. Given my affiliation and close working relationship with Comcast Corporation and NBCUniversal, I was afforded a front-row seat to the potential advantages and disadvantages of leveraging cutting-edge blockchain technology to solve real-world problems.

No other venture capital firm has this level of access to early use cases. Here’s what that looked like: I met with the team developing this technology before it was made public. I spoke with the engineers to understand how they were using blockchain, why they chose it and how it helped their efforts. I saw a demo and got to play with it. This hands-on experience was invaluable to blockchain executives — and it was only afforded to “members of the Comcast family.” Further, the insight also helped inform my investment thesis around blockchain, so I could better serve their business interests.

It comes down to real-world problems, being solved by real-world practitioners.

There are many applications of blockchain technology. Another group within Comcast is looking at how blockchain could be used in advertising. Beyond that, Comcast and NBCUniversal are looking at blockchain technology and how it relates to identity, rewards and loyalty, security and IoT, to name a few.

It comes down to real-world problems, being solved by real-world practitioners, who are experimenting with blockchain. These proprietary insights have been helping drive our investment strategy in blockchain technologies and token-based economies. We have already made a number of investments in the space and continue to believe there are investment opportunities at the protocol, platform, infrastructure and application levels.

Outside of blockchain, there are a number of examples within Comcast Ventures that also show advantages of leveraging resources at a corporate venture capital firm: EdgeConneX successfully pivoted its business model with the help of Comcast; Brightside was incubated and spun out, securing Comcast as its first customer; Zola developed partnership opportunities with NBCU; Comcast became one of DocuSign’s largest customers; and Icontrol was acquired by Comcast.

Setting the record straight

Financially focused corporate venture firms have super-talented partners in the firm who can help entrepreneurs build great companies. Just like other venture capital firms, we are financially incented to find the next billion-dollar company, and we invest in your strategy, not ours.

But unlike other venture capital firms, we have exclusive proprietary insights into dozens of markets and technologies. And, we also can create synergies between portfolio companies and Comcast and NBCUniversal to help accelerate growth if there is mutual interest and benefit. Finally, we are measured on financial returns, so we win only if you win!

Disclaimer: Gil Beyda is a partner at Comcast Ventures, a financially focused corporate venture capital firm which is the venture arm of Comcast and NBCUniversal.

 


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Wove raises $9M to help companies form strategic marketing partnerships

18:00 | 19 September

After rebranding earlier this year and scrapping pretty much their whole mobile ads business, Wove, formerly known as TapFwd, has a fresh plan to disrupt the marketing industry.

Co-founders Eddie Siegel and Alex Wasserman have built what they call a brand collaboration network, a new way for companies to form marketing partnerships with similar brands. They say sourcing and closing a deal with another company on Wove is as easy as sending a Facebook friend request.

“Marketers don’t want to sell data with each other and they don’t want to share data with each other,” Siegel told TechCrunch. “They want to grow their core business and leverage their data assets without having to share it with another company, and they need a third party network to form these partnerships.”

With the launch of their latest product comes new money: Wove has raised $9 million in a round led by August Capital, with participation from new investors Origin Ventures, Walmart’s SVP of U.S. e-commerce Anthony Soohoo, Canaan Partners general partner Deepak Kamra and existing investors Partech Partners, Angel Pad and Tekton Ventures. Partech previously led TapFwd’s $3 million seed round.

To develop a marketing partnership with Wove, a company has to sign up and pay an annual fee. Once you have an account, Wove will make recommendations of companies — other Wove users — to work with based on their market and/or customer demographic. When a pair of companies express mutual interest, Wove handles the execution and measures the effectiveness of the partnership with its suite of digital tools built into the platform.

Here’s an example of a hypothetical partnership born out of Wove: A dog-walking startup like Wag logs onto Wove and is matched with Ollie, a dog food startup. The pair agree to set up a short-term promotion, providing discounts to Ollie customers if they set up a Wag account and vice versa. Wove then negotiates the terms of the partnership, develops the promotional materials and ultimately determines how well that partnership bolstered both businesses. 

The idea for this marketing matchmaking service came, Siegel says, came from TapFwd’s customers.

“We got here because our customers pulled us over here,” Siegel said. “This originally grew as a pretty organic side project and now we are catching up to the customer demand. We have a lot more demand than we can service.”

With the $9 million investment, the San Francisco-based startup, which counts HotelTonight, Turo and Winc as customers, plans to scale its engineering team. As part of the round, August Capital’s Howard Hartenbaum has joined the startup’s board of directors.

 


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‘Brotopia’ inspired OODA Health to raise its $40.5M round only from firm’s with female partners

10:01 | 19 September

It’s never particularly easy to raise a round of venture capital — but I think most experienced founders will tell you its not quite as bad the second or third time around, when you’ve got some experience under your belt and a track record to present to VCs.

It helps if you’re male too, at least according to all the data out there on the gender funding gap in VC.

The leadership team at OODA Health, a startup developing technology to make the U.S. healthcare payment system more efficient, is both male and experienced. But unlike most companies of that nature, OODA decided to raise money for the business only from VC firms that have at least one female leader, a solution to one of tech’s greatest problems that is oft suggested and rarely executed.

“‘Brotopia’ really hit me hard,” OODA Health co-founder and CEO Giovanni Colella told TechCrunch.

Colella is the founder and former CEO of Castlight Health, which raised nearly $200 million in VC funding before going public on the NYSE in 2014. Co-founder and COO Seth Cohen is Castlight’s former VP of sales and alliances and co-founder and CTO Usama Fayyad is the former global chief data officer at Barclays and Yahoo .

The trio ultimately landed on lead investors Annie Lamont of Oak HC/FT and Emily Melton of DFJ, both of which have joined the company’s board of directors.

We have a responsibility of setting an example,” Colella said. “There is no machismo in what we’ve done. We are not better than you because we did it. We were blessed. We had more investors that wanted to invest than we could accommodate.”

Though the company’s c-suite is occupied by men, Cohen and Colella were quick to clarify that the rest of their founding team, head of operations Julie Skaff, head of product Sophie Pinkard and director of product strategy Midori Uehara, are women.

The team began working on OODA Health last year after Colella and Cohen agreed to build something that would upend the healthcare industry. Healthcare, they realized, is at least 20 years behind the advances in financial tech.

The pair said their real aha moment was when they learned even insurance companies — the real laggards — are ready to be rid of the slow, futile billing and payment methods that accompany any and every doctor and hospital visit.

“The idea of submitting a claim and not knowing when you are going to get reimbursed or get a bill, that has been the same for decades,” Cohen told TechCrunch. “Imagine, today, if you took a Visa card and you went to a restaurant … and then a month later received a bill, that’s how healthcare works.”

If OODA has their way, paying for a doctor’s visit will be more like paying for a hotel. You’re told upfront what you owe and you work exclusively with the insurance company to make that payment. And in this idyllic future, you won’t receive an “explanation of benefits” notice in the mail as well as a bill and subsequently fall into a downward spiral of confusion, stress and frustration.

Headquartered in San Francisco, OODA has teamed with several big-name insurance providers, including Anthem, Blue Cross Blue Shield of Arizona, Blue Shield of California, Zaffre Investments, Dignity Health and Hill Physicians to make this happen.

As far as lifting up women in VC, that’s purely been a side benefit of the overall operation.

“At the end of the day, we found two of the best investors to back us,” Cohen said.

 


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Amplify Partners locks in $200 million to transform technical founders into people who can actually lead a startup

23:05 | 18 September

Sunil Dhaliwal has had a solid run in his 20 years so far as a VC. Just two years out of Georgetown, Dhaliwal landed at Battery Ventures, a highly regarded venture firm. Fifteen years later, in 2012, he struck out on his own, creating Amplify Partners. It wasn’t so easy at first. His first fund required 18 months of on-again, off-again fundraising before closing with $49.1 million in capital commitments. But things have picked up substantially since. In fact, today, Amplify, once a micro fund, is taking the wraps off a third fund that it just closed with $200 million.

Some early bets made this newest fund much easier to raise than even its second fund, which closed with $125 million in 2015.

In addition to Dhaliwal’s personal track record, which includes leading deals at Battery like Netezza, acquired by IBM, and CipherTrust, acquired by Secure Computing,  Amplify has already seen four of its portfolio companies get acquired, including: the breach-detection software company LightCyber, which sold last year to Palo Alto Networks for $105 million; the sale of Conjur, which made DevOps security software, to publicly traded CyberArk Software last year for $42 million in cash;  the sale of the app development service Buddybuild to Apple (for undisclosed terms); and the sale of AppNeta, an end-user experience performance monitoring startup, to the private equity firm Rubicon Technology Partners.

Two others portfolio companies, which represent the firm’s biggest bets, look like they could eventually represent even bigger outcomes for the firm: Fastly, which operates a content delivery network to speed up web requests, is already talking about going public, after raising $220 million from investors over the last few years. Meanwhile, DataDog, which offers monitoring and analytics for cloud-based workflows, said five months ago that it had already surpassed $100 million in recurring revenue and that it has been doubling that amount every year so far.

A growing team has helped, too. In addition to David Beyer, a cofounder of Chartio who joined as a principal early on and is today a partner with Amplify, the firm features general partner Mike Dauber, who, like Dhaliwal, previously worked at Battery; partner Lenny Pruss, who was previously principal with Redpoint Ventures; principals Lisha Li and Sarah Catanzano. Li has a PhD from UC Berkeley and worked previously as a data scientist at both Pinterest and Stitch Fix; Catanzano was previously head of data at Mattermark and, before that, as a data partner at the venture firm Canvas Ventures.

Yet perhaps most helpful, Amplify would argue, is the opportunity it is chasing, which is broadly: distributed computing and developer-centric and data analytics companies, because they increasingly cheaper to launch, and they get their products into the hands of technical buyers faster than ever. In fact, roughly 80 percent of the teams with which Amplify is working are led by first-time founders and 90 percent of these are “hyper technical domain experts” who Amplify aims to help evolve from “technical founders to just founders and CEOs who know how to build out a organization,” says Dhaliwal on a call yesterday.

It’s become increasingly competitive for some of that talent, Dhaliwal acknowledged. But staking out Amplify’s territory from the get-go has helped, he suggests. “We work with technical founders on novel applications of computer science at the seed and Series A stages. When you draw a box around that, a lot of people will gladly identify out. Some will say, ‘You really aren’t me.’ But for others who do self-identify, it’s clearly a fit on both sides. We tend to have a deep and powerful connection early on.”

Amplify, which writes checks ranging from $500,000 to upwards of $10 million, has backed roughly 50 companies to date. You can check out its porfolio here.

 


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