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Startups Weekly: Will the real unicorns please stand up?

Posted by on Jun 1, 2019 in Aileen Lee, alex wilhelm, bluevoyant, Co-founder, CRM, crowdstrike, cybersecurity startup, dashlane, economy, editor-in-chief, entrepreneurship, eric lefkofsky, Finance, garry tan, Indonesia, initialized capital, money, neologisms, Pegasus, Private Equity, records, SoFi, Softbank, Southeast Asia, starbucks, Startup company, Startups, startups weekly, stewart butterfield, tiny speck, unicorn, valuation, Venture Capital, virtual reality | 0 comments

Hello and welcome back to Startups Weekly, a newsletter published every Saturday that dives into the week’s noteworthy venture capital deals, funds and trends. Before I dive into this week’s topic, let’s catch up a bit. Last week, I wrote about the sudden uptick in beverage startup rounds. Before that, I noted an alternative to venture capital fundraising called revenue-based financing. Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets.

Here’s what I’ve been thinking about this week: Unicorn scarcity, or lack thereof. I’ve written about this concept before, as has my Equity co-host, Crunchbase News editor-in-chief Alex Wilhelm. I apologize if the two of us are broken records, but I think we’re equally perplexed by the pace at which companies are garnering $1 billion valuations.

Here’s the latest data, according to Crunchbase: “2018 outstripped all previous years in terms of the number of unicorns created and venture dollars invested. Indeed, 151 new unicorns joined the list in 2018 (compared to 96 in 2017), and investors poured more than $135 billion into those companies, a 52% increase year-over-year and the biggest sum invested in unicorns in any one year since unicorns became a thing.”

2019 has already coined 42 new unicorns, like Glossier, Calm and Hims, a number that grows each and every week. For context, a total of 19 companies joined the unicorn club in 2013 when Aileen Lee, an established investor, coined the term. Today, there are some 450 companies around the globe that qualify as unicorns, representing a cumulative valuation of $1.6 trillion. 😲

We’ve clung to this fantastical terminology for so many years because it helps us classify startups, singling out those that boast valuations so high, they’ve gained entry to a special, elite club. In 2019, however, $100 million-plus rounds are the norm and billion-dollar-plus funds are standard. Unicorns aren’t rare anymore; it’s time to rethink the unicorn framework.

Last week, I suggested we only refer to profitable companies with a valuation larger than $1 billion as unicorns. Understandably, not everyone was too keen on that idea. Why? Because startups in different sectors face barriers of varying proportions. A SaaS company, for example, is likely to achieve profitability a lot quicker than a moonshot bet on autonomous vehicles or virtual reality. Refusing startups that aren’t yet profitable access to the unicorn club would unfairly favor certain industries.

So what can we do? Perhaps we increase the valuation minimum necessary to be called a unicorn to $10 billion? Initialized Capital’s Garry Tan’s idea was to require a startup have 50% annual growth to be considered a unicorn, though that would be near-impossible to get them to disclose…

While I’m here, let me share a few of the other eclectic responses I received following the above tweet. Joseph Flaherty said we should call profitable billion-dollar companies Pegasus “since [they’ve] taken flight.” Reagan Pollack thinks profitable startups oughta be referred to as leprechauns. Hmmmm.

The suggestions didn’t stop there. Though I’m not so sure adopting monikers like Pegasus and leprechaun will really solve the unicorn overpopulation problem. Let me know what you think. Onto other news.

Image by Rafael Henrique/SOPA Images/LightRocket via Getty Images

IPO corner

CrowdStrike has set its IPO terms. The company has inked plans to sell 18 million shares at between $19 and $23 apiece. At a midpoint price, CrowdStrike will raise $378 million at a valuation north of $4 billion.

Slack inches closer to direct listing. The company released updated first-quarter financials on Friday, posting revenues of $134.8 million on losses of $31.8 million. That represents a 67% increase in revenues from the same period last year when the company lost $24.8 million on $80.9 million in revenue.

Startup Capital

Online lender SoFi has quietly raised $500M led by Qatar
Groupon co-founder Eric Lefkofsky just-raised another $200M for his new company Tempus
Less than 1 year after launching, Brex eyes $2B valuation
Password manager Dashlane raises $110M Series D
Enterprise cybersecurity startup BlueVoyant raises $82.5M at a $430M valuation
Talkspace picks up $50M Series D
TaniGroup raises $10M to help Indonesia’s farmers grow
Stripe and Precursor lead $4.5M seed into media CRM startup Pico

Funds

Maveron, a venture capital fund co-founded by Starbucks mastermind Howard Schultz, has closed on another $180 million to invest in early-stage consumer startups. The capital represents the firm’s seventh fundraise and largest since 2000. To keep the fund from reaching mammoth proportions, the firm’s general partners said they turned away more than $70 million amid high demand for the effort. There’s more where that came from, here’s a quick look at the other VCs to announce funds this week:

~Extra Crunch~

This week, I penned a deep dive on Slack, formerly known as Tiny Speck, for our premium subscription service Extra Crunch. The story kicks off in 2009 when Stewart Butterfield began building a startup called Tiny Speck that would later come out with Glitch, an online game that was neither fun nor successful. The story ends in 2019, weeks before Slack is set to begin trading on the NYSE. Come for the history lesson, stay for the investor drama. Here are the other standout EC pieces of the week.

Equity

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and I debate whether the tech press is too negative or too positive in its coverage of tech startups. Plus, we dive into Brex’s upcoming round, SoFi’s massive raise and CrowdStrike’s imminent IPO.


Source: The Tech Crunch

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Madrona Venture Labs raises $11M to build companies from the ground up

Posted by on May 15, 2019 in alpha, Amazon, Artificial Intelligence, blake irving, eBay, economy, entrepreneurship, erik blachford, Facebook, Finance, GoDaddy, madrona venture group, Microsoft, money, Private Equity, Seattle, spencer rascoff, Startup company, TC, Trinity Ventures, Venture Capital, venture capital Firms, venture capital funds, Zillow | 0 comments

In regions where would-be entrepreneurs need a little more support and encouragement before they’ll quit their day job, the startup studio model is taking off.

In Seattle, Madrona Venture Labs (MVL), a studio founded within one the city’s oldest and most-celebrated venture capital firms, Madrona Venture Group, has raised $11.3 million. The investment brings the studio’s total funding to $20 million.

Traditional venture capital funds invite founders to pitch their business idea to a line-up of partners. Sometimes that’s a founder with an idea looking for seed capital, other times it’s a more mature company looking to scale. When it comes to startup studios, the partners themselves craft startup ideas internally, recruiting entrepreneurs to lead the projects, then building them from the ground up within their own safe, protective walls. After a project passes the studio’s litmus test, i.e. shows proof of traction, product-market fit and more, it’s spun out with funding from Madrona and other VCs within its large and growing investor network.

For aspiring entrepreneurs deterred by the risk factors inherent to building venture-backed startups, it’s a highly desirable route. In the Pacific Northwest, where MVL focuses its efforts, it’s a chance to lure Microsoft and Amazon employees into the world of entrepreneurship.

“We want to be an onboard for founders in our market,” MVL managing director Mike Fridgen, who previously led the eBay-acquired business Decide.com, tells TechCrunch. “In Seattle, everyone isn’t a co-founder or an angel investor. Not everyone has been at a startup. A lot of people coming here are coming to work at Amazon, Microsoft or one of the larger satellite offices like Facebook. We want to help them fast-track learning, fundraising and everything else that comes with launching a successful company.”

Fridgen, MVL managing director Ben Elowitz, who co-founded the online jewelry marketplace Blue Nile and chief technology officer Jay Bartot, the co-founder of Hulu-acquired Vhoto, lead Madrona’s studio effort.

The investment in MVL comes in part from its parent company, Madrona, and for the first time, outside investors have acquired stakes in the practice. Alpha Edison, West River Group, Founder’s Co-op partner Rudy Gadre, Zillow co-founder Spencer Rascoff, former GoDaddy CEO Blake Irving, Trinity Ventures venture partner Gus Tai, TCV venture partner Erik Blachford and others participated.

With $1.6 billion in assets under management, Madrona is known for investments in Seattle bigwigs like Smartsheet, Rover and Redfin. The firm, which recently closed on another $100 million for an acceleration fund that will expand its geographic reach beyond the Pacific Northwest, launched its startup studio in 2014. Since then, it’s spun-out seven companies with an aggregate valuation of $140 million.

“There are some 85 VCs that have $300 million-plus funds,” Fridgen said. “In Seattle, we have two of the most valuable companies in the world and we have just one [big fund], Madrona; it’s the center of gravity for Seattle technology innovation.”

Companies created within MVL include Spruce Up, an AI-powered personal shopping platform, and Domicile, a luxury apartment rental service geared toward business travelers. Domicile was co-founded by Ross Saario, who spent the three years ahead of launching the startup as a general manager at Amazon. The company recently raised a $5 million round, while Spruce Up, co-founded by serial founder Mia Lewin, closed a $3 million round in May.

Other spin-outs include MightyAI, which was valued at $71 million in 2017; Nordstrom-acquired MessageYes, Chatitive and Rep the Squad. The latter, a jersey rental business, was a failure, shutting down in 2018 after failing to land necessary investment, according to GeekWire.

MVL’s latest fundraise will be used to invest in operations. Though MVL does provide its spin-outs with some capital, between $100,000 to $200,000 Fridgen said, it takes a back seat when it comes time to raise outside capital and doesn’t serve as the lead investor in deals.


Source: The Tech Crunch

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Venture investors and startup execs say they don’t need Elizabeth Warren to defend them from big tech

Posted by on Mar 8, 2019 in Amazon, AT&T, ben narasin, chief technology officer, coinbase, Companies, economy, elizabeth warren, entrepreneurship, Facebook, Federal Trade Commission, Google, IBM, kara nortman, Los Angeles, Microsoft, new enterprise associates, Private Equity, Social Media, Startup company, TC, Technology, Technology Development, United States, upfront ventures, us government, venky ganesan, Venture Capital, Walmart, world wide web, zappos | 0 comments

Responding to Elizabeth Warren’s call to regulate and break up some of the nation’s largest technology companies, the venture capitalists that invest in technology companies are advising the presidential hopeful to move slowly and not break anything.

Warren’s plan called for regulators to be appointed to oversee the unwinding of several acquisitions that were critical to the development of the core technology that make Alphabet’s Google and the social media giant Facebook so profitable… and Zappos.

Warren also wanted regulation in place that would block companies making over $25 billion that operate as social media or search platforms or marketplaces from owning companies that also sell services on those marketplaces.

As a whole, venture capitalists viewing the policy were underwhelmed.

“As they say on Broadway, ‘you gotta have a gimmick’ and this is clearly Warren’s,” says Ben Narasin, an investor at one of the nation’s largest investment firms,” New Enterprise Associates, which has $18 billion in assets under management and has invested in consumer companies like Jet, an online and mobile retailer that competed with Amazon and was sold to Walmart for $3.3 billion.

“Decades ago, at the peak of Japanese growth as a technology competitor on the global stage, the US government sought to break up IBM . This is not a new model, and it makes no sense,” says Narasin. “We slow down our country, our economy and our ability to innovate when the government becomes excessively aggressive in efforts to break up technology companies, because they see them through a prior-decades lens, when they are operating in a future decade reality. This too shall pass.”

Balaji Sirinivasan, the chief technology officer of Coinbase, took to Twitter to offer his thoughts on the Warren plan. “If big companies like Google, Facebook and Amazon are prevented from acquiring startups, that actually reduces competition,” Sirinivasan writes.

“There are two separate issues here that are being conflated. One issue is do we need regulation on the full platform companies. And the answer is absolutely,” says Venky Ganesan, the managing director of Menlo Ventures. “These platforms have a huge impact on society at large and they have huge influence.”

But while the platforms need to be regulated, Ganesan says, Senator Warren’s approach is an exercise in overreach.

“That plan is like taking a bazooka to a knife fight. It’s overwhelming and it’s not commensurate with the issues,” Ganesan says. “I don’t think at the end of the day venture capital is worrying about competition from these big platform companies. [And] as the proposal is composed it would create more obstacles rather than less.”

Using Warren’s own example of the antitrust cases that were brought against companies like AT&T and Microsoft, is a good model for how to proceed, Ganesan says. “We want to have the technocrats at the FTC figure out the right way to bring balance.”

Kara Nortman, a partner with the Los Angeles-based firm Upfront Ventures, is also concerned about the potential unforeseen consequences of Warren’s proposals.

“The specifics of the policy as presented strike me as having potentially negative consequences for innovation, These companies are funding massive innovation initiatives in our country. They’re creating jobs and taking risks in areas of technology development where we could potentially fall behind other countries and wind up reducing our quality of life,” Nortman says. “We’re not seeing that innovation or initiative come from the government – or that support for encouraging immigration and by extension embracing the talented foreign entrepreneurs that could develop new technologies and businesses.”

Nortman sees the Warren announcement as an attempt to start a dialogue between government regulators and big technology companies.

“My hope is that this is the beginning of a dialogue that is constructive,” Nortman says. “And since Elizabeth Warren is a thoughtful policymaker this is likely the first salvo toward an engagement with the technology community to work collaboratively on issues that we all want to see solved and that some of us are dedicating our career in venture to help solving.”


Source: The Tech Crunch

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VCs have growing appetite for ‘AgriFood’

Posted by on Mar 7, 2019 in AgFunder, agriculture, agriculture tech, AgTech, Asia, Biotech, CrunchBase, economy, entrepreneurship, farming, Finance, Food, food delivery, food tech, funding, GreenTech, groceries, grocery, McKinsey, money, Naspers, Private Equity, restaurant tech, Restaurants, Softbank, Startup company, Startups, TC, Venture Capital, Zume Pizza | 0 comments

Venture investors are pouring billions of dollars into feeding their hunger for food and agriculture startups. Whether that trend line is due to enthusiasm for the sector or just broader heavy investing in the VC space is much less clear.

According to a recent report published by AgFunder – a VC and investing marketplace focused on the agriculture and food sectors – the “AgriFood” space is booming. Using data from Crunchbase and several other data partners, the organization published its “2018 AgriFood Tech Investing Report” this morning, finding that investment in AgriFood companies increased 43% year-over-year, reaching $16.9 billion in 2018.

AgFunder classifies AgriFood tech as “the small but growing segment of the startup and venture capital universe that’s aiming to improve or disrupt the global food and agriculture industry.” Their definition is intentionally broad, encompassing everything from crop and livestock biotech, property management systems, and payments, to biomaterials and meat alternatives, all the way up to tech platforms for restaurants, grocers, deliveries and at-home cooks.

While some of the AgriFood tech categories – such as delivery or restaurant software – have long been popular destinations for venture capital, we’re now seeing a more diverse array of startups innovating across the entire food supply chain. According to the report, expansion in AgriFood is fairly consistent across upstream (agricultural and farming) subsectors to downstream (more consumer-facing) subsectors, with each group growing roughly 44% and 42% year-over-year respectively.

The data also shows growth occurring across almost all deal stages. AgriFood saw huge increases in the average deal size and total investment for late-stage companies in particular, as venture-backed startups have grown to global scale. And penetrating and attracting capital from international markets seems more feasible than ever. AgriFood investing, which traditionally has been largely US-centric, is rapidly becoming a global phenomenon, with more than half of total funding – and some of the largest rounds – now coming from companies and investors outside the US.


Source: The Tech Crunch

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How to prepare for an investment apocalypse

Posted by on Feb 8, 2019 in behance, Column, craigslist, customer acquisition cost, economy, entrepreneurship, executive, Facebook, Finance, instagram, Mergers and Acquisitions, money, Private Equity, Scott Belsky, Sequoia, Startup company, Startups, TC, unicorn, United States, Venture Capital, venture debt, WhatsApp | 0 comments

Unlike 2000 and 2008, everyone in the startup world is expecting a crash to come at any moment. But few are taking concrete steps to prepare for it.

If you’re running a venture-backed startup, you should probably get on that. First, go read RIP Good Times from Sequoia to get a sense for how bad it can get, quickly. Then take a look at the checklist below. You don’t need to build a bomb shelter, yet, but adopting a bit of the prepper mentality now will pay dividends down the road.

Don’t wait, prepare

The first step in preparing for a coming downturn is making a plan for how you’d get to a point of sustainability. Many startups have been lulled into a false sense of confidence that profit is something they can figure out “later.” Keep in mind, it has to be done eventually and it’s easier to do when the broader economy isn’t crashing around you. There are two complicating factors to keep in mind.

You’ll have to do it with less revenue

In a downturn, business customers skip investing in capital equipment and new software. Likewise, consumer discretionary spending goes way down. The result is you’ll likely have less revenue than you do now. War-game a variety of scenarios — what you’d do if you lost 20 percent, 50 percent or 80 percent of your revenue, and what decisions would have to be taken to survive.

Sometimes capital can’t be had at any valuation

When a downturn comes, capital markets don’t soften, they seize. Depending on how bad a hypothetical financial crisis got, there’s a good chance that investors would close up their checkbooks and triage. If you aren’t one of your investor’s favorite portfolio companies, there’s a decent chance you may be left in the cold. Don’t even assume you’ll be able to close a down round. Fortunately, showing a plan with a clear path to profitability will allay investors concerns that you’ll need their capital indefinitely and make it more likely you’ll be able to raise.

Planning around these three realities — the need for profits, while experiencing dropping revenue, in a world where capital can’t be had at any valuation — is going to lead to unpleasant conclusions. A dramatically diminished business, major layoffs, and a decisive drop in morale are likely outcomes. Thankfully, you can take steps now to help soften the landing, or if you’re really successful, avoid it entirely.

Avoid “growth at all costs” mentality

Getting acquisition costs under control will help you in two ways. First, it’ll lower your burn rate. Chasing growth for growth’s sake is always a short-sighted decision, but especially during the late part of the business cycle. Avoid this even if you’re VC is encouraging it. Second, by carefully analyzing the inputs to your acquisition cost, it will force you to examine the dynamics of your business. It gives you an opportunity to decide if a poorly performing channel or lackluster sales reps are actually smart investments. Even cutting your payback period from 12 months to nine will provide an increased measure of visibility and control.

Increase the hiring bar

Instagram took over the web with a team of a dozen. Craigslist is a pillar of the internet with a staff of 40 employees. WhatsApp supported hundreds of millions of daily users with fewer than 50 people. Chances are you need fewer people than you think.

In his new book, Scott Belsky shares an algorithm he used building Behance into a $100M company — automate, automate, then hire. His point was that founders should encourage teams to push hard on improving processes and other labor-saving tools before adding more FTEs.

Don’t institute a hiring freeze or take other actions that might spook the staff, but do send the message that new hires should be the last resort, not the first response to a challenge.

Preach discipline — build it into the culture

Founders often try to change spending habits, and in turn culture, when it’s too late. Is there a fair bit of business class flying among the executive team? Do your employees stretch your free dinner policy by staying just past the dinner hour to take advantage of free food? At most tech ventures, everyone is truly an owner. Try to help the entire team to internalize that they are spending their own money.

Get to know your potential acquirers

The week the market drops 50 percent is not the week to start a M&A conversation. You should be getting to know the five most likely buyers of your company, now. Find out who the decision makers at each of the companies are and build relationships. Make it a point to catch up with these people at conferences and even consider sending them regular updates about your company’s progress (but not too much data). You’re not running a formal sales process, but helping build up the internal desire to buy your company if the opportunity presents itself. It may not be the exit of your dreams, but it’s nice to have options if you need them.

Jettison expensive office space

If you’re coming to a T-juncture regarding office space, you may want to prioritize price and lease flexibility over quality and location. I remember one of our offices at my start-up was a twelve month lease with 6 months free. The landlords were desperate, and so were we!

Front-load revenue

If you’re in the kind of business that will support annual contracts, figure out a way to offer them. Pre-sell credits to consumers at a discount. More fundamentally, think about how you might be able to adjust your business model so you can get paid before you deliver services. Plenty of viable businesses are asphyxiated by delays in accounts receivable, don’t allow your ambitions to be thwarted by accounting.

Diversify your customer base

One lesson learned in the 2000 bubble was that startups that serve other startups tend to be hit hardest. It’s important to think about how a downturn will impact your customer base. If more than 30 percent of your revenue comes from one industry (perhaps start-ups!), or heaven help you, a single customer, start thinking about managing risk by diversifying your customer base.

Raise a pre-emptive round (AND DON’T SPEND IT)

Topping up your balance sheet at this point isn’t a bad idea, provided you have the discipline to treat it as a rainy day fund. Communicate this rationale to your investors. It’s also important to use this moment to reflect on valuation. An eye-popping valuation will feel good when you sign the term sheet, but it’s going to feel like a millstone if the economy turns, and the market for blue-chip tech stocks drops precipitously.

Consider venture debt

Many VCs discourage venture debt. They’ll say “if you need more money, we’ll backstop you.” The problem is when things ugly, they may not be there. Debt providers are a good way to extend the runway. The thing is that it’s best to raise debt capital when you don’t need it. Venture debt can add ⅓ to ½ of additional capital to some funding rounds with minimal dilution and relatively modest interest rates. Do note that when things get bad, some debt funds can get aggressive so do your homework before taking the notes.

Don’t panic

It’s tough to predict the top of the market. CNN, Time, The Atlantic, The Wall Street Journal, and many others argued Facebook paying $1 billion for Instagram was a sure sign of a bubble — in 2012. Reputable commentators have claimed that we’re in a bubble every year since, see 2013, 2014, 2015, 2016, 2017, and 2018. Going into survival mode in any of those years would have been a serious mistake for most startups.

Still, we’re only two quarters away from marking the longest economic expansion in US history. The good times have got to end at some point. Venture capital is a hell of a drug and withdrawal can be painful. Keep in mind that there’s no correlation between how much a company raised and how well they did on the public markets. If you’re struggling to make your startup’s economics work, read up on dozens of “invisible unicorns” who show that you can get big without relying on outsized amounts of venture capital.

If your house is in order when the downturn hits, you may actually be able to grow through it. As unprepared competitors go out of business, you’ll find that talent is more plentiful and customer acquisition costs plummet. Some of the best companies have been founded and thrived in the worst of times — if you’re prepared.


Source: The Tech Crunch

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How students are founding, funding and joining startups

Posted by on Feb 6, 2019 in Accel, Accel Scholars, Alumni Ventures Group, Amanda Bradford, Artificial Intelligence, Bill Gates, boston, coinbase, Column, CRM, CrunchBase, distributed systems, Dorm Room Fund, Drew Houston, Dropbox, editor-in-chief, Energy, entrepreneurship, Facebook, Finance, FiscalNote, Forward, General Catalyst, Graduate Fund, greylock, harvard, Jeremy Liew, Kleiner Perkins, lightspeed, Mark Zuckerberg, MIT, Pear Ventures, peter boyce, Pinterest, Private Equity, Series A, stanford, Start-Up Chile, Startup company, Startups, TC, TechStars, True Ventures, Ubiquity6, uc-berkeley, United States, upenn, Venture Capital, venture capital Firms, Warby Parker, Y Combinator | 0 comments

There has never been a better time to start, join or fund a startup as a student. 

Young founders who want to start companies while still in school have an increasing number of resources to tap into that exist just for them. Students that want to learn how to build companies can apply to an increasing number of fast-track programs that allow them to gain valuable early stage operating experience. The energy around student entrepreneurship today is incredible. I’ve been immersed in this community as an investor and adviser for some time now, and to say the least, I’m continually blown away by what the next generation of innovators are dreaming up (from Analytical Space’s global data relay service for satellites to Brooklinen’s reinvention of the luxury bed).

Bill Gates in 1973

First, let’s look at student founders and why they’re important. Student entrepreneurs have long been an important foundation of the startup ecosystem. Many students wrestle with how best to learn while in school —some students learn best through lectures, while more entrepreneurial students like author Julian Docks find it best to leave the classroom altogether and build a business instead.

Indeed, some of our most iconic founders are Microsoft’s Bill Gates and Facebook’s Mark Zuckerberg, both student entrepreneurs who launched their startups at Harvard and then dropped out to build their companies into major tech giants. A sample of the current generation of marquee companies founded on college campuses include Snap at Stanford ($29B valuation at IPO), Warby Parker at Wharton (~$2B valuation), Rent The Runway at HBS (~$1B valuation), and Brex at Stanford (~$1B valuation).

Some of today’s most celebrated tech leaders built their first ventures while in school — even if some student startups fail, the critical first-time founder experience is an invaluable education in how to build great companies. Perhaps the best example of this that I could find is Drew Houston at Dropbox (~$9B valuation at IPO), who previously founded an edtech startup at MIT that, in his words, provided a: “great introduction to the wild world of starting companies.”

Student founders are everywhere, but the highest concentration of venture-backed student founders can be found at just 5 universities. Based on venture fund portfolio data from the last six years, Harvard, Stanford, MIT, UPenn, and UC Berkeley have produced the highest number of student-founded companies that went on to raise $1 million or more in seed capital. Some prospective students will even enroll in a university specifically for its reputation of churning out great entrepreneurs. This is not to say that great companies are not being built out of other universities, nor does it mean students can’t find resources outside a select number of schools. As you can see later in this essay, there are a number of new ways students all around the country can tap into the startup ecosystem. For further reading, PitchBook produces an excellent report each year that tracks where all entrepreneurs earned their undergraduate degrees.

Student founders have a number of new media resources to turn to. New email newsletters focused on student entrepreneurship like Justine and Olivia Moore’s Accelerated and Kyle Robertson’s StartU offer new channels for young founders to reach large audiences. Justine and Olivia, the minds behind Accelerated, have a lot of street cred— they launched Stanford’s on-campus incubator Cardinal Ventures before landing as investors at CRV.

StartU goes above and beyond to be a resource to founders they profile by helping to connect them with investors (they’re active at 12 universities), and run a podcast hosted by their Editor-in-Chief Johnny Hammond that is top notch. My bet is that traditional media will point a larger spotlight at student entrepreneurship going forward.

New pools of capital are also available that are specifically for student founders. There are four categories that I call special attention to:

  • University-affiliated accelerator programs
  • University-affiliated angel networks
  • Professional venture funds investing at specific universities
  • Professional venture funds investing through student scouts

While it is difficult to estimate exactly how much capital has been deployed by each, there is no denying that there has been an explosion in the number of programs that address the pre-seed phase. A sample of the programs available at the Top 5 universities listed above are in the graphic below — listing every resource at every university would be difficult as there are so many.

One alumni-centric fund to highlight is the Alumni Ventures Group, which pools LP capital from alumni at specific universities, then launches individual venture funds that invest in founders connected to those universities (e.g. students, alumni, professors, etc.). Through this model, they’ve deployed more than $200M per year! Another highlight has been student scout programs — which vary in the degree of autonomy and capital invested — but essentially empower students to identify and fund high-potential student-founded companies for their parent venture funds. On campuses with a large concentration of student founders, it is not uncommon to find student scouts from as many as 12 different venture funds actively sourcing deals (as is made clear from David Tao’s analysis at UC Berkeley).

Investment Team at Rough Draft Ventures

In my opinion, the two institutions that have the most expansive line of sight into the student entrepreneurship landscape are First Round’s Dorm Room Fund and General Catalyst’s Rough Draft VenturesSince 2012, these two funds have operated a nationwide network of student scouts that have invested $20K — $25K checks into companies founded by student entrepreneurs at 40+ universities. “Scout” is a loose term and doesn’t do it justice — the student investors at these two funds are almost entirely autonomous, have built their own platform services to support portfolio companies, and have launched programs to incubate companies built by female founders and founders of color. Another student-run fund worth noting that has reach beyond a single region is Contrary Capital, which raised $2.2M last year. They do a particularly great job of reaching founders at a diverse set of schools — their network of student scouts are active at 45 universities and have spoken with 3,000 founders per year since getting started. Contrary is also testing out what they describe as a “YC for university-based founders”. In their first cohort, 100% of their companies raised a pre-seed round after Contrary’s demo day. Another even more recently launched organization is The MBA Fund, which caters to founders from the business schools at Harvard, Wharton, and Stanford. While super exciting, these two funds only launched very recently and manage portfolios that are not large enough for analysis just yet.

Over the last few months, I’ve collected and cross-referenced publicly available data from both Dorm Room Fund and Rough Draft Ventures to assess the state of student entrepreneurship in the United States. Companies were pulled from each fund’s portfolio page, then checked against Crunchbase for amount raised, accelerator participation, and other metrics. If you’d like to sift through the data yourself, feel free to ping me — my email can be found at the end of this article. To be clear, this does not represent the full scope of investment activity at either fund — many companies in the portfolios of both funds remain confidential and unlisted for good reasons (e.g. startups working in stealth). In fact, the In addition, data for early stage companies is notoriously variable in quality, even with Crunchbase. You should read these insights as directional only, given the debatable confidence interval. Still, the data is still interesting and give good indicators for the health of student entrepreneurship today.

Dorm Room Fund and Rough Draft Ventures have invested in 230+ student-founded companies that have gone on to raise nearly $1 billion in follow on capital. These funds have invested in a diverse range of companies, from govtech (e.g. mark43, raised $77M+ and FiscalNote, raised $50M+) to space tech (e.g. Capella Space, raised ~$34M). Several portfolio companies have had successful exits, such as crypto startup Distributed Systems (acquired by Coinbase) and social networking startup tbh (acquired by Facebook). While it is too early to evaluate the success of these funds on a returns basis (both were launched just 6 years ago), we can get a sense of success by evaluating the rates by which portfolio companies raise additional capital. Taken together, 34% of DRF and RDV companies in our data set have raised $1 million or more in seed capital. For a rough comparison, CB Insights cites that 40% of YC companies and 48% of Techstars companies successfully raise follow on capital (defined as anything above $750K). Certainly within the ballpark!

Source: Crunchbase

Dorm Room Fund and Rough Draft Ventures companies in our data set have an 11–12% rate of survivorship to Series A. As a benchmark, a previous partner at Y Combinator shared that 20% of their accelerator companies raise Series A capital (YC declined to share the official figure, but it’s likely a stat that is increasing given their new Series A support programs. For further reading, check out YC’s reflection on what they’ve learned about helping their companies raise Series A funding). In any case, DRF and RDV’s numbers should be taken with a grain of salt, as the average age of their portfolio companies is very low and raising Series A rounds generally takes time. Ultimately, it is clear that DRF and RDV are active in the earlier (and riskier) phases of the startup journey.

Dorm Room Fund and Rough Draft Ventures send 18–25% of their portfolio companies to Y Combinator or Techstars. Given YC’s 1.5% acceptance rate as reported in Fortune, this is quite significant! Internally, these two funds offer founders an opportunity to participate in mock interviews with YC and Techstars alumni, as well as tap into their communities for peer support (e.g. advice on pitch decks and application content). As a result, Dorm Room Fund and Rough Draft Ventures regularly send cohorts of founders to these prestigious accelerator programs. Based on our data set, 17–20% of DRF and RDV companies that attend one of these accelerators end up raising Series A venture financing.

Source: Crunchbase

Dorm Room Fund and Rough Draft Ventures don’t invest in the same companies. When we take a deeper look at one specific ecosystem where these two funds have been equally active over the last several years — Boston — we actually see that the degree of investment overlap for companies that have raised $1M+ seed rounds sits at 26%. This suggests that these funds are either a) seeing different dealflow or b) have widely different investment decision-making.

Source: Crunchbase

Dorm Room Fund and Rough Draft Ventures should not just be measured by a returns-basis today, as it’s too early. I hypothesize that DRF and RDV are actually encouraging more entrepreneurial activity in the ecosystem (more students decide to start companies while in school) as well as improving long-term founder outcomes amongst students they touch (portfolio founders build bigger and more successful companies later in their careers). As more students start companies, there’s likely a positive feedback loop where there’s increasing peer pressure to start a company or lean on friends for founder support (e.g. feedback, advice, etc).Both of these subjects warrant additional study, but it’s likely too early to conduct these analyses today.

Dorm Room Fund and Rough Draft Ventures have impressive alumni that you will want to track. 1 in 4 alumni partners are founders, and 29% of these founder alumni have raised $1M+ seed rounds for their companies. These include Anjney Midha’s augmented reality startup Ubiquity6 (raised $37M+), Shubham Goel’s investor-focused CRM startup Affinity (raised $13M+), Bruno Faviero’s AI security software startup Synapse (raised $6M+), Amanda Bradford’s dating app The League (raised $2M+), and Dillon Chen’s blockchain startup Commonwealth Labs (raised $1.7M). It makes sense to me that alumni from these communities that decide to start companies have an advantage over their peers — they know what good companies look like and they can tap into powerful networks of young talent / experienced investors.

Beyond Dorm Room Fund and Rough Draft Ventures, some venture capital firms focus on incubation for student-founded startups. Credit should first be given to Lightspeed for producing the amazing Summer Fellows bootcamp experience for promising student founders — after all, Pinterest was built there! Jeremy Liew gives a good overview of the program through his sit-down interview with Afterbox’s Zack Banack. Based on a study they conducted last year, 40% of Lightspeed Summer Fellows alumni are currently active founders. Pear Ventures also has an impressive summer incubator program where 85% of its companies successfully complete a fundraise. Index Ventures is the latest to build an incubator program for student founders, and even accepts founders who want to work on an idea part-time while completing a summer internship.

Let’s now look at students who want to join a startup before founding one. Venture funds have historically looked to tap students for talent, and are expanding the engagement lifecycle. The longest running programs include Kleiner Perkins’<strong class=”m_1196721721246259147gmail-markup–strong m_1196721721246259147gmail-markup–p-strong”> KP Fellows and True Ventures’ TEC Fellows, which focus on placing the next generation’s most promising product managers, engineers, and designers into the portfolio companies of their parent venture funds.

There’s also the secretive Greylock X, a referral-based hand-picked group of the best student engineers in Silicon Valley (among their impressive alumni are founders like Yasyf Mohamedali and Joe Kahn, the folks behind First Round-backed Karuna Health). As these programs have matured, these firms have recognized the long-run value of engaging the alumni of their programs.

More and more alumni are “coming back” to the parent funds as entrepreneurs, like KP Fellow Dylan Field of Figma (and is also hosting a KP Fellow, closing a full circle loop!). Based on their latest data, 10% of KP Fellows alumni are founders — that’s a lot given the fact that their community has grown to 500! This helps explain why Kleiner Perkins has created a structured path to receive $100K in seed funding to companies founded by KP Fellow alumni. It looks like venture funds are beginning to invest in student programs as part of their larger platform strategy, which can have a real impact over the long term (for further reading, see this analysis of platform strategy outcomes by USV’s Bethany Crystal).

KP Fellows in San Francisco

Venture funds are doubling down on student talent engagement — in just the last 18 months, 4 funds have launched student programs. It’s encouraging to see new funds follow in the footsteps of First Round, General Catalyst, Kleiner Perkins, Greylock, and Lightspeed. In 2017, Accel launched their Accel Scholars program to engage top talent at UC Berkeley and Stanford. In 2018, we saw 8VC Fellows, NEA Next, and Floodgate Insiders all launch, targeting elite universities outside of Silicon Valley. Y Combinator implemented Early Decision, which allows student founders to apply one batch early to help with academic scheduling. Most recently, at the start of 2019, First Round launched the Graduate Fund (staffed by Dorm Room Fund alumni) to invest in founders who are recent graduates or young alumni.

Given more time, I’d love to study the rates by which student founders start another company following investments from student scout funds, as well as whether or not they’re more successful in those ventures. In any case, this is an escalation in the number of venture funds that have started to get serious about engaging students — both for talent and dealflow.

Student entrepreneurship 2.0 is here. There are more structured paths to success for students interested in starting or joining a startup. Founders have more opportunities to garner press, seek advice, raise capital, and more. Venture funds are increasingly leveraging students to help improve the three F’s — finding, funding, and fixing. In my personal view, I believe it is becoming more and more important for venture funds to gain mindshare amongst the next generation of founders and operators early, while still in school.

I can’t wait to see what’s next for student entrepreneurship in 2019. If you’re interested in digging in deeper (I’m human — I’m sure I haven’t covered everything related to student entrepreneurship here) or learning more about how you can start or join a startup while still in school, shoot me a note at sxu@dormroomfund.comA massive thanks to Phin Barnes, Rei Wang, Chauncey Hamilton, Peter Boyce, Natalie Bartlett, Denali Tietjen, Eric Tarczynski, Will Robbins, Jasmine Kriston, Alicia Lau, Johnny Hammond, Bruno Faviero, Athena Kan, Shohini Gupta, Alex Immerman, Albert Dong, Phillip Hua-Bon-Hoa, and Trevor Sookraj for your incredible encouragement, support, and insight during the writing of this essay.


Source: The Tech Crunch

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Partech is doubling the size of its African venture fund to $143 million

Posted by on Jan 31, 2019 in africa, berlin, Business, Column, east africa, economy, entrepreneurship, Finance, kenya, Nairobi, paris, partech ventures, Private Equity, San Francisco, Startup company, TPG Growth | 0 comments

Partech has doubled its Africa VC fund to $143 million and opened a Nairobi office to complement its Dakar practice.

The Partech Africa Fund plans to make 20 to 25 investments across roughly 10 countries over the next several years, according to General Partner Tidjane Deme. The fund has added Ceasar Nyagha as Investment Officer for the Kenya office to expand its East Africa reach.

Partech Africa will primarily target Series A and B investments and some pre-series rounds at higher dollar amounts. “We will consider seed-funding—what we call seed-plus—tickets in the $500,000 range,” Deme told TechCrunch on a call from Dakar.

“In terms of sectors, we’re agnostic. We’ve been looking at all…sectors. We’re open to all plays; we have a strong appetite for people who are tapping into Africa’s informal economies,” he said.

African startups who want to pitch to the new fund should seek a referral. “My usual recommendation is to find someone who can introduce you to any member of the team. We receive a lot of requests…but an intro and recommendation…shortcuts one through all that,” Deme said.

Headquartered in Paris, Partech has offices in Berlin, San Francisco, Dakar, and now Nairobi. To bring the Arica fund to $143 million the VC firm tapped a number of other funds, several undisclosed corporate venture arms, and development finance institutions.

They include Averroes Finance III, the IFC, the EBRD, and African Development Bank. Deme would not list figures, but confirmed “the IFC and European Bank for Reconstruction committed the largest amounts.”

On why players like the IFC, which has its own VC shop for African startups, would place capital with Partech, Deme explained, “many have existing mandates to co-invest…others may not know this territory as well and would rather invest in another fund” with regional experience.

Partech used that experience in 2018 to make 4 investments in African startups (2 undisclosed). They led the $16 million round in South African fintech firm Yoco (covered here at TechCrunch) and a $3 million round in Nigerian B2B e-commerce platform TradeDepot.

Partech Africa joined several Africa focused funds over the last few years to mark a surge in VC for the continent’s startups. Partech announced its first raise of $70 million in early 2018 next to TLcom Capital’s $40 million, and TPG Growth’s $2 billion.

Africa focused VC firms, including those locally run and managed, have grown to 51 globally, according to recent Crunchbase research.

As for a bead on total VC spending for African tech, figures can vary widely.

By Partech’s numbers, compiled from an annual survey it does on Africa, 2017 funding for African startups reached $560 million.

Partech hasn’t released its 2018 Africa VC estimate but it will now be up  some $70 million more from its own recent raise.


Source: The Tech Crunch

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Startups Weekly: Squad’s screen-shares and Slack’s swastika

Posted by on Jan 19, 2019 in alex wilhelm, altos ventures, AnchorFree, Andreessen Horowitz, Autotech Ventures, Aviva Ventures, berlin, bird, bluerun ventures, Business, ceo, Ciitizen, crowdstrike, CrunchBase, economy, editor-in-chief, entrepreneurship, Finance, First Round Capital, Flash, France, Greenspring Associates, Ingrid Lunden, Italy, josh constine, Lance Armstrong, Maverick Ventures, Next Ventures, norwest venture partners, Portugal, Private Equity, redpoint ventures, resolute ventures, Rubrik, series C, slack, slow ventures, Spain, Startup company, Startups, switzerland, Tandem Capital, TC, TechStars, tools, unicorn, valar ventures, Venture Capital, zack Whittaker | 0 comments

We’re three weeks into January. We’ve recovered from our CES hangover and, hopefully, from the CES flu. We’ve started writing the correct year, 2019, not 2018.

Venture capitalists have gone full steam ahead with fundraising efforts, several startups have closed multi-hundred million dollar rounds, a virtual influencer raised equity funding and yet, all anyone wants to talk about is Slack’s new logo… As part of its public listing prep, Slack announced some changes to its branding this week, including a vaguely different looking logo. Considering the flack the $7 billion startup received instantaneously and accusations that the negative space in the logo resembled a swastika — Slack would’ve been better off leaving its original logo alone; alas…

On to more important matters.

Rubrik more than doubled its valuation

The data management startup raised a $261 million Series E funding at a $3.3 billion valuation, an increase from the $1.3 billion valuation it garnered with a previous round. In true unicorn form, Rubrik’s CEO told TechCrunch’s Ingrid Lunden it’s intentionally unprofitable: “Our goal is to build a long-term, iconic company, and so we want to become profitable but not at the cost of growth,” he said. “We are leading this market transformation while it continues to grow.”

Deal of the week: Knock gets $400M to take on Opendoor

Will 2019 be a banner year for real estate tech investment? As $4.65 billion was funneled into the space in 2018 across more than 350 deals and with high-flying startups attracting investors (Compass, Opendoor, Knock), the excitement is poised to continue. This week, Knock brought in $400 million at an undisclosed valuation to accelerate its national expansion. “We are trying to make it as easy to trade in your house as it is to trade in your car,” Knock CEO Sean Black told me.

Cybersecurity stays hot

While we’re on the subject of VCs’ favorite industries, TechCrunch cybersecurity reporter Zack Whittaker highlights some new data on venture investment in the industry. Strategic Cyber Ventures says more than $5.3 billion was funneled into companies focused on protecting networks, systems and data across the world, despite fewer deals done during the year. We can thank Tanium, CrowdStrike and Anchorfree’s massive deals for a good chunk of that activity.

Send me tips, suggestions and more to kate.clark@techcrunch.com or @KateClarkTweets

Fundraising efforts continue

I would be remiss not to highlight a slew of venture firms that made public their intent to raise new funds this week. Peter Thiel’s Valar Ventures filed to raise $350 million across two new funds and Redpoint Ventures set a $400 million target for two new China-focused funds. Meanwhile, Resolute Ventures closed on $75 million for its fourth early-stage fund, BlueRun Ventures nabbed $130 million for its sixth effort, Maverick Ventures announced a $382 million evergreen fund, First Round Capital introduced a new pre-seed fund that will target recent graduates, Techstars decided to double down on its corporate connections with the launch of a new venture studio and, last but not least, Lance Armstrong wrote his very first check as a VC out of his new fund, Next Ventures.

More money goes toward scooters

In case you were concerned there wasn’t enough VC investment in electric scooter startups, worry no more! Flash, a Berlin-based micro-mobility company, emerged from stealth this week with a whopping €55 million in Series A funding. Flash is already operating in Switzerland and Portugal, with plans to launch into France, Italy and Spain in 2019. Bird and Lime are in the process of raising $700 million between them, too, indicating the scooter funding extravaganza of 2018 will extend into 2019 — oh boy!

Startups secure cash

  • Niantic finally closed its Series C with $245 million in capital commitments and a lofty $4 billion valuation.
  • Outdoorsy, which connects customers with underused RVs, raised $50 million in Series C funding led by Greenspring Associates, with participation from Aviva Ventures, Altos Ventures, AutoTech Ventures and Tandem Capital.
  • Ciitizen, a developer of tools to help cancer patients organize and share their medical records, has raised $17 million in new funding in a round led by Andreessen Horowitz.
  • Footwear startup Birdies — no, I don’t mean Allbirds or Rothy’s — brought in an $8 million Series A led by Norwest Venture Partners, with participation from Slow Ventures and earlier investor Forerunner Ventures.
  • And Brud, the company behind the virtual celebrity Lil Miquela, is now worth $125 million with new funding.

Feature of the week

TechCrunch’s Josh Constine introduced readers to Squad this week, a screensharing app for social phone addicts.

Listen to me talk

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase editor-in-chief Alex Wilhelm and I marveled at the dollars going into scooter startups, discussed Slack’s upcoming direct listing and debated how the government shutdown might impact the IPO market.

Want more TechCrunch newsletters? Sign up here.

Source: The Tech Crunch

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In emerging markets there are no copycats, just budding entrepreneurs

Posted by on Dec 17, 2018 in Amazon, Business, business incubators, chef, Column, eBay, economy, entrepreneurship, Flipkart, founder, Innovation, Kickstarter, oliver samwer, Postmates, Private Equity, Rocket Internet, stanford, Startup company, Startups, Uber, United States | 0 comments

Every year I teach an MBA course at Stanford about the exciting opportunities for tech investors and entrepreneurs in developing economies. When we designed the syllabus back in 2013, Rocket Internet was still firing on all cylinders on four continents. The unapologetic machine built to copy big American internet companies created billions of dollars for the Samwer brothers and its backers. During Rocket’s golden years, the best startups in the developing economies seemed to inevitably have an original reference in Silicon Valley.

Accordingly, we added a class about the opportunity of replicating business models to seize this information arbitrage. Call it the second-mover advantage.

Despite my conviction about the model, the copycat word  —  short for replicating startups and attached to these ventures  —  annoyed me from the start. More than a term to describe a straightforward recipe to launch, I see it as an unconscious way to belittle an entire group of hard-charging founders and investors.

Indeed, while in foreign eyes, we have been building a Mexican Kickstarter, a Middle Eastern Uber, an Indian Amazon or a Colombian Postmates, I argue visionary founders are taking a simple idea that already exists and creating new worlds.

On the internet, there are Einsteins and there are Bob the Builders. I’m Bob the Builder. Oliver Samwer, founder of Rocket Internet

Gateway to entrepreneurship

While impact is the final goal, founders can approach the journey in different ways. The most common approach in the startup world is to use the business method, or more pompously, the design thinking methodology. “Fall in love with the problem, not the solution,” mentors keep telling a succession of startup clusters in acceleration programs. The best and “leanest” way to product market fit is by starting small then keep iterating the solution until you nail it.

A second way to start is favored by engineers and scientists: Take a new promising technology or a forgotten molecule, then find a big problem. Keep iterating until you find a problem worth solving, like a hammer looking for a nail.

A third way is starting like painters create, building skills by copying classics, or like a new chef cooks by starting with iconic recipes: replicate a proven idea and iterate until you find traction.

Until a few years ago it was ostensibly the only way to scale in developing economies. The model helped raise local capital from risk-averse investors who needed reassurance. The playbook to scale was unfolding a couple of years ahead and served as a guide to founders without previous startup experience and no local role models. The potential acquirer was identified and sometimes contacted in advance. Founders weren’t crazy and investors weren’t dumb.

Replicating a business model has served in emerging ecosystems as the gateway to entrepreneurship and venture investing.

Photo courtesy of Flickr/A_Marga

Riding the next wave

According to conventional wisdom, new ecosystems around the world grow through the following three stages, be them in developing economies or more developed countries. First, local and foreign entrepreneurs replicate successful models focused on local markets. Then as the ecosystem evolves, founders start applying existing technologies to solve local problems. Finally, as the tech space matures, new technologies begin to flourish.

In my opinion, those stages never happen sequentially as stated by ecosystem observers. Successful startups that started with a foreign inspiration can outgrow the master. If they are not bought into submission by the first mover, some of the most famous copycats reinvented the original and made it better: Mercado Libre is much more relevant in the e-commerce space than eBay . Flipkart is hardly an Amazon, not to mention WeChat. These companies are in turn some of the most prolific tech innovators on the globe. Truly ecosystems evolve organically in unique ways reflecting their history, geopolitical environment, economic structure and cultural features.

Two ways to defend the status quo: “It’s been done before” and “It’s never been done before.” –Thibault @Kpaxs

In defense of talent

Recently, it’s hard to hear American observers use the word copycat to describe any American company. After all, Guilt replicated VentesPrivees and Lime, Chinese dockless bike sharing and many more examples. All American startups are treated as innovators while the rest as mere followers.

Recently, Chinese or Indian startups seem to be given the benefit of the doubt regarding their originality. Is it because these regions have become more innovative? Maybe. But it’s also because these ecosystems have gained the respect of Silicon Valley. Indeed, Chinese consumer tech surpassed decisively the U.S. as the most important country in terms of investments.

So here’s my humble suggestion to our wealthier and more accomplished colleagues: stop using the c-word with founders. It’s offensive. Most probably, these founders are facing more challenges to build their companies and lower odds for success that the first mover. If anything, they have more merit than the originals.

As for founders, when they call you a me-too, remember all teams started somewhere, somehow. In fact, most started like Bob the Builder before turning into Einsteins. The truth is, it doesn’t matter where you start. You can start by applying a new technology or protocol. You can start with a problem you feel passionate about. You can start by replicating a business model. It doesn’t really matter if you take a big swing at the future and trust you will figure out how to make it happen. It doesn’t matter what label they use while you change the world for the better.


Source: The Tech Crunch

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TNB Aura closes $22.7M fund to bring PE-style investing to Southeast Asia’s startups

Posted by on Dec 13, 2018 in Artificial Intelligence, Asia, Australia, Business, economy, entrepreneurship, Finance, funding, Fundings & Exits, golden gate ventures, Google, Indonesia, jungle ventures, manufacturing, money, Monk's Hill Ventures, openspace ventures, Philippines, Private Equity, Singapore, Southeast Asia, Startup company, TC, temasek, Thailand, TradeGecko, United States, Venture Capital, vietnam | 0 comments

TNB Aura, a recent arrival to Southeast Asia’s VC scene, announced today that it has closed a maiden fund at SG$31.1million, or around US$22.65 million, to bring a more private equity-like approach to investing in startups in the region.

The fund was launched in 2016 and it is a joint effort between Australia-based venture fund Aura and Singapore’s TNB Ventures, which has a history of corporate innovation work. It reached a final close today, having hit an early close in January. It is a part of the Enterprise Singapore ‘Advanced Manufacturing and Engineering’ scheme which, as you’d expect, means there is a focus on hardware, IO, AI and other future-looking tech like ‘industry 4.0.’

The fund is targeting Series A and B deals and it has the firepower to do 15-20 deals over likely the next two to three years, co-founder and managing partner Vicknesh R Pillay told TechCrunch in an interview. There’s around $500,000-$4 million per company, with the ideal scenario being an initial $1 million check with more saved for follow-on rounds. Already it has backed four companies including TradeGecko, which raised $10 million in a round that saw TNB Aura invest alongside Aura, and AI marketing platform Ematic.

The fund has a team of 10, including six partners and an operating staff of four. It pitches itself a little differently to most other VCs in the region given that manufacturing and engineering bent. That, Pillay said, means it is focused on “hardware plus software” startups.

“We are very strong fundamentals guys,” Pillay added. We ask what is the valuation and decide what we can get from a deal. It’s almost like PE-style investing in the VC world.”

A selection of the TNB Aura team [left to right]: Samuel Chong (investment manager), Calvin Ng, Vicknesh R Pillay, Charles Wong (partners), Liu Zhihao (investment manager)

Another differentiator, Pillay believes, is the firm’s history in the corporate innovation space. That leads it to be pretty well suited to working in the B2B and enterprise spaces thanks to its existing networks, he said.

“We particularly like B2B saas companies and we believe we can assist them through of our innovation platforms,” Pillay explained.

Outside of Singapore — which is a heavy focus thanks to the relationship with Enterprise Singapore — TNB Aura is focused on Indonesia, the Philippines, Thailand and Vietnam, four of the largest markets that form a large chunk of Southeast Asia’s cumulative 650 million population. With an internet population of over 330 million — higher than the entire U.S. population — the region is set to grow strongly as internet access increases. A recent report from Google and Temasek tipped the region’s digital economy will triple to reach $240 billion by 20205.

The report also found that VC funding in Southeast Asia is developing at a fast clip. Excluding unicorns, which distort the data somewhat, startups raised $2.6 billion in the first half of this year, beating the $2.4 billion tally for the whole of 2017.

There are plenty of other Series A-B funds in the region, including Jungle Ventures, Golden Gate Ventures, Openspace Ventures, Monks Hill Ventures, Qualgro and more.


Source: The Tech Crunch

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