Author: azeeadmin

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

This morning we’re hunting up “green shoots” for software companies. Green shoots is financial slang for positive signals that could point to an economic recovery — or good news amidst a greater pullback. You can even use the term sarcastically, perhaps noting that unemployment claims, while still elevated to historic levels, are falling on a week-over-week basis: Only 2.5 million jobs lost last week! #greenshoots

You get the idea. But today we’re not joking. At the end trading yesterday, the Bessemer cloud index had recovered to around a 10% decline, in total, since the start of the COVID-19 era. Given that the same basket of cloud and SaaS companies was down as much as 37.9% at its 2020 low, its recovery has been little short of monstrous.

But there’s a bit more to dig into. This morning we’ve parsed a set of recent, fascinating survey data from Stifel, a wealth management and investment banking concern. The firm’s technology group asked a few hundred “tech executives, entrepreneurs, and investors” what they are seeing in the market regarding churn. There’s good news for software companies in the mix.

And we’ve pulled a grip of new data from Crunchbase to understand what we know about April’s venture capital market so far. It’s not bad news!

So, some positive vibes today, even if the markets are down. Let’s go!

Green Shoots

How bad SaaS churn will get during the present market downturn is not clear. TechCrunch has covered the issue, asking venture capitalists and doing various surveys of founders about what they are seeing in the market. The results are cautionary, with one survey indicating that three-quarters of founders expecting to see their net retention rates falling “by at least 3% and up to 20+.” That wasn’t a great sign.

The pandemic may feel all-encompassing at the moment, but Confluent announced a $250 million Series E today, showing that major investment continues in spite of the dire economic situation at the moment.

Today’s round follows last year’s $125 million Series D. At that point the company was valued a mere $2.5 billion. Investors obviously see a lot of potential here.

Coatue Management led the round with help from Altimeter Capital and Franklin Templeton. Existing investors Index Ventures and Sequoia Capital also participated. Today’s investment brings the total raised to $456 million.

The company is based on Apache Kafka, the open source streaming data project that emerged from LinkedIn in 2011. Confluent launched in 2014 and has gained steam, funding and gaudy valuations along the way.

CEO and co-founder Jay Kreps reports that growth continued last year when sales grew 100% over the previous year. A big part of that is the cloud product the company launched in 2017. It added a free tier last September, which feels pretty prescient right about now.

But the company isn’t making money giving stuff away, so much as attracting users, who can become customers at some point as they make their way through the sales funnel. The beauty of the cloud product is that you can buy by the sip.

The company has big plans for the product this year. Although Kreps was loath to go into detail, he says that there will be a series of changes coming up this year that will add significantly to the product’s capabilities.

“As part of this we’re going to have a major new set of capabilities for our cloud service, and for open source Kafka, and for our product that we’re going to announce every month for the rest of the year,” Kreps told TechCrunch. These will start rolling out the first week in May.

While he wouldn’t get specific, he says that it relates to the changing nature of cloud infrastructure deployment. “This whole infrastructure area is really evolving as it moves to the cloud. And so it has to become much, much more elastic and scalable as it really changes how it works. And we’re going to have announcements around what we think are the core capabilities of event streaming in the cloud,” he said.

While a round this big with a valuation this high and an institutional investor like Franklin Tempeton involved typically means an IPO could be the next step, Kreps was not ready to talk about that, except to say the company does plan to begin behaving in the cadence of a public company with a set of quarterly earnings, just not for public consumption yet.

The company was founded in 2014. It has 1000 employees and has plans to continue to hire and to expand the product. Kreps sees plenty of opportunity here in spite of the current economics.

“I don’t think you want to just turtle up and hang on to your existing customers and not expand if you’re in a market that’s really growing. What really got this round of investors excited is the fact that we’re onto something that has a huge market, and we want to continue to advance, even in these really weird uncertain times,” he said.

Alphabet-owned Loon, the high-altitude broadband connectivity company for hard-to-reach places, has launched the first balloons that will provide its first ever commercial connectivity services to Kenyans following the approval of its service deployment by the government of Kenya a couple of weeks ago. The balloons are now in testing, but pending the results of those tests, they’ll turn on service “in the coming weeks,” according to the company.

Loon is working with partner Telkom Kenya to provide services to that network’s subscribers in the country. Its balloons fly at a height of roughly 65,000 feet, in the Earth’s stratosphere, with the goal of providing stable, reliable and fast connectivity to a specific area without requiring satellites and with access for remote areas not served by ground cell tower infrastructure.

The Loon balloons actually have quite the journey to make to get to the area they’ll service in Kenya, taking off from either Puerto Rico or Nevada, as Loon CTO Sal Candido explains in a Medium post. From there, they navigate on air currents to make their way to their target destination, using “the fastest route that drifting on the stratospheric winds allow,” to traverse upwards of 6,800 miles through a somewhat circuitous route, which is determined by Loon’s automated navigation software.

Upon arrival in Kenya, those same machine learning powered-algorithms are used to help the balloons maintain a relatively stable position over the target coverage area. Balloons move up and down in the stratosphere to catch different air currents, taking short trips in a fixed geographic area to provide 24-hour coverage to customers on the ground.

Loon’s model and partnership with Telkom means that it can provide access through Telkom’s network to that company’s customers instantly once the system is tested and proven, but that also means Telkom sets the rates, which African internet accessibility startup BRCK has noted might be a barrier to some. Still, this first commercial deployment is a significant milestone for Loon, and should help make the case for more and more varied deployments to follow, including a range of different business model approaches.

Nintendo is selling a lot of Switches. The convertible console has been a lifesaver for people sheltering in place around the world. COVID-19-induced travel restrictions and the long-awaited arrival of Animal Crossing: New Horizons have proven to be a perfect storm for the three-year-old platform.

New numbers out from NPD this morning shed some light on just how good last month was for Nintendo. Switch sales more than double their numbers from March 2019, per the analyst firm. It was a March record for the console, which launched in March 2017. It was also the best first quarter unit sales for any gaming console since the company’s DS system, way back in 2010.

The arrival of Animal Crossing: New Horizons was no doubt a bit part of the sales bump. The latest addition to the popular sim series was both the the best selling game on any platform for March and had the third-best -selling launch month of any title in Nintendo’s history since NPD started tracking. Only Super Smash Bros. Ultimate and Super Smash Bros. Brawl (2018 and 2008, respectively) sold more physical units in their first month.

New Horizons is already the best selling title in Animal Crossing’s history, according to the firm. Both the timing of the title and its focus on social gaming play have been a huge boost to the game. It’s also been a hit with critics, currently sporting a 91% on Metacritic.

Stores have struggled to keep Switch units in stock amid a sharp bump in sales. Nintendo is reportedly boosting production of the system up by 10% in order to keep up with demand.

“If your kids aren’t sleeping, you aren’t sleeping,” says Moshi founder and CEO Ian Chambers.

As mindfulness apps grow increasingly popular among adults, Moshi is looking to bring mindfulness and meditative techniques to children. The app today announced the close of a $12 million Series B financing led by Accel, with participation from Latitude Ventures (the follow-on sister fund to LocalGlobe) and Triplepoint Capital. Bill Roedy, former MTV CEO, also participated in the round.

As part of the deal, Latitude Ventures’ Julia Hawkins will join the Moshi board.

Moshi was originally born out of Mind Candy, which was founded by Michael Acton Smith (founder and CEO of Calm) who created an online entertainment platform for kids called Moshi Monsters. In 2015, Smith stepped down as CEO to go build Calm, and Moshi CEO Ian Chambers stepped in, ultimately developing and launching Moshi in 2017. Mind Candy is now rebranding to Moshi.

Moshi is an app that helps kids sleep. The app offers close to 150 bits of original content, with 80 original 30-minute bedtime stories written and produced entirely by the company. Leading that charge is Steve Cleverley, the app’s Chief Creative Officer and Director of Dozing, a BAFTA-winning writer who authors, composes and produces each bit of content on the app.

Moshi’s bed time stories all follow a similar formula: verse (narration), chorus (song), and the underlying musical score. Each story is crafted with meticulous attention to detail. For example, one of the app’s most popular stories, “Mr. Snoodle’s Twilight Train” has the ‘chuga-chuga-choo-choo’ of train noise in the background throughout the story. That sound effect is timed up to the average resting heart rate of a child, purposefully lulling them into a restful place.

Moshi has also managed to get celebrities involved in the project, with narrations from Goldie Hawn and Sir Patrick Stewart, alongside other voice over actors.

The app offers parents the ability to create their own custom playlist or choose from a themed playlist within the app, such as ‘Busy Little Minds.’

Beyond sleep, Moshi is also offering mindfulness content to be used during the day, whether it’s for timeout or anxiety management or what have you.

Moshi offers a free one-week trial before charging USD$40 annually, with six pieces of content free for anyone.

The company has more than 100,000 subscribers, with 85 million stories played. Chambers told TechCrunch that 70 percent of all stories are completed.

Moshi plans to use the financing to launch new features and content in collaboration with sleep industry experts and scientists, as well as scaling up user acquisition through marketing, advertising and partnerships.

“The reason I get up in the morning to do this, and it sounds a bit cliche, but it’s the feedback,” said Chambers. “It’s the human stories of how we’re helping families to improve how they operate and having a positive impact on their health and wellbeing. That’s what excites us.”

In the time many of us live in now, we all know our online media consumption is — to state the obvious — going through the roof. Subsequently, the amount of data pertaining to online marketing is, equally, reaching stratospheric heights and in recent years tech companies like Datorama and Funnel.io, SuperMetrics and Adverity have appeared to give marketeers a data intelligence platform to deal with the welter of spreadsheets and reports necessary to track everything.

Last year, Vienna HQ’d Adverity closed an €11 million Series B funding round for its AI-driven platform to produce actionable insights in real-time for marketers.

Today it’s announcing a Series C financing round of $30 million, bringing the total amount it has raised to $50 million. The latest funding round is led by Valley-based Sapphire Ventures . Also participating is Mangrove Capital Partners, Felix Capital, SAP.iO and aws Gründerfonds who have all re-invested in this latest round. 

The Series C funding will be used to accelerate Adverity’s business growth, office network and R&D. Adverity’s clients include IKEA, Red Bull, Unilever, MediaCom and IPG Mediabrands.

Alexander Igelsböck, CEO and co-founder of Adverity, said in a statement: “Our platform plays a crucial role in helping enterprises become agile, empowering digital teams with intelligent insights. It is imperative we invest in evolving and developing new solutions, improving access and quality, and tackle the challenges of data complexity.”

Nino Marakovic, CEO and managing director at Sapphire Ventures commented that Adverity has “the opportunity to help all companies become more data-driven in their marketing.”

In an interview with TechCrunch, long-time Adverity investor Frederic Court of Felix Capital said: “We backed them as marketing is becoming a science with increasing complexity, we see this across all our consumer investments. Take Farfetch, where there is a dedicated team just for marketing. Adverity enables brands and ad agencies to aggregate their marketing data and extract intelligence automatically. I describe it as having a data scientist in a box, where a brand can understand its marketing data and get smart insights effortlessly. Their technology is very strong and their sales have taken off strongly.”

Speaking to this latest round of investment, he told me: “We were not fundraising but Sapphire was a very compelling partner. Post COVID-19, e-commerce is going to grow even faster (as we see with Shopify, Amazon and across our portfolio) and the company can benefit from this accelerated transition to e-commerce.”

LabCorp’s at-home COVID-19 test, which is called ‘Pixel,’ has received the first Emergency Use Authorization (EUA) for such a test missed by the U.S. Food and Drug Administration (FDA). The test is an at-home collection kit, which provides sample collection materials including a nasal swab to the user, who then uses the included shipping package to return the sample to a lab for testing.

Until now, the FDA has not authorized any at-home testing or sample collection kits for use, and in fact clarified its guidelines to specifically note that their use was not authorized under its guidelines when a number of startup companies debuted similar products for at-home collection and round-trip testing with labs already certified to run molecular RT-PCR tests to detect the presence of COVID-19.

The FDA notes that only LabCorp’s COVID-19 RT-PCR test has received this authorization, and that it still requires any such test to have an EUA before they can being offering services, whether or not the test is administered at home with the help of guidance from an authorized medical professional via telemedicine. Some labs facilitating at home serology tests using an exception in the FDA guidelines, but these are not viewed by the agency as tests that can confirm a case of COVID-19.

Opening up at-home testing (even via just sample collection, vs. full at-home test administration) is a big step in terms of a change in the way the agency has operated thus far. The FDA has recently updated its guidelines to note that it is working with at-home test providers to determine the best way to make those available to the public, since it “sees the public health value in expanding the availability of COVID-19 testing through safe and accurate tests that may include home collection.”

LabCorp is a U.S. medical diagnostics company with over 40 years of experience, including at-home testing via its Pixel line for colorectal cancer, diabetes, and cardiac lipid conditions. It seems like the FDA is favoring long-standing industry experience in terms of who it’s willing to open up authorizations for with at-home collection, which is likely due to the potential for increased error when you add unsupervised self-collection, packing and logistics into the mix.

Testing for COVID-19 in the U.S. currently relies on drive-through sites, as well as in-clinic and hospital testing. These tests have a high bar for access in terms of risk profile and symptom presentation, and their administration also exposes the healthcare professionals running them to risk of contracting the infection themselves. At-home testing could increase overall testing rates, while decreasing risk to frontline healthcare workers, providing a better picture of the true extent and depth of the COVID-19 pandemic.

Last week, Lightspeed Venture Partners announced that it had closed on $4.2 billion in new capital across three distinct funds — an $890 million early-stage venture fund, a $1.83 billion later-stage fund and a $1.5 billion “opportunity fund.”

With offices in the U.S., China, India, South East Asia, U.K. and Israel, the firm certainly has wide access to courting new deals in the midst of a crisis. The question is how easy it will be to source those deals.

Lightspeed partner Nicole Quinn joined the company in 2016 to help build out its consumer investment portfolio. Quinn’s investments include direct-to-consumer fashion company Rothy’s, celebrity shout-out platform Cameo, meditation app Calm and liquor company Haus.

I talked with Quinn last week about how her schedule is changing, who she’s talking to and where she is looking to invest next.

This conversation has been edited for length and clarity.

TechCrunch: What’s your schedule looking like these days? How much have things changed?

Nicole Quinn: My schedule has certainly changed; I’m spending much more time with portfolio companies. It’s thinking through uncharted waters and we’re thinking through all of these aspects because we’re encouraging them to make sure that they are in the strongest position they can be in. After that is making sure they have two years of runway, because who knows how long this is going to last — it’s pretty hard to model out a global pandemic.

More departures are taking place at Bó, the digital bank developed by RBS-owned Natwest. Following the departure of Bó CEO Mark Bailie in January, the latest to seek a new opportunity is chief product officer Ollie Purdue, TechCrunch has learned.

According to sources, Purdue is joining Antler, the company builder and early-stage venture capital firm that operates in Amsterdam, London, New York, Stockholm, Sydney, Nairobi and Singapore. He’s expected to join the VC in the next few weeks as a Partner, bringing his product background and expertise to Antler. Prior to working at Bó, Purdue founded millennial bank account Loot in 2014 while still at University, aged just 20.

Founded in 2018 by Magnus Grimeland (co-founder of Zalora, which sold to Global Fashion Group), and initially launched in Singapore, Antler runs a company-builder program in multiple locations, not entirely dissimilar to London-headquartered Entrepreneur First, which pioneered the pre-team, pre-idea model of talent investing.

Like EF, Antler invites applicants to apply to its various programs with the aim of helping them find a co-founder and settle on a new startup idea. It provides a stipend for the first two months to cover participants’ basic living costs, and then pre-seed funding. In addition, later-stage capital is also available for successful companies, with Antler operating local funds in each geography.

Meanwhile, Purdue has a coloured history with Bó, and RBS specifically. RBS was an investor in Loot and the incumbent bank was thought to be close to acquiring the startup before ultimately pulling out of the deal. This led to Loot scrambling for additional funding, which it was unable to obtain in time before running out of cash entirely after existing investors decided not to follow on.

Not long after, Purdue and around 17 other ex-Loot team members — spanning product, marketing and design functions — were recruited to Bó by then CEO Bailie.

I’ve reached out to Bó/RBS and Antler and will update this post if and when I hear back.

In recent years, fintech’s revolution has felt like a rising tide.

Behemoths like Stripe and Square edged out banks while newbies like Brex nonchalantly raised nine-figure rounds. Today, however, the state of the financial technology industry feels more wobbly — some healthy startups in the genre are faring better than ever, while others are feeling the strain as consumers tighten their wallets and change their spending patterns.

It’s clear that we’re going to see some fintech startups struggle in the near future, but venture capitalists claim not to think in a short-term manner. We ran our last fintech VC survey in November 2019, so we wanted to get their take on where fintech is today. We turned to eight top VCs to better understand the state of the industry, which market signals they’re tracking and where opportunities still exist within the already-crowded pool of financial services:

• Matt Harris, Bain Capital Ventures
• Charles Birnbaum, Bessemer Venture Partners 
• Jackson Gates, Manresa Ventures
• Rob Moffat, Balderton Capital
• Hope Cochran, Madrona Ventures
• Brendan Dickinson, Canaan
• Yann Ranchere, Anthemis
• Cherry Miao, Accel

Next week, we’ll publish the other findings we received from these investors, focusing on fintech’s future in a post-COVID-19 world.

What follows is a collection of themes we noted from the investors, followed by their at-length responses.

Investing pace, flight to quality, varied impacts and uncertainty

Our first theme deals with investing pace. More investors than we expected were willing to note that their investing pace into fintech companies was slowing for one reason or another. While it’s become a cliché for private investors to state that they are open for business as a market signal, that doesn’t appear to mean that investments into fintech won’t slow.

The reasons why investors are slowing their pace of deals is varied, with some noting issues on their end (difficulty to reach conviction while operating remotely, etc.), and some detailing that some fintech companies are more internally focused today than reaching out to raise new capital. Investors also noted an expectation for fundraising to take longer and lower valuations. While that’s not great for founders, it’s also not the worst news; there is still money out there to be raised, and many investors claim they are writing checks of the same size as before.

The second theme deals with an expected flight to quality, with investors stressing that startups in the space should curtail spend that isn’t core to survival (marketing spend around branding was raised, for example), focus on key business metrics (unit economics, aggregate profitability), and monitor leading business indicators more closely. This is not a surprising set of advice, per se, but it is one that matters. If founders will listen remains to be seen, but investor are clearly signaling a return to more sober business operations.

Our third theme deals with how varied the impact of COVID-19 has been on fintech companies. As TechCrunch has reported, fintech companies have seen a distributed set of results since the pandemic closed much of the U.S. economy. However, when reading through investor responses, the true scale of this divergence became clear. The new reality is not merely that some fintech companies are doing a bit better or a bit worse. Instead, it’s that some are sharply down, some are flat, and some are soaring. This is perhaps a good argument for tightening what fintech means, or perhaps dealing with the category on a more tailored basis; fintech may have become too broad a bucket to treat as a group.

And finally, our fourth theme is uncertainty. Our investor group this morning isn’t expecting the economy to snap right back. But when it will return, and in what form, are far from clear. 2020 could be a lost year, said Brendan Dickinson from Canaan. The market recovery will not be swift, said Matt Harris of Bain Capital Ventures. And Charles Birnbaum from Bessemer Venture Partners said that “economic shocks” all “play out quite differently from one another.”

With that collection of notes, let’s begin. Responses have been edited for length and clarity.

Matt Harris, Bain Capital Ventures

What portion of your fintech portfolio companies is thriving? What portion is struggling?

Recently, we’ve started to look at our portfolio along two dimensions. The first dimension is the vulnerability of the company in general, considering things like cash balance and level of burn, fundraising needs and durability of revenue. The second dimension is the impact of COVID-19 on that company. Fortunately, a good portion of our portfolio fell into the positive end of both dimensions, and we were quick to focus our attention on companies with either high vulnerability or high COVID-19 impact.

Businesses that relied more on transactional revenue and exhibited urgent need for capital that couldn’t be solved by cost-cutting measures are the most vulnerable, while businesses centered on consumer investing and spending, or those companies serving highly affected sectors like restaurants and travel tend to be most impacted.