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Main article: Business incubators

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TLcom Capital closes $71M Africa fund with plans to back 12 startups

12:00 | 5 February

VC firm TLcom Capital has closed its Tide Africa Fund at $71 million with plans to make up to 12 startup investments over the next 18 months.

The group —  with offices in London, Lagos, and Nairobi — is looking for tech enabled, revenue driven ventures in Africa from seed-stage to Series B, according to TLcom Managing Partner Maurizio Caio.

“We’re rather sector agnostic, but right now we are looking at companies that are more infrastructure type tech rather than super commoditized things like consumer lending,” he told TechCrunch on a call.

On geographic scope, TLcom Capital will focus primarily on startups in Africa’s big-three tech hubs — Nigeria, Kenya, South Africa — but is also eyeing rising markets, such as Ethiopia.

Part of the fund’s investment approach, according to Caio, is backing viable companies with strong founders and then staying out of the way.

“We are venture capitalists that believe in looking at Africa as an investment opportunity that empowers local entrepreneurs without…coming in and explaining what to do,” said Caio.

TLcom’s team includes Caio (who’s Italian), partners Ido Sum and Andreata Muforo (from Zimbabwe) and senior partner Omobola Johnson, the former Minister of Communication Technology in Nigeria.

Speaking at TechCrunch Disrupt Berlin in 2018, Johnson offered perspective on next startups in Africa that could reach billion-dollar valuations. “When I look at the African market I suspect it’s going to be a company that’s very much focused on business to business and business to very small business — a company that can that can solve their challenges,” she said.

Omobola Johonson

Omobola Johnson

TLcom’s current Africa portfolio reflects startups similar to what Johnson described. The fund has invested in Nigerian trucking logistics venture Kobo360, which is working to reduce business delivery costs in Africa.

TLcom has also backed Kenya’s Twiga Foods, a B2B food distribution company aimed a improving supply-chain operations around agricultural products and fast-moving-consumer-goods for farmers and SMEs.

Both of these companies have gone on to expand in Africa and receive subsequent investment by U.S. investment bank, Goldman Sachs .

Other investments for TLcom include talent accelerator Andela  — which trains and places African software engineers — and Ulesson, the latest venture of serial founder Sim Shagaya.

The firm’s close of the $71 million Tide Africa Fund comes on the high-end of a several-year mobilization of capital for the continent’s startup scene. Investment shops specifically focused on Africa have been on the rise. A TechCrunch and Crunchbase study in 2018 tracked 51 viable Africa specific VC funds globally, TLcom included.

This trend has moved in tandem with a quadrupling of venture funding for the continent over the past six years. Accurately measuring VC for Africa is a work in progress, but one of the earlier reliable estimates placed it at just over $400 million in 2014. Recent stats released by Partech peg Africa focused VC funding at over $2 billion for 2019.

TLcom’s listed in a number of the larger rounds that made up Partech’s tally.

The fund’s latest $71 million raise, which included support from Sango Capital and IFC, reversed the roles a bit for TLcom founder Maurizio Caio.

The VC principal — who usually gets pitches from African startups — needed to sell the value of African tech to other investors.

“It’s been tough to raise the fund, there’s no doubt about it,” Caio said. TLcom highlighted its past exit record and the viability of the African market and founders to bring investors on board.

“We had the advantage of showing some good exits…The emphasis was also on the gigantic size of these markets that are underserved, the role that technology can play, and the fact that the entrepreneurs in Africa are just as good as anywhere else,” said Caio.

He also referenced African startups being constrained by the social impact factors often placed on them from outside investors.

“The equation is not just about ensuring employment and inclusion, but also about the fact that African entrepreneurs have to be in charge of their own destiny without instructions from the West,” he said.

For those startups who wish to pitch to TLcom Capital, Caio encouraged founders to contact one of the fund’s partners and share a value proposition. “If it’s something we find vaguely interesting, we’ll make a decision,” he said.

 


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The case for cooperative tech startups

20:33 | 2 February

When Uber and Lyft went public, it wasn’t the drivers who got rich — it was the executives, investors and some early employees. In an era when it has become clear that tech executives and investors are frequently the only ones who’ll reap rewards for a company’s success, cooperative startups are getting more attention.

Depending on how it’s set up, a cooperative model offers workers and users true ownership and control in a company; any profits that are generated are returned to the members or reinvested in the company.

Co-ops aren’t new: The nation’s longest-running example is The Philadelphia Contributionship, a mutually owned insurance company founded by Benjamin Franklin in 1752. In 1895, the International Co-operative Alliance formed to serve as a way to unite cooperatives across the world. Some colleges have student-run housing co-ops where cleaning, food preparation and other responsibilities are shared. Today, there are many well-known large-scale co-ops, including outdoor recreation store REI, Arizmendi Bakery in San Francisco and Blue Diamond Growers, one of the world’s largest tree-nut processors.

What’s novel, however, is applying the co-op model to technology startups. Start.coop, an accelerator for cooperative startups, is just one group trying to facilitate that practice.

 


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Techstars Detroit accelerator is shutting down

19:16 | 30 January

Techstars Detroit, the accelerator that has funded 54 startups in the past five years, is shutting down, TechCrunch has learned.

In an email to supporters, Techstars Detroit managing director Ted Serbinski said the accelerator was not able to secure enough funding for 2020.

“It’s clear the entire automotive mobility industry is tightening as sales slump and we hit the trough of disillusionment with autonomy,” Serbinski wrote in the email. The sales and business development piece of the accelerator is working to build a new program in Detroit if “great corporates can be found,” he added.

Techstars isn’t disappearing from Detroit altogether. The company has a presence through events like Startup Week and Startup Weekends. Serbinski will continue to support the 54 startups that have come out of the program. A number of these startups are working on Series A rounds.

Serbinski will continue to work at Techstars, this time running an accelerator program focused on “quality of life” startups.

An excerpt from Serbinksi’s email:

An experiment for Techstars, Detroit showed you could build a world-class program in an emerging market, in a hyper-competitive industry, that was going through a transformational change.

More importantly, the program proved that wonderful and talented mentors from around the region and globe would graciously support the founders. Truly, an incredible community formed around this program and region. It’s wonderful to see all the new activity as Detroit continues to grow in startup and VC activity.

Techstars Detroit began in 2015 as Techstars Mobility, a mentorship-driven accelerator program that was supported by numerous corporate and auto-focused backers including Ford, Honda, Lear and Nationwide as well as global partners such as Amazon’s AWS, Silicon Valley Bank and Microsoft for Startups. The intent was to bring attention and business into Detroit, a strategy that Serbinksi told TechCrunch was successful.

“The Detroit program was an experiment from the start,” Serbinski said in an interview Wednesday. “The experiment was could TechStars run an accelerator with multiple corporate partners in an emerging market that had a lot of potential, but a significant amount of unknowns? Over the last five years, it became clear that you can work with multiple corporates, you can be in a hyper competitive auto industry, Detroit has momentum and Silicon Valley isn’t waiting anymore. A lot of that proved out.”

Serbinksi’s portfolio is diverse and global. For instance, the startups in the portfolio are from 11 different countries and 40% have female founders. Of the 54 startups Techstars Detroit invested in, just one is from Detroit and two are from Michigan. Serbinksi added that he was not tied to a single thesis that “autonomy is going to take over today” and instead focused on what would work “today and tomorrow.” In other words, he didn’t heavily weight the portfolio with startups focused autonomous vehicle technology, which could take 10 to 15 years to turn into a product.

The portfolio has had success with less than 10% of startups shutting down. Some of the successful accelerator graduates include Cargo, Acerta and Wise.

In 2019, Serbinski announced the name was changing to Techstars Detroit to diversify even more. The new broader aim was to look for startups “transforming the intersection of the physical and digital worlds that can leverage the strengths of Detroit to succeed.” It could be more than just mobility.

“The word mobility was becoming too limiting,” Serbinksi wrote in a blog post at the time. “We knew we needed to reach a broader audience of entrepreneurs who may not label themselves as mobility but are great candidates for the program.”

Even as the accelerator diversified, Serbinski said, it was becoming more difficult to attract investments from the automotive industry.

“We were talking to a healthy amount of new partners for this year and all of those conversations went to zero,” he said. “I’m seeing a tightening of innovation budgets around automotive and mobility  because we’re entering that trough of disillusionment for autonomy. And so, with less accessible money, it made it a lot harder for us to fill in that gap.”

 


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All eyes are on the next liquidity event when it comes to space startups

04:28 | 30 January

At the FAA’s 23rd Annual Commercial Commercial Space Transportation Conference in Washington, DC on Wednesday, a panel dedicated to the topic of trends in VC around space startups touched on public vs. private funding, the right kinds of space companies that should even be considering venture funding, and, perhaps most notably, the big L: Liquidity.

Moderator Tess Hatch, Vice President at Bessemer Venture Partners, addressed the topic in response to an audience question that noted while we’ve heard a lot about how much money will flow into space-related startups from the VC community, we haven’t actually et seen much in the way of liquidity events that prove out the validity of these investments.

“In 2008, a company called Skybox was created and a handful of years later Google acquired the company for $500 million,” Hatch said. “Every venture capitalist’s ears perked up and they thought ‘Hey, that’s pretty good ROI in a short amount of time – maybe the space thing is an investable area’ and then a ton of venture capital investments flooded into space startups, and all of these venture capitalists made one, or maybe two investments in the area. Since then, there have not been many — if any – liquidity events: Perhaps Virgin Galactic going public via the SPAC (special uprose vehicle) on the New York Stock Exchange late last year would be the second. So we’re still waiting; we’re still waiting for those exits, we are still waiting for companies to pave the path for the 400+ startups in the ecosystem to return our investment.”

Hatch added that she’s looking at a number of companies who have the potential to break this somewhat prolonged exit drought in 2020, including five who are either quite mature in terms of their development, naming SpaceX, Rocket Lab, Planet and Spire as all likely candidates to have some kind of liquidity event in 2020, with the mostly likely being an IPO.

Space as an industry was described to me recently as a ‘maturing’ startup market by Space Angels CEO Chad Anderson, by virtue of the distribution of activity in terms of the overall investment rounds in the sector. There is indeed a lot of activity with early stage companies and seed rounds, but the fact remains that there hasn’t been much in the way of exits, and it’s also worth pointing out that corporate VCs haven’t been as acquisitive in space as some of their consumer and enterprise technology counterparts.

The panel touched on a lot more apart from liquidity, which actually only came up towards the end of the discussion, which included panelists Astranis CEO and co-founder John Gedmark; Capella Space CEO and founder Payam Banazadeh and Rocket Lab VP of Global Commercial Launch Services Shane Fleming. Both Gedmark and Banazadeh addressed aspects of the risks and benefits of seeking VC as a space technology company.

“Not every space business is a venture-backable business,” said Banazadeh earlier in the conversation. “But there are a lot of space businesses that are specifically going after raising venture money, and that’s dangerous for everyone – because at the end of the day venture is looking at high risk, high return. The ‘high return’ comes from being able to get substantial amount of revenue in a market that’s big
enough for those revenues to be coming from. But if your idea is to go build, maybe, some very specific part in a satellite, then you have to make the case of why you’ll be able to make those returns for the investors, and in a lot of cases, that’s just not possible.”

Banazadeh also concedes that doing any kind of space technology development is expensive, and the money has to come from somewhere. Gedmark talked about one popular source, government funding and grants, and why that often isn’t as obviously a positive thing for startups as it might seem.

“Small government grants can be great, and obviously a fantastic source of non dilutive capital,” Gedmark said. “But there is a little bit of a trick there, or something to be aware of: I think people are often surprised how much time is spent in the early days of a startup refining the exact idea and the product, and if you’re not certain that you have the that product market fit […] then, the government grant can be extremely dangerous, because they will fund you to do something that is sort of similar to what to what you’re doing, but it really prevents you changing your approach later; you’re going to end up spending time executing on the specific project of the program manager on the government side and you’re executing on what they want.”

VC funds, on the other hand, come with the built-in expectation that you’re going to refine and potentially even change direction altogether, Gedmark says. Depending on the terms of the public funding you’re seeking, that flexibility may not be part of the arrangement, which ultimately could be more important than a bit of equity dilution.

 


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Catalyst Fund gets $15M from JP Morgan, UK Aid to back 30 EM fintech startups

08:09 | 20 January

The Catalyst Fund has gained $15 million in new support from JP Morgan and UK Aid and will back 30 fintech startups in Africa, Asia, and Latin America over the next three years.

The Boston based accelerator provides mentorship and non-equity funding to early-stage tech ventures focused on driving financial inclusion in emerging and frontier markets.

That means connecting people who may not have access to basic financial services — like a bank account, credit or lending options — to those products.

Catalyst Fund will choose an annual cohort of 10 fintech startups in five designated countries: Kenya, Nigeria, South Africa, India and Mexico. Those selected will gain grant-funds and go through a six-month accelerator program. The details of that and how to apply are found here.

“We’re offering grants of up to $100,000 to early-stage companies, plus venture building support…and really…putting these companies on a path to product market fit,” Catalyst Fund Director Maelis Carraro told TechCrunch.

Program participants gain exposure to the fund’s investor networks and investor advisory committee, that include Accion and 500 Startups. With the $15 million Catalyst Fund will also make some additions to its network of global partners that support the accelerator program. Names will be forthcoming, but Carraro, was able to disclose that India’s Yes Bank and University of Cambridge are among them.

Catalyst fund has already accelerated 25 startups through its program. Companies, such as African payments venture ChipperCash and SokoWatch — an East African B2B e-commerce startup for informal retailers — have gone on to raise seven-figure rounds and expand to new markets.

Those are kinds of business moves Catalyst Fund aims to spur with its program. The accelerator was founded in 2016, backed by JP Morgan and the Bill & Melinda Gates Foundation.

Catalyst Fund is now supported and managed by Rockefeller Philanthropy Advisors and global tech consulting firm BFA.

African fintech startups have dominated the accelerator’s startups, comprising 56% of the portfolio into 2019.

That trend continued with Catalyst Fund’s most recent cohort, where five of six fintech ventures — Pesakit, Kwara, Cowrywise, Meerkat and Spoon — are African and one, agtech credit startup Farmart, operates in India.

The draw to Africa is because the continent demonstrates some of the greatest need for Catalyst Fund’s financial inclusion mission.

By several estimates, Africa is home to the largest share of the world’s unbanked population and has a sizable number of underbanked consumers and SMEs.

Roughly 66% of Sub-Saharan Africa’s 1 billion people don’t have a bank account, according to World Bank data.

Collectively, these numbers have led to the bulk of Africa’s VC funding going to thousands of fintech startups attempting to scale finance solutions on the continent.

Digital finance in Africa has also caught the attention of notable outside names. Twitter/Square CEO Jack Dorsey recently took an interest in Africa’s cryptocurrency potential and Wall Street giant Goldman Sachs has invested in fintech related startups on the continent.

This lends to the question of JP Morgan’s interests vis-a-vis Catalyst Fund and Africa’s financial sector.

For now, JP Morgan doesn’t have plans to invest directly in Africa startups and is taking a long-view in its support of the accelerator, according to Colleen Briggs — JP Morgan’s Head of Community Innovation

“We find financial health and financial inclusion is a…cornerstone for inclusive growth…For us if you care about a stable economy, you have to start with financial inclusion,” said Briggs, who also oversees the Catalyst Fund.

This take aligns with JP Morgan’s 2019 announcement of a $125 million, philanthropic, five-year global commitment to improve financial health in the U.S. and globally.

More recently, JP Morgan Chase posted some of the strongest financial results on Wall Street, with Q4 profits of $2.9 billion. It’ll be worth following if the company shifts any of its income-generating prowess to business and venture funding activities in Catalyst Fund markets like Nigeria, India and Mexico.

 


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Bolt raises €50M in venture debt from the EU to expand its ride-hailing business

14:30 | 16 January

Bolt, the billion-dollar startup out of Estonia that’s building a ride-hailing, scooter and food delivery business across Europe and Africa, has picked up a tranche of funding in its bid to take on Uber and the rest in the world of on-demand transportation.

The company has picked up €50 million (about $56 million) from the European Investment Bank to continue developing its technology and safety features, as well as to expand newer areas of its business such as food delivery and personal transport like e-scooters.

With this latest money, Bolt has raised over €250 million in funding since opening for business in 2013 and as of its last equity round in July 2019 (when it raised $67 million), it was valued at over $1 billion, which Bolt has confirmed to me remains the valuation here.

Bolt further said that its service now has over 30 million users in 150 cities and 35 countries and is profitable in two-thirds of its markets.

“Bolt is a good example of European excellence in tech and innovation. As you say, to stand still is to go backwards, and Bolt is never standing still,” said The EIB’s Vice President Alexander Stubb in a statement. “The Bank is very happy to support the company in improving its services, as well as allowing it to branch out into new service fields. In other words, we’re fully on board!”

The EIB is the non-profit, long-term lending arm of the European Union, and this financing in the form of a quasi-equity facility.

Also known as venture debt, the financing is structured as a loan, where repayment terms are based on a percentage of future revenue streams, and ownership is not diluted. The funding is backed in turn by the European Fund for Strategic Investments, as part of a bigger strategy to boost promising companies, and specifically riskier startups, in the tech industry. It expects to make and spur some €458.8 billion in investments across 1 million startups and SMEs.

Opting for “quasi-equity” loan instead of a straight equity or debt investment is attractive to Bolt for a couple of reasons. One is fact that the funding comes without ownership dilution is one attractive factor of the funding. Two is the endorsement and support of the EU itself, in a market category where tech disruptors have been known to run afoul of regulators and lawmakers, in part because of the ubiquity and nature of the transportation/mobility industry.

“Mobility is one of the areas where Europe will really benefit from a local champion who shares the values of European consumers and regulators,” said Martin Villig, the co-founder and CEO of Bolt, in a statement. :Therefore, we are thrilled to have the European Investment Bank join the ranks of Bolt’s backers as this enables us to move faster towards serving many more people in Europe.”

(Butting heads with authorities is something that Bolt is no stranger to: it tried to enter the lucrative London taxi market through a backdoor to bypass the waiting time to get a license. It really didn’t work, and the company had to wait another 21 months to come to London doing it by the book. In its first six months of operation in London, the company has picked up 1.5 million customers.)

While private VCs account for the majority of startup funding, backing from government groups is an interesting and strategic route for tech companies that are making waves in large industries that sit adjacent to technology. Before it was acquired by PayPal, IZettle also picked up a round from funding from the EIB specifically to invest in its AI R&D. Navya, the self-driving bus and shuttle startup, has also raised money from the EIB in the past.

One of the big issues with on-demand transportation companies has been its safety record — indeed, this is at the center of Uber’s latest scuffle in Europe, where London’s transport regulator has rejected a license renewal for the company over concerns about Uber’s safety record. (Uber is appealing and while it does, it’s business as usual. )

So it’s no surprise that with this funding, Bolt says that it will be specifically using the money to develop technology to “improve the safety, reliability and sustainability of its services while maintaining the high efficiency of the company’s operations.”

Bolt is one of a group of companies that have been hatched out of Estonia, which has worked to position itself as a leader in Europe’s tech industry as part of its own economic regeneration in the decades after existing as part of the Soviet Union (it formally left in 1990). The EIB has invested around €830 million in Estonian projects in the last five years.

“Estonia is as the forefront of digital transformation in Europe,” said Paolo Gentiloni, European Commissioner for the Economy, in a statement. “I am proud that Europe, through the Investment Plan, supports Estonian platform Bolt’s research and development strategy to create innovative and safe services that will enhance urban mobility.”

 


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Felix Capital closes $300M fund to double down on DTC, break into fintech and make late-stage deals

12:49 | 15 January

To kick off 2020, one of Europe’s newer — and more successful — investment firms has closed a fresh, oversubscribed fund, one sign that VC in the region will continue to run strong in the year ahead after startups across Europe raised some $35 billion in 2019. Felix Capital, the London firm founded by Frederic Court that was one of the earlier firms to identify and invest in the trend of direct-to-consumer businesses, has raised $300 million, money that it plans to use to continue investing in creative and consumer startups and platform plays as well as begin to tap into a newer area, fintech — specifically startups that are focused on consumer finance. 

Felix up to now has focused mostly on earlier-stage investments — it now has $600 million under management and 32 companies in its portfolio in eight countries — based across both Europe and the US. Court said in an interview that a portion of this fund will now also go into later, growth rounds, both for companies that Felix has been backing for some time as well as newer faces.

As with the focus of the investments, the make-up of the fund itself has a strong European current: the majority of the LPs are European, Court noted. Although Asia is something it would like to tackle more in the future both as a market for its current portfolio and as an investment opportunity, he added, the firm has yet to invest into the region or substantially raise money from it.

Felix made its debut in 2015, founded by Court after a strong run at Advent Capital where he was involved in a number of big exits. While Court had been a strong player in enterprise software, Felix was a step-change for him into more of a primary focus on consumer startups focused on fashion, lifestyle and creative pursuits.

That has over the years included investing in companies like the breakout high-fashion marketplace Farfetch (which he started to back when still at Advent and is now public), Gwyneth Paltrow’s GOOP, the jewellery startup Mejuri, trend-watching HighSnobiety, and fitness startup Peloton (which has also IPO’d).

It’s not an altogether easygoing, vanilla list of cool stuff. Peloton and GOOP have had been mightily doused in

and sharky sentiments; and sometimes it even seems as if the brands themselves own and cultivate that image. As the saying goes, there’s no such thing as bad press, I guess.

Although it wasn’t something especially articulated in startup land at the time of Felix’s launch, what the firm was honing in on was a rising category of direct-to-consumer startups, essentially all in the area of e-commerce and building brands and businesses that were bypassing traditional retailers and retail channels to develop primary relationships with consumers through newer digital channels such as social media, messaging and email (alongside their own DTC websites). 

This is not all that the company has focused on, with investments into a range of platform businesses like corporate travel site TravelPerk, Amazon -backed food delivery juggernaut Deliveroo and Moonbug (a platform for children’s entertainment content), as well as increasingly later stage rounds (for example it was part of a $104 million round at TravelPerk; a $70 million round for marketplace-building service Mirakl; and $23 million for Mejuri.

Court’s track record prior to Felix, and the success of the current firm to date, are two likely reasons why this latest fund was oversubscribed, and why Court says it wants to further spread its wings into a wider range of areas and investment stages.

The interest in consumer finance is not such a large step away from these areas, when you consider that they are just the other side of the coin from e-commerce: saving money versus spending money.

“We see this as our prism of opportunity,” said Court. “Just as we had the intuition that there was a space for investors looking at [DTC]… we now think there is enough evidence that there is demand from consumers for new ways of dealing with money and personal finance.”

The firm has from the start operated with a board of advisors who also invest money through Felix while also holding down day jobs. They include the likes of executives from eBay, Facebook, and more. David Marcus –who Court backed when he built payments company Zong and eventually sold it to eBay before he went on to become a major mover and shaker at Facebook and is now has the possibly Sisyphean task of building Calibra — is on the list, but that has not translated into Felix dabbling in cryptocurrency.

“We are watching cryptocurrency, but if you take a Felix stance on the area, it’s only had one amazing brand so far, bitcoin,” said Court. “The rest, for a consumer, is very difficult to understand and access. It’s still really early, but I’ve got no doubt that there will be some things emerging, particularly around the idea of ‘invisible money.'”

 


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How startups fill the gap between revenue and investment

18:21 | 9 January

Joe Procopio Contributor
Joe Procopio is a multi-exit, multi-failure entrepreneur. Joe is currently building Spiffy, and previously sold Automated Insights, sold ExitEvent and built Intrepid Media.

I get tons of inbound from entrepreneurs and founders, from first-timers with an idea to CEOs with millions in annual revenue, and they all ask what basically boils down to the same question:

“I’ve taken my startup this far, how do I get the money to take it to the next level?”

In 20 years of building companies, roughly half of our companies have taken some form of investment to go after a much larger payoff than our existing revenue would allow. It wasn’t something we celebrated, it was something we felt was mandatory. In other words, there was no other way and outside funding became our best hope.

When you have revenue and you chase funding, you should know what you’re getting into and you should exhaust every other avenue before you decide that someone else’s money is a better bet than your customers’ money. 

Remember: the easier the path, the lesser the payoff. 

The easiest path: venture capital funding

I know it’s heresy to talk about how easy it is to raise money. It’s actually not, and I’ll be the first to admit it: your odds are poor, it’s going to take all your time and energy, and you’re going to be beholden to a bunch of people who have a different vision of your idea than you do.

But if you need scale money, this is the only shortcut.

Now, I say “scale money” because you should only be seeking VC money to scale your business, not establish it. The odds of getting funded for an idea with no current revenue and no current growth are infinitesimally slim. 

So let me start with some truth for the earliest of early-stagers. You’re going to have to walk a harder path, so keep reading.

If you do have revenue, the first thing you have to show a VC associate, the gatekeeper of the firm, is how your existing revenue is going to grow 10x to 100x over the next three to five years. This is standard VC math. 

I’ll leave it to others to debate the logic and/or fairness of the process. My point is that you can put any multiplier you want on zero revenue and the result will still be zero. Even if you’ve got $1,000 in monthly revenue, then that’s about $10,000 in annual revenue, and at best, at 100x, the investor is thinking you might be worth $1 million if all the stars align. 

Most VCs won’t touch a valuation that low unless you’ve got a track record. If you don’t, you’re kind of wasting your time putting a deck together. 

Don’t waste your time. Your startup is probably better than that. You just need to prove it.

The not-so-easy-path: find a rich person

 


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#ANGELS founding partner raises $25M for debut fund Moxxie Ventures

16:00 | 18 December

Katie Jacobs Stanton, a former Twitter executive and co-founder of the #ANGELS investment collective, has raised $25 million for her debut venture capital fund Moxxie Ventures.

As the sole general partner, she plans to invest between $250,000 and $500,000 in underrepresented and underestimated founders, Stanton tells TechCrunch, with a focus on “products that make life and work better.”

Stanton co-founded #ANGELS alongside Chloe Sladden, Jessica Verrilli, April Underwood, Vijaya Gadde and Jana Messerschmidt in 2014 with a goal of getting more women on startup cap tables. The #ANGELS, four of whom are Moxxie limited partners, share deal flow but invest in startups independently. Stanton said she will continue her work with the collective as she ramps up Moxxie Ventures.

“I wanted more agency over the types of companies I wanted to back,” Stanton said of her decision to raise capital from LPs rather than stick to investing personal capital. As for her decision to invest primarily in minority entrepreneurs, Stanton cited recent statistics.

In 2019, just 2.8% of U.S. venture capital invested went to female-led startups, a small increase from last year’s 2.2%. Despite efforts from new organizations like All Raise, venture capital firms tapping their first-ever female check-writers or new funds cropping up focused on the underfunded, the latest data paints a disappointing picture.

“We just aren’t moving fast enough,” Stanton said. “We need to take bigger swings to move the needle faster. The fastest way to make progress isn’t to move inside those existing institutions but by creating new ones.”

Stanton is not new to investing, having built a portfolio of some 40 companies over the last several years, including Cameo, Carta, Coinbase, Ethel’s Club, Lambda School, Literati, Modern Fertility, Shape Security and Threads. As such, she was able to raise the $25 million effort in roughly six months. However, even with an extensive network of Silicon Valley heavyweights, Stanton said she pitched 279 individuals and organizations before closing the fund: “I told myself if I’m not getting rejected daily, I’m not trying hard enough.”

The process made her a better investor, she said. A whopping 29% of the entities she initiated conversations with ghosted her after an initial reply indicating interest. “A fast no is a lot better than a long maybe,” she said. “It’s kind of like we went on these dates — it’s not like we had a great date — and I never heard from him again.”

Entrepreneurs, of course, are all too familiar with the concept of ghosting, as venture capital investors are prone to disappearing or elongating an eventual “sorry, we’re not interested.”

Moxxie enters the market at an interesting time for venture capital fundraising and investing. There are more funds than ever deploying more capital than ever. In fact, there are so many new sub-$100 million funds, there are new names to differentiate the sub $25 million funds, or nano funds, from the $25 million to $100 million funds, or micro funds. In total, U.S. VCs were expected to dole out more than $120 billion this year, surpassing last year’s all-time high of $117 billion.

The frothy markets have allowed entrepreneurs to be pickier than in the past, leading to swelling valuations and frustrated investors. Stanton, like any optimistic VC, said she plans to be very disciplined and committed to the strategy she pitched LPs, meaning she will do her best to avoid the buzzy Y Combinator graduates that seek a $37 million valuation right out of the gate.

“People are raising a lot more money now just because they can,” Stanton said. “I am trying to maintain some discipline and have some constraints around the valuation. When I hear things valued at $20 million at seed pre-revenue, I just back away. There’s going to be a correction at some point and I worry for those founders.”

Moxxie has invested in four startups to date, including women’s professional network Elpha, hiring platform Purple Dot, a soon-to-launch tool for arranging meetings called Sesh and Honeycomb Labs, a parenting tech startup.

“My kids were encouraging me to do this and I realized it really just takes courage to do what founders do every day and to create something from nothing,” Stanton said of the firm’s name, Moxxie. “I added the extra X for the female chromosome because of my passion for the broader female founder and investor community.”

I’m really proud of this,” she added. “It’s the scariest thing I’ve ever done but it’s something that I think is important to do.”

 


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Finding free money for your social impact startup

00:31 | 3 December

David Teten Contributor
David Teten is an advisor to emerging investment managers and a Venture Partner with HOF Capital. He was previously a partner for 8 years with HOF Capital and ff Venture Capital. David writes regularly at teten.com and @dteten.

Congratulations; you’ve decided to launch a technology-enabled startup with a positive social impact! Nearly every major Silicon Valley venture-capital firm has now invested in a B Corp; maybe you will be one of them!

The bad news: some venture capitalists have a bias against startups with an explicit positive social impact on the grounds that they have a smaller addressable market, and that the founders are not sufficiently focused on creating shareholder wealth. And of course, effectively all venture capitalists are going to require some equity for their investment.

Fortunately, there are a wide range of organizations that specifically want to support you, not just the VC community. I’m now researching non-dilutive funding for Action Tank, a startup I’m gestating to “Make America Functional Again.” I worked with outsourced research firm Wonder* to identify all of the institutions we could who support tech impact startups with cash and community, and in many cases without dilution.  I emphasize my focus here is organizations which are backing for-profit companies and do not take equity. If you think I’ve missed any, please contact me.

I suggest start by looking at the many programs offered by the Fortune 500’s startup networks. In addition, there are many other groups will give you cash, training, and community with few or no strings attached:

Ashoka is a foundation that engages in scouring for and choosing the leading social entrepreneurs across the globe, who it refers to as Ashoka Fellows.

Aspen Tech Policy Hub. “Our program mixes the best of both Washington and Silicon Valley, bringing together stakeholders in policy and technology to train the next generation of policy entrepreneurs. The Aspen Tech Policy Hub is a West Coast policy incubator, training a new generation of tech policy entrepreneurs. We take tech experts, teach them the policy process through an in-residence fellowship program in the Bay Area, and encourage them to develop outside-the-box solutions to society’s problems. We model ourselves after tech incubators like Y Combinator, but train new policy thinkers and focus the impact of their ideas.

Bluhm/Helfand Social Innovation (BHSI) Fellowship. Since 2011, the Bluhm/Helfand Social Innovation (BHSI) Fellowship has supported the work of 36 innovators—representing the United States as well as 18 other countries on five continents—who address pressing global issues, from healthcare delivery to college persistence and sustainable construction in developing nations.  From the beginning, the BHSI Fellowship has created meaningful, customized experiences for Fellows with connections to influential business and civic leaders, exposure to a broad audience as a speaker at Chicago Ideas, and over $3 million in financial support and in-kind contributions.”

The Clayton, Dubilier & Rice Fund for Entrepreneurial Studies. “The Clayton, Dubilier & Rice Fund for Entrepreneurial Studies supports entrepreneurs attempting to build something that advances business and society in revolutionary ways. “

Columbia Business School Tamer Fund for Social Ventures. Requires Columbia affiliation.

Draper Richards Kaplan Foundation identifies entrepreneurs that display characteristics of “exceptional social leadership through discretion, influence, vision, ambition, intelligence, and follow-through.” 

DV Hacks, led by BCG Digital Ventures: “A 48-hour hackathon to improve how we live, work, collaborate, and learn.”

Echoing Green is a foundation that distinguishes transformational leaders via its fellowships. Their foci include addressing environmental sustainability, racial and gender equity, economic development concerns, etc.

Future Labs Flash Pitch. “For pre-seed and seed companies based in the U.S. and Israel with a focus on AI for social impact,” 

Google AI for Social Good. “Our 20 selected organizations will receive coaching from Google’s AI experts, Google.org grant funding from a $25 million pool, and credits and consulting from Google Cloud. They will also be offered the opportunity to join a customized 6-month Google Developers Launchpad Accelerator program, including guidance from our nonprofit partner, DataKind, to jumpstart their work. We looked for projects across a range of social impact domains and levels of technical expertise, from organizations that are experienced in AI to those with an idea for how they could put their data to better use. “

Google for Startups Accelerator. “Geared toward social impact startups working to create a healthier and more sustainable future, the accelerator provides access to training, products and technical support. Startup founders will work with Google engineers and receive mentoring from over 20 teams at Google, as well as outside experts and local mentors.  

J.M.Kaplan Innovation Prize. “The J.M.K. Innovation Prize seeks out innovators who are spearheading transformative early-stage projects in the fields of the environment, heritage conservation, and social justice. The J.M.K. Innovation Prize is open to nonprofit and mission-driven for-profit organizations that are tackling America’s most pressing challenges through social innovation. In 2019, we will award up to ten prizes, each including a cash award of $150,000 over three years, plus $25,000 for project expenses, for a total award of $175,000. 

Kairos Fellows. “The Kairos Fellowship is designed to build the next generation of leaders in the field of technology, analytics, digital campaigning, and online organizing.”

MIT Solve initiative. “MIT Solve advances lasting solutions from tech entrepreneurs to address the world’s most pressing problems. Solve is a marketplace for social impact: we find tech entrepreneurs from around the world and broker partnerships across our community to scale their innovative work — driving lasting, transformational change.”

Mulago Foundation Rainer Arnhold Fellowship. “The course brings Fellows and faculty together for an intensive week to work on design for maximum impact and scalability. Held in a retreat center on the coast in Bolinas, California, the course gives Fellows the rare opportunity to focus completely on their ideas and a systematic way to apply them.”

Bloomberg New Economy Forum Solutions. “Mike Bloomberg announces an open call for solutions to global challenges facing the new economy. Entrepreneurs, academics, founders, and big thinkers are invited to submit their solutions to societal problems that need momentum, support, and adoption from the private sector.”

Notley Ventures.Notley is a catalyst for social innovation unlocking opportunities with today’s impact organizations and changing communities.  Our mission is to scale and support businesses, nonprofits, individuals, and programs making positive change in the world.” 

Recurse Center. “The Recurse Center is a self-directed, community-driven educational retreat for people who want to get better at programming.”

Skoll Foundation. “The Skoll Foundation drives large-scale change by investing in, connecting, and celebrating social entrepreneurs and innovators who help them solve the world’s most pressing problems.”

Summit Fellows. “Through a series of invitation-only events, Summit fosters a global community of entrepreneurs, academics, athletes, artists, astronauts, authors, chefs, engineers, explorers, philanthropists, spiritual leaders, scientists, and beyond.”

Thiel Fellowship. “Founded by technology entrepreneur and investor Peter Thiel in 2011, the Thiel Fellowship is a two-year program for young people [under 22] who want to build new things. Thiel Fellows skip or stop out of college to receive a $100,000 grant and support from the Thiel Foundation’s network of founders, investors, and scientists.”

Pioneer.app.Get funding and guidance for your project.  Pioneer is a weekly contest for creative people around the world making their ideas become real.  Winners get $7000, a round-trip ticket to Silicon Valley, access to world-class mentorship, and more.”

Roddenberry Foundation Catalyst Fund. “The Catalyst Fund awards small grants for early-stage, innovative, and unconventional ideas that address serious global challenges.“

SEIF Awards Tech for Impact. The SEIF Awards target European impact entrepreneurs who develop or make innovative use of technologies to tackle social and/or environmental challenges and contribute to the UN SDGs [Sustainable Development Goals]. Each Award grants the winners CHF 10’000. Together with our partners UBS and PwC we provide finalists a unique opportunity to increase their international awareness, gain reputation and present themselves to a top-class jury.

Three dot dash. “Powers the most influential social entrepreneurs between the ages of 13 -19, who have found a solution or innovation to address a basic human need.” 

YC120 (part of Y Combinator). “We’d like to find more curious, creative people who are doing exciting work in emerging fields and give them an opportunity to start building their network. “

VentureCrush FG.  Pando Daily wrote: “VentureCrushFG takes no equity, there is no co-working space, and no demo day. The application process is not advertised. Most applicants come from referrals.” “VentureCrushFG[‘s]…stellar reputation among founders and investors is due, in part, to the success of its most high-flying companies.” “If anything, it’s more of a community than an accelerator, a way to keep a strong network of alumni, mentors and investors connected. Between one and two hundred techies are part of the group, including founders, execs, 40 to 50 VCs and a few dozen angel investors.””

We Company Creator Awards. “This global competition is open to entrepreneurs, performers, startups, and nonprofits-anyone who embodies our mantra, Create Your Life’s Work.”

World Summit Awards for Young Innovators. “WSA Young Innovators is a special recognition for young social entrepreneurs under 30 years of age, using ICTs to take action on the United Nations Sustainable Development Goals (UN SDGs). Together with the WSA winners of each year, they are honored as outstanding digital innovation with social impact.”

You may also want to look at product-based crowdfunding, e.g., Indiegogo*. Other traditional options for non-dilutive financing include grants, loans, SBIR, STTR, vouchers and tax credits, include:

You’re eligible for the many accelerators, as well as specifically the impact accelerators. See Conveners Impact Accelerator Selection Tool. Some specific accelerators:

There are many VCs who have a stated focus on social impact; for full lists see Impact Capital Managers and InvestorFlow. Oliver Libby, Managing Partner, H/L Ventures, notes, “it is important to remember that impact funders occupy the same spectrum of returns as regular investors.  From 100% loss capital (e.g. a grant) to shooting for massive returns (some impact VCs), an entrepreneur can unlock everything in between, including first-loss capital, impact bonds, patient capital from program-related investments and families, and more.  The market is also coming to understand that high impact can sometimes come with high returns too.”   

Rachel Butler, President, Cavendish Impact Foundation (where I’m an advisor), mentioned fiscal sponsorship as an option. “It’s an arrangement where an entity in need of funding (and it can be a for-profit, social enterprise) teams up with a 501(c)(3) that has an aligned mission, and money can be raised through the 501(c)(3) and used to support a specific project being done by the social enterprise.

So, for example, if the 501(c)(3) has in its mission to support improving education, and a for-profit social enterprise is developing an app to help improve access to better education for people in underserved communities, the 501(c)(3) could support that specific project. The 501(c)(3) does have to maintain discretion about how they use the funds (as a safeguard to just having it be an arrangement for funneling philanthropic funds), and there are some other stipulations, but otherwise it’s pretty straightforward.  The ‘Project’ can actually do the fundraising, as an agent of the 501(c)(3), and have the money directed to the 501(c)(3). The project is usually something that has a fairly short timeframe with measurable milestones that indicate progress. The 501(c)(3) also takes an administrative fee for their role in the collaboration.“

Bill Warren, CEO of Peeps Democracy, Inc., wrote, “another type of funding source for a social impact entrepreneur to think about is startup challenges/competitions at her/his alma mater. For example, Duke sponsors a $10,000 annual prize for students, faculty, or alumni working on a startup in the clean energy space. These prizes can be a great source of non-dilutive funding for early-stage ventures and also offer free exposure to academic thought-leaders and other alumni, who might support your startup via mentorship or investment. “

Emily Rasmussen, founder & CEO of Grapevine.org, suggests turning philanthropic donations into for-profit investments using Donor Advised Funds (DAFs), which are like Health Savings Accounts for charitable giving. You make a tax deductible donation into a DAF account, get an immediate tax deduction, and then donate your funds out to charities over time. In the meantime, your funds are invested to help grow your fund, just like an endowment. With some 501(c)(3) DAF sponsors (e.g Impact Assets), after making  a tax-deductible donation into their DAF account, donors can then advise the sponsor to invest their charitable assets into a specific social enterprise deal. These deals are sourced by the donor investor and any future returns go back into the DAF account and are available for future impact investments or charitable donations.

Lastly, I suggest reviewing these links on fundraising:

* I’m an investor in this company.

Thanks to Emily Campbell, Esq., of The Campbell Firm PLLC for helpful input; she has advised me on some legal matters in the past.

 


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