Year: 2021

Today, my colleague Kirsten Korosec reported that the autonomous vehicle startup Aurora is close to finalizing a deal to merge with one of three blank-check companies that have been formed to date by renowned entrepreneurs Reid Hoffman and Mark Pincus and a third partner in these deals, Michael Thompson, who long managed special situation funds.

This one is intriguing for a lot of reasons, including because Aurora’s founders are big wheels in their industry (no pun intended) and their moves are widely watched, and having already acquired the self-driving unit of Uber in a complicated arrangement, Aurora could, as a publicly traded entity, snap up even more rivals, given it would have a more liquid currency than it does right now.

Possible merits of the deal aside, it’s worth zooming in on Hoffman here. His venture firm, Greylock, is an investor in Aurora and has been since co-leading its Series A round in 2018, at which point Hoffman joined the board as a director. Now Hoffman’s SPAC is looking to take Aurora public at what we can safely assume is a much, much higher valuation than where it was valued back then. In fact, Kirsten reports that one of the sticking points in this new deal is the targeted valuation, writing that it had been as high as $20 billion during one point of its current talks and is now closer to $12 billion, with the deal expected to be announced as early as next week.

This isn’t the first time a SPAC sponsor has pursued an existing investment as its target. In just one similar case, Chamath Palihapitiya was an investor in insurance company Clover through his VC firm Social Capital and as industry watchers will know, one of his blank-check companies merged with Clover last year.

Palihaptiya declined to disclose to Bloomberg whether or not he sold the stake prior to the SPAC deal, but legally, it doesn’t matter anyway. All a SPAC sponsor need do right now is write a lengthy disclosure when raising a SPAC that ultimately says, ‘Hey, I might use the capital I’m raising for this blank-check company to buy another company where I already have a financial interest, and here’s how that’s going to work.’

The question is whether such rules around potential conflicts — or lack of them — will continue to exist indefinitely. The SEC is clearly taking a closer look right now at SPACs, and while it offered guidance specifically around conflicts of interest last December, saying that they make the agency a little nervous and could sponsors please disclose as much as possible to everyone involved in a deal about any pre-existing financial relationships and who is going to own how much, there’s a new administration in Washington and a new agency head in SEC Chief Gary Gensler, and it wouldn’t be surprising to see more being done on this front than we’ve seen to date.

There seemingly should be. SPACs already have a lousy reputation because investors lose money on the majority of them, and notwithstanding the esteemed reputation of people like Hoffman, these obvious conflicts of interest — let’s face it — generally stink.

Yes, there’s a strong argument that a SPAC sponsor who has been long involved with a target company knows better the value of that company than anyone else, but that inside knowledge cuts both ways. The target could be an amazing company that just needs a way to go public more quickly than might be possible with a traditional IPO; the target could also need to bailed out by SPAC sponsors with a vested interest in not losing their shirts on their earlier investment.

Do most retail investors know the difference between the two? It’s really doubtful, and in this go-go market, they seem bound to get hurt if regulators continue to turn a blind eye to the practice. So, SEC, what are you waiting for?

Cruise, the autonomous vehicle subsidiary of GM that also has backing from SoftBank Vision Fund, Microsoft and Honda, has secured a permit that will allow the company to shuttle passengers in its test vehicles without a human safety operator behind the wheel.

The permit, issued by the California Public Utilities Commission as part of its driverless pilot program, is one of several regulatory requirements autonomous vehicle companies must meet before they can deploy commercially. This permit is important — and Cruise is the first to land this particular one — but it does not allow the company to charge passengers for any rides in test AVs.

“In order to launch a commercial service for passengers here in the state of California, you need both the California DMV and the California PUC to issue deployment permits. Today we are honored to have been the first to receive a driverless autonomous service permit to test transporting passengers from the California PUC,” Prashanthi Raman, Cruise’s director of Government Affairs said in an emailed statement to TechCrunch.

There are two regulatory bodies, the CPUC and the California Department of Motor Vehicles, that dictate the testing and eventual deployment of autonomous vehicles. The California DMV regulates testing of autonomous vehicles with and without safety operators. About 55 companies have permits to test autonomous vehicles with a safety driver. Driverless testing permits, in which a human operator is not behind the wheel, have become the new milestone and a required step for companies that want to launch a commercial robotaxi or delivery service in the state. AutoX, Baidu, Cruise, Nuro, Pony.ai, Waymo, WeRide and Zoox have driverless permits with the DMV.

The final step with the DMV, which only Nuro has achieved, is a deployment permit. This permit allows Nuro to deploy at a commercial scale. Nuro’s vehicles can’t hold passengers, just cargo, which allows the company to bypass the CPUC permitting process.

Over at the CPUC, there are “drivered” and “driverless” permits, which allow companies to give rides in their autonomous vehicles. Aurora, AutoX, Cruise, Deeproute.ai, Pony, Voyage (which was acquired by Cruise) Waymo and Zoox all have “drivered” permits. Cruise is the first to snag the driverless permit.

Any company that wants to eventually shuttle and charge passengers for rides in their robotaxis have to secure all of these permits from the DMV and CPUC.

“Issuance of this first driverless permit for the CPUC’s Autonomous Vehicle Passenger Service Pilot Programs is a significant milestone. Autonomous vehicles have the potential to transform our transportation system and communities by solving individual mobility needs, improving roadway safety, and moving goods throughout the state sustainably and efficiently,” Commissioner Genevieve Shiroma said in statement. “The effective deployment of autonomous vehicles can also transform vehicle manufacturing, maintenance, and service business models to create new jobs and industries for the California workforce.”

Last year, the CPUC approved two new programs to allow permitted companies to provide and charge for shared rides in autonomous vehicles as long as they can navigate the lengthy regulatory process. The decision came after months of lobbying by the AV industry pushing the CPUC to consider a rule change that would allow for operators to charge a fare and offer shared rides in driverless vehicles.

The CPUC said Cruise, along with any other company that eventually participates in the pilot, must submit quarterly reports about the operation of their vehicles providing driverless AV passenger service. Companies must also submit a passenger safety plan that outlines their plans for protecting passenger safety for driverless operations.

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Hello and welcome to Daily Crunch for June 4, 2021. What a week, yeah? That was four super-packed days. But don’t think that the pace of news is about to slow down. It’s not. Next week is Apple’s big WWDC developer event, which we previewed here. And TechCrunch’s next event focused on mobility is just around the corner.

Here’s to catching up on sleep this weekend. — Alex

The TechCrunch Top 3

• Facebook can’t quit Trump: News broke today that Facebook will reconsider its ban of former American president and wannabe autocrat Donald Trump in two years’ time. The decision fits inside of Facebook’s larger struggle to decide the rules for its hugely popular social platforms.
• The IPO wave continues: Venture-backed startups are filing to go public at a rapid clip. Today it was Xometry (our first look here) and SentinelOne (more here). Expect to see more filings as a busy Q3 pipeline forms.
• Governments v. Tech: The world’s governments continue to push tech companies around. Sometimes for reasons that make some sense, as with the U.S. government’s refreshed crackdown on certain Chinese tech companies. And sometimes for reasons that do not, like Nigeria trying to ban Twitter late this week. Regardless of your politics, expect more from this space every week until the end of time.

Startups and VC

• Flink raises quick $240M: After operating in the market for just half a year, German grocery delivery startup Flink has raised a quarter billion dollars. Flink is German for quick, which relates to both its delivery timeline and its venture capital cadence.
• GBM raises “up to” $150M from SoftBank: When is a startup not a startup? When it’s 35 years old. That’s the case with Mexican company Grupo Bursátil Mexicano, or GBM. But as TechCrunch reports, the company is seeing hypergrowth, expanding from “having 38,000 investment accounts in January 2020 to more than 650,000 by year’s end.” It is not over the 1,000,000 account mark. Not bad.
• The BNPL market is growing quickly, still expensive: A TechCrunch analysis of recent buy-now-pay-later companies that are big enough to report earnings indicates that the popular startup market is still growing quickly, but that few if any companies working on the consumer sales model are actually making money. Yet.
• Toyota commits $300M to startups: Toyota’s AI-focused venture capital fund is AI-branded no more, and TechCrunch reports that the corporate VC group is “commemorating its new identity by investing an additional $300 million in emerging technologies and carbon neutrality.” That’s a lot of bread to help save the world.
• Auto SPAC: TechCrunch broke the news that “autonomous vehicle startup Aurora is close to finalizing a deal to merge with Reinvent Technology Partners Y, the newest special purpose acquisition company launched by LinkedIn co-founder and investor Reid Hoffman.”

Domain experts wanted: Submit your guest articles to Extra Crunch

Prospective Extra Crunch contributors regularly ask us about which topics Extra Crunch subscribers would like to hear more about, and the answer is always the same:

• Actionable advice that is backed up by data and/or experience.
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Our general submission guidelines haven’t changed, but Managing Editor Eric Eldon and Senior Editor Walter Thompson wrote a short post that identifies the topics we’re prioritizing at the moment:

• How-to articles for early-stage founders.
• Market analysis of different tech sectors.
• Growth marketing strategies.
• Alternative fundraising.
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If you’re a skillful entrepreneur, founder or investor who’s interested in helping someone else build their business, read our latest guidelines, then send your ideas to guestcolumns@techcrunch.com.

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Big Tech Inc.

Today’s Big Tech news is essentially a huge slug of Facebook. So, if you are irked by spending more time than you have to considering Zuckerberg’s empire, feel free to move on to the Community section of today’s missive!

Facebook land was more today than just the news regarding former U.S. President Donald Trump. Big Blue also got busy buying a gaming company and getting hit with antitrust probes in the U.K. and EU.

On the gaming front, Facebook announced today that it is buying Crayta, which TechCrunch described as a ”a Roblox-like game creation platform.” Roblox, of course, recently went public via a direct listing after seeing its fortunes rise during the COVID-19 pandemic. TechCrunch also wrote that Facebook has been buying one-off VR startups as well. So, there’s something of a larger gaming push afoot at the company, perhaps. If there is any rule to Facebook’s actions, it’s that if it sees any other company doing a thing and making money, it has to copy it.

To close out Big Tech for the week, Facebook is under new scrutiny by both the U.K. and the EU, this time for its use of data from advertising customers and the folks who use its single-sign-on tool. TechCrunch reported that the investigations are “looking at whether it uses this data as an unfair lever against competitors in markets such as classified ads.”

Community

Thanks for joining us yesterday for our chat about the future of e-commerce. It’s nice to be able to dive deeper into the things we write. Twitter Spaces was fun to use, but sadly our friend Brandon Chu from Shopify wasn’t able to join from his Android device (yay beta apps!). Just means we’ll have to do it again.

Speaking of doing Twitter Spaces again, we’re going to be pregaming WWDC on Monday, led by our hardware editor, Brian Heater. We’ll start bright and early at 8:30 a.m. PDT/11:30 a.m. EDT, so bring all of your thoughts and questions then.

Despite the complications of meeting new people in the midst of a global pandemic, dating apps have shown a recent spike in both downloads and usage. Now, as COVID-19 vaccines become more widely available, it’s likely that this trend will continue.

In other words, Tinder is anticipating a “post-pandemic uncuffing season,” and they’re rolling out a new feature to prepare. Now, users can upload their phone contacts to select certain people that they’d rather not see on the app, whether that’s an ex, a coworker, or a family member. According to a survey commissioned by Tinder, 40% of people have found an ex-partner on the app, 24% have encountered a family member, and one in ten have even encountered their professor.

Sure, it would be pretty awkward to see your ex out on the dating market again. But the new feature is more interesting for the user safety aspect. For example, if someone has previously encountered a stalker or otherwise abusive figure – whether on the app or off – they now have a tool to directly block them on Tinder.

However, instead of creating a simple form where you could enter in the phone number or email address of the abuser, Tinder is asking for permission to access the user’s entire contacts list. Ostensibly, this is for ease of use – Tinder even claims it only keeps the contact information for those you’ve blocked on hand, and not your entire address book – but users may still be wary. For years, social apps have used address book uploads as a big data grab from users, with little benefit beyond friend-finding functionality. More recently, this trend has reemerged with new apps like Poparazzi and Clubhouse. The latter thankfully stopped the practice in March after user outcry.

“We’re rolling out Block Contacts as an additional resource empowering members with peace of mind by helping create a worry-free space for them to spark new connections,” said Bernadette Morgan, Group Product Manager, Trust & Safety at Tinder, in a statement.

Tinder tested the Block Contacts feature in India, Korea, and Japan, reporting that members who used the feature blocked about a dozen people on average.

To use the feature, you’ll go to Settings under your profile icon, select “Block Contacts” then grant the app permission. To block individuals, you can’t rely on whether or not they were blocked on your phone. You’ll need to select each person you want to block under the “Contacts” tab then tap “Block Contacts.”

This user interface makes it easier to block abusers and exes, but it’s also designed for people who want to block a large number of people – like everyone in their family or close friend group. That makes the feature a big perk for those using Tinder’s app to cheat, too.

Tinder is strict about requiring a valid phone number to register, though it’s not impossible for people to circumvent the system by registering with a Google Voice number, for example. So, regardless of what safety features Tinder rolls out, proceed wisely.

The average corporate security organization spends $18 million annually but is largely ineffective at preventing breaches, IP theft and data loss. Why? The fragmented approach we’re currently using in the security operations center (SOC) does not work.

Here’s a quick refresher on security operations and how we got where we are today: A decade ago, we protected our applications and websites by monitoring event logs — digital records of every activity that occurred in our cyber environment, ranging from logins to emails to configuration changes. Logs were audited, flags were raised, suspicious activities were investigated, and data was stored for compliance purposes.

As malicious actors and adversaries became more active, and their tactics, techniques and procedures (or TTP’s, in security parlance) grew more sophisticated, simple logging evolved into an approach called “security information and event management” (SIEM), which involves using software to provide real-time analysis of security alerts generated by applications and network hardware. SIEM software uses rule-driven correlation and analytics to turn raw event data into potentially valuable intelligence.

Although it was no magic bullet (it’s challenging to implement and make everything work properly), the ability to find the so-called “needle in the haystack” and identify attacks in progress was a huge step forward.

Today, SIEMs still exist, and the market is largely led by Splunk and IBM QRadar. Of course, the technology has advanced significantly because new use cases emerge constantly. Many companies have finally moved into cloud-native deployments and are leveraging machine learning and sophisticated behavioral analytics. However, new enterprise SIEM deployments are fewer, costs are greater, and — most importantly — the overall needs of the CISO and the hard-working team in the SOC have changed.

New security demands are asking too much of SIEM

First, data has exploded and SIEM is too narrowly focused. The mere collection of security events is no longer sufficient because the aperture on this dataset is too narrow. While there is likely a massive amount of event data to capture and process from your events, you are missing out on vast amounts of additional information such as OSINT (open-source intelligence information), consumable external-threat feeds, and valuable information such as malware and IP reputation databases, as well as reports from dark web activity. There are endless sources of intelligence, far too many for the dated architecture of a SIEM.

Additionally, data exploded alongside costs. Data explosion + hardware + license costs = spiraling total cost of ownership. With so much infrastructure, both physical and virtual, the amount of information being captured has exploded. Machine-generated data has grown at 50x, while the average security budget grows 14% year on year.

The cost to store all of this information makes the SIEM cost-prohibitive. The average cost of a SIEM has skyrocketed to close to $1 million annually, which is only for license and hardware costs. The economics force teams in the SOC to capture and/or retain less information in an attempt to keep costs in check. This causes the effectiveness of the SIEM to become even further reduced. I recently spoke with a SOC team who wanted to query large datasets searching for evidence of fraud, but doing so in Splunk was cost-prohibitive and a slow, arduous process, leading the team to explore alternatives.

The shortcomings of the SIEM approach today are dangerous and terrifying. A recent survey by the Ponemon Institute surveyed almost 600 IT security leaders and found that, despite spending an average of $18.4 million annually and using an average of 47 products, a whopping 53% of IT security leaders “did not know if their products were even working.” It’s clearly time for change.

Prospective contributors regularly ask us about which topics Extra Crunch subscribers would like to hear more about, and the answer is always the same:

• Actionable advice that is backed up by data and/or experience.
• Strategic insights that go beyond best practices and offer specific recommendations readers can try out for themselves.
• Industry analysis that paints a clear picture of the companies, products and services that characterize individual tech sectors.

Our submission guidelines haven’t changed, but Managing Editor Eric Eldon and I wrote a short post that identifies the topics we’re prioritizing at the moment:

• How-to articles for early-stage founders.
• Market analysis of different tech sectors.
• Growth marketing strategies.
• Alternative fundraising.
• Quality of life (personal health, sustainability, proptech, transportation).

If you’re a skillful entrepreneur, founder or investor who’s interested in helping someone else build their business, please read our latest guidelines, then send your ideas to guestcolumns@techcrunch.com.

Thanks for reading; I hope you have a great weekend.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

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Opting for a debt round can take you from Series A startup to Series B unicorn

Image Credits: olegkalina (opens in a new window) / Getty Images

Debt is a tool, and like any other — be it a hammer or handsaw — it’s extremely valuable when used skillfully but can cause a lot of pain when mismanaged. This is a story about how it can go right.

Mario Ciabarra, the founder and CEO of Quantum Metric, breaks down how his company was on a “tremendous growth curve” — and then the pandemic hit.

“As the weeks following the initial shelter-in-place orders ticked by, the rush toward digital grew exponentially, and opportunities to secure new customers started piling up,” Ciabarra writes. “A solution to our money problems, perhaps? Not so fast — it was a classic case of needing to spend in order to make.”

If companies want to preserve equity, debt can be an advantageous choice. Here’s how Quantum Metric did it.

4 proven approaches to CX strategy that make customers feel loved

Image Credits: mucahiddin / Getty Images

People have been working to optimize customer experiences (CX) since we began selling things to each other.

A famous San Francisco bakery has an exhaust fan at street level; each morning, its neighbors awake to the scent of orange-cinnamon morning buns wafting down the block. Similarly, savvy hairstylists know to greet returning customers by asking if they want a repeat or something new.

Online, CX may encompass anything from recommending the right shoes to AI that knows when to send a frustrated traveler an upgrade for a delayed flight.

In light of Qualtrics’ spinout and IPO and Sprinklr’s recent S-1, Rebecca Liu-Doyle, principal at Insight Partners, describes four key attributes shared by “companies that have upped their CX game.”

Twitter’s acquisition strategy: Eat the public conversation

Image Credits: We Are (opens in a new window) / Getty Images

What is a microblogging service doing buying a social podcasting company and a newsletter tool while also building a live broadcasting sub-app? Is there even a strategy at all?

Yes. Twitter is trying to revitalize itself by adding more contexts for discourse to its repertoire. The result, if everything goes right, will be an influence superapp that hasn’t existed anywhere before. The alternative is nothing less than the destruction of Twitter into a link-forwarding service.

Let’s talk about how Twitter is trying to eat the public conversation.

Reading the IPO market’s tea leaves

Image Credits: Nigel Sussman (opens in a new window)

Although it was a truncated holiday week here in the United States, there was a bushel of IPO news. We sorted through the updates and came up with a series of sentiment calls regarding these public offerings.

Earlier this week, we took a look at:

• Marqeta‘s first IPO price range (fintech).
• 1st Dibs‘ first IPO price range (e-commerce).
• Zeta Global‘s IPO pricing (martech).
• The start of SoFi trading post-SPAC (fintech).
• The latest from BarkBox (e-commerce).

How Expensify hacked its way to a robust, scalable tech stack

Image Credits: Nigel Sussman

Part 4 of Expensify’s EC-1 digs into the company’s engineering and technology, with Anna Heim noting that the group of P2P pirates/hackers set out to build an expense management app by sticking to their gut and making their own rules.

They asked questions few considered, like: Why have lots of employees when you can find a way to get work done and reach impressive profitability with a few? Why work from an office in San Francisco when the internet lets you work from anywhere, even a sailboat in the Caribbean?

It makes sense in a way: If you’re a pirate, to hell with the rules, right?

With that in mind, one could assume Expensify decided to ask itself: Why not build our own totally custom tech stack?

Indeed, Expensify has made several tech decisions that were met with disbelief, but its belief in its own choices has paid off over the years, and the company is ready to IPO any day now.

How much of a tech advantage Expensify enjoys owing to such choices is an open question, but one thing is clear: These choices are key to understanding Expensify and its roadmap. Let’s take a look.

Etsy asks, ‘How do you do, fellow kids?’ with $1.6B Depop purchase

Image Credits: Getty Images

The news this week that e-commerce marketplace Etsy will buy Depop, a startup that provides a secondhand e-commerce marketplace, for more than $1.6 billion may not have made a large impact on the acquiring company’s share price thus far, but it provides a fascinating look into what brands may be willing to pay for access to the Gen Z market.

Etsy is buying Gen Z love. Think about it — Gen Z is probably not the first demographic that comes to mind when you consider Etsy, so you can see why the deal may pencil out in the larger company’s mind.

But it isn’t cheap. The lesson from the Etsy-Depop deal appears to be that large e-commerce players are willing to splash out for youth-approved marketplaces. That’s good news for yet-private companies that are popular with the budding generation.

Confluent’s IPO brings a high-growth, high-burn SaaS model to the public markets

Image Credits: Andriy Onufriyenko / Getty Images

Confluent became the latest company to announce its intent to take the IPO route, officially filing its S-1 paperwork this week.

The company, which has raised over $455 million since it launched in 2014, was most recently valued at just over $4.5 billion when it raised $250 million last April.

What does Confluent do? It built a streaming data platform on top of the open-source Apache Kafka project. In addition to its open-source roots, Confluent has a free tier of its commercial cloud offering to complement its paid products, helping generate top-of-funnel inflows that it converts to sales.

What we can see in Confluent is nearly an old-school, high-burn SaaS business. It has taken on oodles of capital and used it in an increasingly expensive sales model.

How to win consulting, board and deal roles with PE and VC funds

Image Credits: Orla (opens in a new window) / Getty Images

Would you like to work with private equity and venture capital funds?

There are relatively few jobs directly inside private equity and venture capital funds, and those jobs are highly competitive.

However, there are many other ways you can work and earn money within the industry — as a consultant, an interim executive, a board member, a deal executive partnering to buy a company, an executive in residence or as an entrepreneur in residence.

Let’s take a look at the different ways you can work with the investment community.

The existential cost of decelerated growth

Image Credits: Nigel Sussman (opens in a new window)

Even among the most valuable tech shops, shareholder return is concentrated in share price appreciation, and buybacks, which is the same thing to a degree.

Slowly growing tech companies worth single-digit billions can’t play the buyback game to the same degree as the majors. And they are growing more slowly, so even a similar buyback program in relative scale would excite less.

Grow or die, in other words. Or at least grow or come under heavy fire from external investors who want to oust the founder-CEO and “reform” the company. But if you can grow quickly, welcome to the land of milk and honey.

Even among the most valuable tech shops, shareholder return is concentrated in share price appreciation, and buybacks, which is the same thing to a degree.

Slowly growing tech companies worth single-digit billions can’t play the buyback game to the same degree as the majors. And they are growing more slowly, so even a similar buyback program in relative scale would excite less.

Grow or die, in other words. Or at least grow or come under heavy fire from external investors who want to oust the founder-CEO and “reform” the company. But if you can grow quickly, welcome to the land of milk and honey.

Hormonal health is a massive opportunity: Where are the unicorns?

Image Credits: Carol Yepes (opens in a new window) / Getty Images

There is a growing group of entrepreneurs who are betting that hormonal health is the key wedge into the digital health boom.

Hormones are fluctuating, ever-evolving, and diverse — but these founders say they’re also key to solving many health conditions that disproportionately impact women, from diabetes to infertility to mental health challenges.

Many believe it’s that complexity that underscores the opportunity. Hormonal health sits at the center of conversations around personalized medicine and women’s health: By 2025, women’s health could be a $50 billion industry, and by 2026, digital health more broadly is estimated to hit $221 billion.

Still, as funding for women’s health startups drops and stigma continues to impact where venture dollars go, it’s unclear whether the sector will remain in its infancy or hit a true inflection point.

3 lessons we learned after raising $6.3M from 50 investors

Image Credits: sorbetto (opens in a new window)/ Getty Images

Two years ago, founders of calendar assistant platform Reclaim were looking for a “mango” seed round — a boodle of cash large enough to help them transition from the prototype phase to staffing up for a public launch.

Although the team received offers, co-founder Henry Shapiro says the few that materialized were poor options, partially because Reclaim was still pre-product.

“So one summer morning, my co-founder and I sat down in his garage — where we’d been prototyping, pitching and iterating for the past year — and realized that as hard as it was, we would have to walk away entirely and do a full reset on our fundraising strategy,” he writes.

Shapiro shares what he learned from embracing failure and offers three conclusions “every founder should consider before they decide to go out and pitch investors.”

For SaaS startups, differentiation is an iterative process

Image Credits: Kevin Schafer / Getty Images

Although software as a service has been thriving as a sector for years, it has gone into overdrive in the past year as businesses responded to the pandemic by speeding up the migration of important functions to the cloud, ActiveCampaign founder and CEO Jason VandeBoom writes in a guest column.

“We’ve all seen the news of SaaS startups raising large funding rounds, with deal sizes and valuations steadily climbing. But as tech industry watchers know only too well, large funding rounds and valuations are not foolproof indicators of sustainable growth and longevity.”

VandeBoom notes that to scale sustainably, SaaS startups need to “stand apart from the herd at every phase of development. Failure to do so means a poor outcome for founders and investors.”

“As a founder who pivoted from on-premise to SaaS back in 2016, I have focused on scaling my company (most recently crossing 145,000 customers) and in the process, learned quite a bit about making a mark,” VandeBoom writes. “Here is some advice on differentiation at the various stages in the life of a SaaS startup.”

Autonomous vehicle startup Aurora is close to finalizing a deal to merge with Reinvent Technology Partners Y, the newest special purpose acquisition company launched by LinkedIn co-founder and investor Reid Hoffman, Zynga founder Mark Pincus and managing partner Michael Thompson, according to several sources familiar with the talks.

One of the sticking points is the targeted valuation, which had been as high as $20 billion. It is now closer to $12 billion and the deal is expected to be announced as early as next week, said multiple sources who have asked not to be identified because they’re not authorized to discuss the deal. Aurora declined to comment. Reinvent also declined to comment.

The Hoffman, Pincus, Thompson trio, who are bullish on a concept that they call “venture capital at scale,” have formed three SPACs, or blank check companies. Two of those SPACs have announced mergers with private companies. Reinvent Technology Partners announced a deal in February to merge with the electric vertical take off and landing company Joby Aviation, which will be listed on the New York Stock Exchange later this year. Reinvent Technology Partners Z merged with home insurance startup Hippo.

Their latest SPAC, known as Reinvent Technology Partners Y,  priced its initial public offering of 85 million units at $10 per unit to raise $850 million. The SPAC issued an additional 12.7 million shares to cover over allotments with total gross proceeds of $977 million, according to regulatory filings. The units are listed on Nasdaq exchange and trade under the ticker symbol “RTPYU.”

Aurora already has a relationship with Hoffman. In February 2018, Aurora raised $90 million from Greylock Partners and Index Ventures. Hoffman, who is a partner at Greylock and Index Ventures’ Mike Volpi became board members of Aurora as part of the Series A round. The following year, Aurora raised more than $530 million in a Series B round led by Sequoia Capital and included from Amazon, T. Rowe Price Associates. Lightspeed Venture Partners, Geodesic, Shell Ventures and Reinvent Capital also participated in the round, as well as previous investors Greylock and Index Ventures.

While Hoffman and Reinvent showing up on two sides of a SPAC deal would be unusual, it is not unprecedented. For instance, a blank check company formed by T.J. Rodgers announced in February a merger with Enovix, a battery technology company that he has been a director of since 2012 and is its largest shareholder, Bloomberg reported at the time. In this case, Hoffman is a board member, but not its largest shareholder.

Aurora, which was founded in 2017 by Sterling Anderson, Drew Bagnell and Chris Urmson, has had a high-flying year. In December, the company reached an agreement with Uber to buy the ride-hailing firm’s self-driving unit in a complex deal that value the combined company at $10 billion.

Aurora did not pay cash for Uber ATG, a company that was valued at $7.25 billion following a $1 billion investment in 2019 from Toyota, DENSO and SoftBank’s Vision Fund. Instead, Uber handed over its equity in ATG and invested $400 million into Aurora. The deal gave Uber a 26% stake in the combined company, according to a filing with the U.S. Securities and Exchange Commission. (As a refresher, Uber held an 86.2% stake (on a fully diluted basis) in Uber ATG, according to filings with the SEC. Uber ATG’s investors held a combined stake of 13.8% in the company.)

Since the acquisition, Aurora has spent the past several months integrating Uber ATG employees and now has a workforce of about 1,600 people. Aurora more recently said it reached an agreement with Volvo to jointly develop autonomous semi-trucks for North America. That partnership, which is expected to last several years and is through Volvo’s Autonomous Solutions unit, will focus on developing and deploying trucks built to operate autonomously on highways between hubs for Volvo customers.

In March, Aurora disclosed in a regulatory filing, that it has sold $54.9 million in an equity offering that kicked off in March 2021.

Xometry, a Maryland-based service that connects companies with manufacturers with excess production capacity around the world, filed an S-1 form with the U.S. Securities and Exchange Commission announcing its intent to become a public company.

As the global supply chain tightened during the pandemic in 2020, a company that helped find excess manufacturing capacity was likely in high demand. CEO and co-founder Randy Altschuler described his company to TechCrunch this way last September upon the announcement of a $75 million Series E investment:

“We’ve created a marketplace using artificial intelligence to power it, and provide an e-commerce experience for buyers of custom manufacturing and for suppliers to deliver that manufacturing,” Altschuler said at the time. Xometry raised nearly $200 million while private, per Crunchbase data.

With Xometry, companies looking to build custom parts now have the ability to do so in a digital way. Rather than working the phones or starting an email chain, they can go into the Xometery marketplace, define parameters for their project and find a qualified manufacturer who can handle the job at the best price.

As of last September, the company had built relationships with 5,000 manufacturers around the world and had 30,000 customers using the platform.

At the time of that funding round, perhaps it wasn’t a coincidence that the company’s lead investor was T. Rowe Price. When an institutional investor is involved in a late-stage round, it’s usually a sign that the company is ready to start thinking about an IPO. Altschuler said it was definitely something the company was considering, and had brought on a CFO, too, another sign that a company is ready to take that next step.

So what do Xometry’s financials look like as it heads to the public markets? We took a look at the S-1 to find out.

The numbers

Xometry makes money in two ways. The first comes from one part of its marketplace, with the company generating “substantially all of [its] revenue” from charging “buyers on its platform.” The other way that Xometry engenders top-line is seller-related services, including financial work. The company notes that seller-generated revenues were just 5% of its 2020 total, though it does expect that figure to rise.

We’re just five days away from TC Sessions: Mobility 2021 where thousands of mobility movers and shakers will dive deep into the game-changing technology that’s reinventing the way we move people — and pretty much everything else — around the world.

Mobility 2021 is a jam-packed event, and we want to make sure you know about everything that’s going down on June 9. But first, a message from the home office: Buy your TC Sessions: Mobility 2021 pass here. We now return you to our regularly scheduled post.

We’ve told you about the incredible slate of speakers, and you’ll find the wide range of topics they’ll cover in the event agenda. Remember, you can watch any session later at your convenience thanks to video on demand.

Now we want to remind you to visit our virtual expo area. It’s one of the most exciting aspects of Mobility 2021 — and one that offers untold opportunity. That’s where you’ll find 28 outstanding early-stage startups exhibiting their awesome tech and talent.

Hopin, our virtual platform, lets exhibitors schedule and host interactive product demos via live stream. Don’t be shy. Ask for a demo and start a conversation. Whether you’re looking to invest, collaborate or find the right solution for your business, you’ll find opportunity waiting for you in the expo.

Pro Tip: Watch all the exhibiting startups pitch live to TC editors and event attendees during the Startup Pitch Feedback Session (check the agenda for the exact time).

Ready to start planning your expo strategy? Here’s the list of the mighty mobility startups exhibiting at TC Sessions: Mobility 2021.

• Akridata
• AMPECO EV Charging Platform
• Bestmap
• CitySwift
• Civilized Cycles
• DRONAMICS
• EMC Squared Vehicles
• EVBloom
• EyeLights
• FTEX
• Go Oil
• GridMatrix
• Imtyrd.com
• Infinite Mobility
• Ivee
• Koop Technologies
• LinkedCar
• MACA
• NODAR
• PIX Moving
• ROADZ
• Busability
• Sonatus
• Tangram Vision
• Threshold 360
• Vene Rides Inc
• Zygg
• Zync

TC Sessions: Mobility 2021 takes place on June 9 — in just five days. Grab your pass and dive into all the information, education, community and opportunity designed to drive your business forward.

Is your company interested in sponsoring or exhibiting at TC Sessions: Mobility 2021? Contact our sponsorship sales team by filling out this form.

Ransomware attacks on the JBS beef plant, and the Colonial Pipeline before it, have sparked a now familiar set of reactions. There are promises of retaliation against the groups responsible, the prospect of company executives being brought in front of Congress in the coming months, and even a proposed executive order on cybersecurity that could take months to fully implement.

But once again, amid this flurry of activity, we must ask or answer a fundamental question about the state of our cybersecurity defense: Why does this keep happening?

I have a theory on why. In software development, there is a concept called “technical debt.” It describes the costs companies pay when they choose to build software the easy (or fast) way instead of the right way, cobbling together temporary solutions to satisfy a short-term need. Over time, as teams struggle to maintain a patchwork of poorly architectured applications, tech debt accrues in the form of lost productivity or poor customer experience.

Our nation’s cybersecurity defenses are laboring under the burden of a similar debt. Only the scale is far greater, the stakes are higher and the interest is compounding. The true cost of this “cybersecurity debt” is difficult to quantify. Though we still do not know the exact cause of either attack, we do know beef prices will be significantly impacted and gas prices jumped 8 cents on news of the Colonial Pipeline attack, costing consumers and businesses billions. The damage done to public trust is incalculable.

How did we get here? The public and private sectors are spending more than $4 trillion a year in the digital arms race that is our modern economy. The goal of these investments is speed and innovation. But in pursuit of these ambitions, organizations of all sizes have assembled complex, uncoordinated systems — running thousands of applications across multiple private and public clouds, drawing on data from hundreds of locations and devices.

Complexity is the enemy of security. Some companies are forced to put together as many as 50 different security solutions from up to 10 different vendors to protect their sprawling technology estates — acting as a systems integrator of sorts. Every node in these fantastically complicated networks is like a door or window that might be inadvertently left open. Each represents a potential point of failure and an exponential increase in cybersecurity debt.

We have an unprecedented opportunity and responsibility to update the architectural foundations of our digital infrastructure and pay off our cybersecurity debt. To accomplish this, two critical steps must be taken.

First, we must embrace open standards across all critical digital infrastructure, especially the infrastructure used by private contractors to service the government. Until recently, it was thought that the only way to standardize security protocols across a complex digital estate was to rebuild it from the ground up in the cloud. But this is akin to replacing the foundations of a home while still living in it. You simply cannot lift-and-shift massive, mission-critical workloads from private data centers to the cloud.

There is another way: Open, hybrid cloud architectures can connect and standardize security across any kind of infrastructure, from private data centers to public clouds, to the edges of the network. This unifies the security workflow and increases the visibility of threats across the entire network (including the third- and fourth-party networks where data flows) and orchestrates the response. It essentially eliminates weak links without having to move data or applications — a design point that should be embraced across the public and private sectors.

The second step is to close the remaining loopholes in the data security supply chain. President Biden’s executive order requires federal agencies to encrypt data that is being stored or transmitted. We have an opportunity to take that a step further and also address data that is in use. As more organizations outsource the storage and processing of their data to cloud providers, expecting real-time data analytics in return, this represents an area of vulnerability.

Many believe this vulnerability is simply the price we pay for outsourcing digital infrastructure to another company. But this is not true. Cloud providers can, and do, protect their customers’ data with the same ferocity as they protect their own. They do not need access to the data they store on their servers. Ever.

To ensure this requires confidential computing, which encrypts data at rest, in transit and in process. Confidential computing makes it technically impossible for anyone without the encryption key to access the data, not even your cloud provider. At IBM, for example, our customers run workloads in the IBM Cloud with full privacy and control. They are the only ones that hold the key. We could not access their data even if compelled by a court order or ransom request. It is simply not an option.

Paying down the principal on any kind of debt can be daunting, as anyone with a mortgage or student loan can attest. But this is not a low-interest loan. As the JBS and Colonial Pipeline attacks clearly demonstrate, the cost of not addressing our cybersecurity debt spans far beyond monetary damages. Our food and fuel supplies are at risk, and entire economies can be disrupted.

I believe that with the right measures — strong public and private collaboration — we have an opportunity to construct a future that brings forward the combined power of security and technological advancement built on trust.