Author: azeeadmin

The COVID-19 pandemic is making life worse for many startups, but not all. Those benefiting are often taking advantage of the market updraft to add more capital to their accounts. Robinhood, for example, saw usage of its consumer fintech product rise rapidly. Then the company raised a Series F worth $280 million at a new, higher valuation.

Another startup has done something similar. Human Interest, a finservices 401(k) provider for SMBs, added $10 million to its Series C today. The company’s Series C round is now worth a total of $50 million. Glynn Capital led the Series C extension.

The reason for the new capital is simple. According to Jeff Schneble, the company’s CEO, Human Interest has seen “some of the strongest sales months in the company’s history, and are seeing 2-3X year-over-year growth in customer acquisition even in the midst of the COVID-19 crisis.”

When usage and revenue scale ahead of expectations, options open up. TechCrunch had a few questions about the additional capital. Let’s explore.

$10 million more

TechCrunch first wanted to know if the San Francisco-based Human Interest’s new $10 million — which brings its total known capital raised to around $80 million — is earmarked for offense (greater investment into GTM functions, for example), or defense (runway extension, and so forth).

According to the CEO, the round is “more about playing offense,” with the executive adding that offense has been “something we’ve had the luxury of thinking about since the beginning of the crisis, given our large raise in February.” Human Interest intends to double its engineering team, and is “aggressively ramping up [its] GTM team (more reps, more partners, growing our marketing team and budget).”

TechCrunch was also curious about its customer profile — is Human Interest seeing growth from a different set of customers in the COVID-19 era? According to Schneble, not really: “We have not seen a significant shift in customer size, geography or vertical,” he said.

Human Interest, however, is seeing more companies coming to it looking to change 401(k) providers. Schneble told TechCrunch that “historically” 85% of his company’s customers are looking to offer “a retirement benefit for the first time.” However, “in the last couple of months” Human Interest has seen “a surge of customers with existing retirement plans that want to move to a lower-cost benefit.”

As Human Interest uses “technology, rather than people” to run its 401(k) service, the startup can offer a service that is “typically 30-50% lower-cost than a legacy 401(k) plan,” according to Schneble.

Is this new demand changing the company’s economics? TechCrunch wanted to know if market interest in 401(k) plans — consumers are flocking to savings and investing apps, likely driving more companies to add retirement savings plans for their employees — was lowering Human Interest’s customer acquisition costs (CAC).

According to the CEO, Human Interest focuses on gross-margin payback, or the time period it takes for gross-margin adjusted revenue to repay CAC. “I can’t stress how important profitability is in this space,” Schneble told TechCrunch, adding that “many of [his] competitors have negative contribution margins, which is obviously not a recipe for building a successful public company.”

The company’s gross-margin payback pace is improving, with the company telling TechCrunch that it has “come down by ~70% in the past 12 months, and is now approaching zero for many of our customers (meaning the margin contribution from their initial payment when they launch their plan covers our CAC).”

Human Interest’s gross margins help with that, with Human Interest telling TechCrunch that it has “typical software margins” on its product. That means 70%+ gross margins.

Back to the $10 million add-on, TechCrunch confirmed that the new capital was raised at the same pre-money valuation as the rest of its Series C. The CEO added the following color:

We had interest from several of the later-stage growth funds we talked to in our Series C process, but decided to move forward with Glynn Capital. They are long-term investors that plan to hold their investment in us long after we’re public (similar to one of our other large investors, Oberndorf Enterprises). While we probably could have demanded a higher price for the extension, given the acceleration we’ve seen in the last few months, we decided to optimize on partner quality instead.

Now with more capital aboard, expectations are even higher for Human Interest. Let’s see how fast it can grow.

Plaid, the fintech company that was acquired by Visa for $5.3 billion a few months ago, is launching Plaid Exchange this week. Plaid is mostly known for its range of APIs that let developers access banking information.

This time, with Plaid Exchange, the company wants to help financial institutions directly so that they can build and maintain an API that other developers can use. An API is an interface that lets two services interact with each other.

If you’ve used Venmo, Betterment, Square’s Cash App or Robinhood, chances are you’ve interacted with Plaid in the past. Plaid has built a universal API that connects with thousands of financial institutions. When a service like Cash App asks you to connect to your bank account to get your banking information and cash out your balance, Square uses Plaid behind the scene.

And the ability to connect to thousands of banks with the same API is valuable on its own. Banks are built on legacy IT systems, which means that it isn’t always straightforward to communicate with some banks.

Plaid sometimes has to rely on screen scraping, which means that it connects to your banking website through a web browser that runs on its server and then saves the information. Those integrations can break if the website is updated, and they aren’t as effective as using an API.

With Plaid Exchange, Plaid can help banks when it comes to implementing an API. It should be more secure and reduce load on the servers.

Banks that choose to work with Plaid to build their API would then have a modern token-based system for their customers. For instance, just like on a social network, customers would be able to see if they have connected their bank account with third-party service and disable those connections.

Financial institutions could also leverage Plaid Exchange to build new services that connect directly with your main bank account through the API. Companies would be able to see if connections are working fine, which would make it much easier to identify issues with the infrastructure.

In some countries, such as the U.K., open banking is slowly becoming mandatory. Banks will have to provide an API sooner or later to increase competition between financial services. And Plaid wants to take advantage of those changes in the banking industry.

In one Atlanta suburb, finding and returning an electric shared scooter will be taken care of by teleoperators some 1,700 miles away in Mexico City.

Riders in the enclave of Peachtree Corners will be able to use an app beginning this week to hail a GoX scooter equipped with tech from teleoperations startup Tortoise. Using the “Hail my Scooter” app developed by GoX, riders can have the scooter cruise on its own to their location. After riders complete trips, the scooters will drive themselves back to a safe parking spot. From here, GoX employees charge and sanitize the scooters and then mark them with a sticker that indicates they have been properly cleaned.

These scooters are not truly autonomous, however. Instead, Tortoise’s teleoperators are able to remotely control the scooters thanks to its operating system and other modifications such as an extra set of wheels that make it easier to maneuver the micromobility devices.

The six-month pilot, which is done in collaboration with GoX, Tortoise and local tech incubator Curiosity Labs, makes this the first fleet of teleoperated electric scooters available for the public in the United States.

Image Credits: Tortoise

The COVID-19 pandemic, which wiped out public transit and shared micromobility ridership, has made Tortoise co-founder and president Dmitry Shevelenko more convinced and bullish than ever on scooter teleoperations.

“The pressure on unit economics is even greater now than it was pre-COVID,” Shevelenko said. “A use case that we had never really thought about before is the ability to disinfect vehicles throughout the day and that now feels pretty essential.”

The traditional shared scooter business model relies on gig economy workers to pick up and charge the devices. With the constant shuttling, scooters wear out more quickly. And they’re certainly not cleaned after every use.

“An important goal for us was to ensure that residents can enjoy the convenience of using e-scooters, while creating a world first in efficient, organized and advanced micromobility — right here in Peachtree Corners,” said Brian Johnson, city manager of Peachtree Corners.

The pilot also marks a bit of a coup for Tortoise. Peachtree Corners passed an ordinance mandating that all shared micromobility devices must be capable of automated repositioning in an effort to reduce clutter on sidewalks that have plagued other cities with dockless scooters.

“We didn’t even ask for this, it was just the city that did this on their own,” Shevelenko said.

This kind of mandate might become more common as city officials try to control scooter deployments. For instance, King County, which is home to Seattle and Bellevue, specifically called out remote repositioning as a technology that if an operator were deploying it, they would receive more points in their scoring mechanism to determine what companies receive permits.

“So it’s great to see cities embrace this technology right as it matures,” he said.

The novel coronavirus has been devastating for many people, families and communities — and the consequences are still being calculated. The tech world has seen wave after wave of layoffs, sometimes multiple waves at one company only weeks apart. Some startups have lost nearly all their revenue, and depending on their cash reserves, have little hope of recovering.

For VCs, the last two months have been an exercise in triage.

Partners have gone through their entire investment portfolios to identify the winners, what’s salvageable and what (at least in their minds) has no hope of resuscitation. If you are in the first two groups, it’s back to whatever normal looks like in the midst of a global pandemic and a deep economic recession.

But what if you suddenly get a call informing you that your investor — perhaps your biggest champion to date — is going to cut the rope and write you off entirely?

That’s what we are going to talk about today.

Before we go anywhere, be thankful if you even know how your investors are judging your startup. Most, unfortunately, will couch the terms they use (“we will be engaging less” or perhaps “we are unlikely to do our pro rata going forward”) rather than just saying directly, “we are writing you off; don’t call us — we’ll call you.” That’s polite and face-saving for all parties, but the lack of transparency can make decisions down the road much harder. It’s better to know where you stand, even if the news is hard.

Finding your bearings

The first step to approaching this situation is to get your bearings. Much like during a fundraise process, it’s not uncommon for different investors on your cap table to reach different conclusions about your startup’s potential. One investor may write you off, while another has you marked at a more neutral valuation or even positively. This can absolutely be frustrating, and given the emotion of this situation, it can be hard to rationally accept that an investor who once believed in you no longer does so.

Sphero just announced that it has spun off another company. Once again, the new startup has a decidedly different focus from its parent company’s core of education-focused products. While still a robotics company at its heart, the underwhelmingly named Company Six will create robotic systems designed for first responders and other humans whose work requires them to put themselves in harm’s way.

Also snuck into the press into the press release almost as an an after thought, is the appointment of Paul Copioli as the new CEO of Sphero, effective immediately. The executive is an industry veteran, who has worked at VEX Robotics, industrial robotics giant Fanuc and Lockheed Martin. Most recently, he was the President and COO of LittleBits when the startup was acquired by Sphero.

Copioli takes over after the company’s exit from the consumer space. Sphero has pivoted almost entirely into the educational market, with the LittleBits acquisition making up an important piece of the puzzle.

“It’s an honor to lead the Sphero team as we continue to pave the way for accessible robots, STEAM and computer science education for kids around the world,” he says in a release “With our focus on education and our mission to inspire the creators of tomorrow, Sphero has a long-standing place in our school systems and beyond.”

Spinning Company Six off as its own independent entity is seemingly part of the new focus. The seeds of the startups were formed by former CEO Paul Berberian’s Public Safety Division within Sphero. He has since shifted to become Chairman of both companies, while former Sphero COO Jim Booth will head Company Six as COO. Got all that?

Company Six has already closed a $3 million seemed round, lead by Spider Capital, with Sphero investors Foundry Group and Techstars also on-board. Like previous Sphero spinoff Misty, information about Company Six is minimal at the time of its announcement. The new company’s site is essentially bare. We only know it will be focused on creating robotic systems for first responders, defense workers and other dangerous jobs. The news echoes iRobot’s 2016 spinoff of its military wing, Endeavor. 

Sphero explains,

By applying the experience used to bring more than 4 million robots to market at Sphero, the Company Six team believes it can create products that are not only robust and feature-rich enough for professional applications, but also affordable enough to be adopted by the majority, rather than the minority, of civilian and military personnel.

More news to follow soon, no doubt.

This morning, Coalition announced that it has closed a $90 million Series C. The funding comes around a year after the cybersecurity insurance startup raised a $40 million Series B that TechCrunch covered at time.

The startup’s new, larger funding round was led by Valor Equity Partners and included participation from Greyhound Capital and Felicis, along with “existing investors,” per the company. Coalition told TechCrunch that its Series C was raised at an $800 million pre-money valuation, making the firm worth $890 million today.

Coalition noted in a release that it has raised $125 million in equity capital in its life. Given that the company’s Series B was generally reported as $40 million, the math didn’t add up. TechCrunch spoke with the company, learning that its Series B was $25 million in primary, and $15 million in secondary. So, the company’s $10 million Series A, $25 million primary Series B, and its $90 million Series C do add up to $125 million, as they should.

The San Francisco-based cybersecurity insurance startup raised its new capital, and nearly reached a unicorn valuation (the $1 billion threshold means less than it once did, of course), on the back of rapid customer growth. Let’s dig into the numbers.

Customers

Coalition’s funding round stood out not only because it represented an outsized Series C, but also because the firm reported an impressive customer growth figure. The startup told TechCrunch that had grown its customer base to 25,000, a figure that was up 600% from “the prior year.”

Landing that many new customers in a year, more or less, made us sit up and take notice; there is a strong connection between customer growth and revenue growth, implying that Coalition’s business was rapidly scaling.

TechCrunch wanted to know more, so we corresponded with Joshua Motta, the company’s co-founder and CEO.

First, we wanted to know if Coalition had juiced its sales and marketing spend in the last year, perhaps pushing its customer number through brute force and heavy spend. According to Matta, the answer appears to be not really:

Coalition’s insurance products are sold by insurance brokers across the country. While we’ve grown our internal sales and marketing team from 5 to 13 people [year-over-year], we’ve appointed over 1,000 new brokers in the same period, each of whom was driven by an interest to help their clients manage growing cyber risks.

Accreting brokers is not the same sort of cost as, say, spending gobs of money on advertising.

As TechCrunch noted at the time of the company’s Series B, “an ongoing threat of breaches and data exposures” has made cyber insurance attractive, so there may be secular tailwinds that are pushing Coalition along, helping boost its customer count.

Matta agrees, telling TechCrunch in an email that “data breaches and cyberattacks are now so commonplace that organizations can no longer afford to ignore them, and there is a growing awareness that insurance is often the only protection from catastrophic financial loss.”

Back to customer growth, TechCrunch was curious if the company had changed its pricing in the last year, perhaps lowering it and thus attracting more customers. Answer from its CEO: No.

But what is changing at Coalition is its size. According to Matta, the company has “made 20 new hires since the outset of March, and anticipates making an additional 100 hires over the next twelve months.”

The staffing-up makes sense, as the company plans to enter the Canadian market. TechCrunch asked what markets are coming next. According to the company: The UK, Europe and Australia.

Now we have to wait until we get another growth metric from the firm. Perhaps next time we’ll get a revenue figure, instead of merely a customer result. But hey, better some data than no data.

Since its inception, shared micromobility services have been in a precarious position — one supported by millions of dollars in venture capital. But the COVID-19 pandemic has brought even more turmoil upon an industry that has long struggled with unit economics. It has led to mass layoffs, operation shutdowns across several markets and more consolidation.

Despite the struggles of individual operators, micromobility as technology will come out of this stronger than before, industry analyst Horace Dediu tells TechCrunch.

Dediu, an analyst who coined the term “micromobility” and founded Micromobility Industries, sees the silver lining in the pandemic for micromobility as it relates to the adoption of public transit alternatives. With ongoing concerns about the disease and social distancing, consumers may look to alternative modes of transportation — ones that require fewer interactions with strangers. But simply because a certain technology takes off doesn’t mean the current slate of operators will benefit.

“The companies involved may not survive a crisis,” Dediu says. “We don’t remember the fact there were 3,000 automobile companies in the United States prior to Henry Ford’s Model T. We don’t remember all the electrical suppliers out there and the consolidation that took place in the electrical field with Westinghouse. There’s a lot of historic references we can cite. But the fact of the matter is that up until the crisis there was an over-investment where probably too much capital was allocated to the industry chasing business models which are not sustainable…I think there will be a washout with a kind of consolidation and we’re seeing that already.”

Earlier this month, for example, Uber sold off JUMP to Lime, while simultaneously leading a $170 million investment in the micromobility startup. That funding round brought Lime’s valuation down 79%, to $510 million, according to The Information. Last April, Lime was valued at $2.4 billion.

Strapi, the company behind the popular open-source headless CMS also called Strapi, has raised a $10 million Series A round led by Index Ventures. The company previously raised a $4 million seed round led by Accel and Stride.vc in October 2019.

Strapi is a headless content management system, which means that the back end and the front end operate totally separately. You can run Strapi on your own server and write content and pages for your site by connecting to Strapi’s admin interface.

After that, the front-end part of your application can fetch content from your Strapi instance using an API and display it to your customers and readers.

There are many advantages in separating the front end from the back end. First, it gives you a ton of flexibility when it comes to displaying your content. You can use a popular front-end framework, such as React, Vue and Angular, or develop your own custom front end.

When you want to update the design of your site, you can just switch from one front end to another with Strapi running like usual behind the scene.

Similarly, it offers more flexibility when it comes to server architecture. For instance, you could also leverage Strapi to build static websites and distribute them using a content delivery network, such as Cloudflare or AWS Cloudfront. You could imagine using Gatsby combined with a CDN to deploy your site on the edge. Most of your traffic will go through your CDN instead of hitting your servers directly.

Additionally, Strapi can be used to distribute content to different front ends. For instance, you could use a Strapi instance for the content of your website and your mobile app.

Strapi proves that eventually everything becomes an API. Sure, a headless CMS is probably overkill for most projects. But if you’re running a large scale application, Strapi can fit nicely in your architecture. Companies using Strapi include IBM, NASA and Walmart.

Many well-known open-source business angels have also invested in Strapi, such as Augusto Marietti and Marco Palladino from Kong, David Cramer from Sentry, Florian Douetteau from Dataiku, Solomon Hykes from Docker, Guillermo Rauch from Cloudup, Socket.io, Next.js and Zeit.co, and Eli Collins from Cloudera.

Brainbase, the rights management platform that’s helping Hollywood studios manage the licensing rights to their cultural icons, has picked up another $8 million in financing.

Behind every popular story is an attempt to make money off of it, and Brainbase helps Hollywood find new ways to make money off of consumer tastes.

The money came from new investors Bessemer Venture Partners and Nosara Capital, with participation from previous investors Alpha Edison, Struck Capital, Bonfire Ventures, and FJ Labs. Individual investors including Spencer Lazar, Michael Stoppelman, the former senior vice president of engineering at Yelp; Jenny Fleiss, co-founder of Rent The Runway, and David Fraga, president of InVision.

The Los Angeles-based company said the new money would be used to build a payments feature to speed up the process of wringing payments from licensees and to continue building its Marketplace product that connects celebrities, athletes and social media stars of all stripes with new and emerging brands.

“We need to stay focused on building the best platform for brands that own and license their IP,” said Brainbase co-founder and CEO Nate Cavanaugh, in a statement. “With a strong bench of investors and advisors who believe in our vision to make the intellectual property industry more open, efficient and accessible, we are prepared for our next stage of growth. In 2020, Brainbase plans to nearly double in size, making key hires across sales, product, and engineering in the U.S. and Europe.”

The new financing comes as Brainbase brings new brands and spokespeople into the fold including Buzzfeed, the model-turned-shopping network celebrity and brand ambassador extraordinaire Kathy Ireland, MDR Brand Management, and Bonnier. These new branding megaliths join a roster that includes Sanrio, the owner of the ubiquitous Hello Kitty character.

“Brainbase is bringing the archaic, paper shuffling world of IP management into the 21st century. We’re thrilled to partner with this team as they help owners of IP assets capture more value while saving a boatload of time and effort,” stated Kent Bennett, partner at Bessemer Venture Partners.

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

Startups in the Midwest are optimistic despite the fact that a fair number of companies in the region are suffering from economic impacts stemming from COVID-19, recently collected data shows.

The global pandemic has shaken the U.S. economy, but it hasn’t affected each area in the same way. States have seen differing levels of infection, paces of response, qualities of medical infrastructure and so on. What happens to Silicon Valley startups in the COVID-19 era, therefore, might not be exactly the same as what happens to Boston’s or Utah’s startup ecosystems (more on Boston here, Utah here).

A report out this month from Sandalphon Capital that digs into the reality, reaction and sentiment of the Midwest’s startup scene paints an interesting picture. While data collected from 197 startup CEOs from the region includes worrisome responses regarding fundraising and cash runways, it also reflects more optimism and green shoots than we anticipated.

This morning, let’s study a few key data points from the Chicago-based, early stage venture capital firm’s survey to better understand one of America’s most interesting, if least-covered, startup scenes.

Chin up

The full survey — you can find Sandalphon’s summation and the link here — contains a wealth of data, but today we’re focusing on three things:

• COVID-19’s direct impacts
• runway and fundraising situations
• CEO optimism

Impact