Author: azeeadmin

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

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

Don’t wait, prepare

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

You’ll have to do it with less revenue

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

Sometimes capital can’t be had at any valuation

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

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

Avoid “Growth at all Costs” Mentality

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

Increase the hiring bar

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

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

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

Preach discipline – build it into the culture

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

Get to know your potential acquirers

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

Jettison expensive office space

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

Front-load revenue

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

Diversify your customer base

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

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

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

Consider venture debt

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

Don’t Panic

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

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

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

Just in time for the Grammy Awards, Apple has unveiled three new ads for Apple Music, featuring new singles from Ariana Grande, Khalid and Florida Georgia Line.

In each video, the musicians have been transformed in Memoji (the human-style Animoji variant that was announced last year), which lip synch to their latest songs. The ads probably won’t change any minds when it comes to Memoji and Animoji — but if you like the format, they’re are fun.

Apple actually created similar ads with Animoji lip synching to Childish Gambino and Migos before last year’s Grammys.

As The Verge points out, if you watch to the end of the videos and pay attention to the small print, you’ll notice that these Memoji were “professional animated.” So don’t feel too bad if your lip synching Animoji videos don’t look quite as good.

It’s that time of the week again when Megan Rose Dickey and I talk about the good and could-be-better tech companies. This week, we talked about Instacart  href="https://techcrunch.com/2019/02/05/instacart-faces-class-action-lawsuit-regarding-wages-and-tips/">getting caught shorting its shoppers out of dough they rightfully deserved. Of course the company apologized for its “misguided” approach. Which at least sounds better than apologizing for getting caught — and getting caught, the company did.

And wouldn’t you know it, scooter drama persists in San Francisco. The city this week shot down an appeal by JUMP to let it deploy its Uber-run scooters. The company it seems could have filed a better application in the first place, so back to the drawing board it goes to try to convince the municipality to relent.

Finally this week we talk about Tyra Banks’s Modelland, a physical space that will open in Santa Monica, California, later this year. It will give visitors an opportunity to experience life in a tech environment. I am intrigued at what this could be.

Click play above to listen to this week’s episode. And if you haven’t subscribed yet, what are you waiting for? Find us on Apple Podcasts, Stitcher, Overcast, CastBox or whatever other podcast platform you can find.

Rebag, an online resale marketplace for luxury handbags, is getting another infusion of capital as it prepares to expand its offline retail operations. The company this week announced $25 million in Series C funding, in a round led by private equity firm Novator, with participation from existing investors, General Catalyst and FJ Labs.

The round brings Rebag’s total raise to date to $52 million.

Rebag competes with other luxury goods resellers, like TheRealReal, and to some extent with broader resale marketplaces like thredUP or Poshmark, which also attract shoppers looking to buy quality pre-owned items. And it exists in alongside large marketplaces like eBay as well as rental shops like Rent the Runway, which offers an alternative to a site focused only on handbags.

In fact, Rebag founder and CEO Charles Gorra spent a brief period at Rent the Runway, before leaving to start Rebag in 2014. At the time, he said he saw an immediate opportunity to not just rent the items out, but to actually resell them on a secondary market.

Today, Rebag’s shop sells bags from over 50 designer brands, including all the majors like Chanel, Louis Vuitton, Hermes, Gucci, and others.

However, in the years following Rebag’s launch, the company has expand its offerings beyond just online resale to include brick-and-mortar retail and, more recently, a service called Rebag Infinity, which allows shoppers to turn in any Rebag handbag purchase within 6 months in exchange to receive a credit of at least 70 percent of the purchase price.

Last year, Rebag made headlines in the fashion world for selling the rare Hermès White Crocodile Himalayan Birkin collectible – typically an over $100,000 bag – for “just” $70,000, to celebrate the opening of its 57th Street and Madison Avenue store, its second Manhattan flagship location.

With the new funding, Rebag will expand its offline footprint, it says. The company currently operates five stores in New York and L.A. but plans to launch 30 more locations in the “medium term.” This will include both standalone storefronts, as well as presences within luxury malls.

It’s common these days for resale marketplaces these days to take their wares to offline shoppers. TheRealReal, Rent the Runway, ThredUP, and others all today offer real world locations, where shoppers can browse in person instead of just online.

Rebag says since it opened its retail stores las year, it moved from being a 100 percent digital operation to 80 percent digital, and 20 percent offline. Its sourcing network also grew to include over 20,000 stylists, partners, shoppers and sales associates.

With the funding, Rebag adds it will also refine its pricing and handbag evaluation tools aimed at standardizing the resale process, something that could represent another business for the brand (or make it attractive to an acquirer.)

“We are a technology company first,” noted founder and CEO Charles Gorra, in a statement. “Our goal is to become the standard for the luxury resale industry, just like Kelley Blue Book is the main resource for the auto industry.”

The company plans also to triple its team of 100, which today includes newer hires CTO Jay Winters (Delivery.com, Goldman Sachs) and CMO Elizabeth Layne (Bonobos, Appear Here).

Rebag doesn’t share its hard numbers about sales, revenues, valuation, customer base or others, but told us it has tripled revenues since its Series B.

 

Fertility services are raising venture cash left and right. Last week, it was Dadi, a sperm storage startup that nabbed a $2 million seed round. This week, it’s Extend Fertility, which helps women preserve their fertility through egg freezing.

Headquartered in New York, the business has secured a $15 million Series A investment from Regal Healthcare Capital Partners to expand its fertility services, which also include infertility treatments, such as in vitro and intrauterine insemination. The company has also appointed Anne Hogarty, the former chief business officer at Prelude Fertility and vice president of international business at BuzzFeed, to the role of chief executive officer. Hogarty replaces Extend Fertility co-founder Ilaina Edison, who had held the C-level title since the business launched in 2016. Edison will remain on the startup’s board of directors.

Extend Fertility, in its New York cryopreservation and embryology lab and treatment center, completed 1,000 egg-freezing cycles in 2018.

“A lot of amazing things have happened for women over the last century,” Hogarty told TechCrunch earlier this week. “Now, women are permitted and encouraged to seek higher education, pursue a career, follow their dreams and end up with a partner who’s the right partner, not just any partner. Doing all those things has pushed the window for when women want to start a family from their 20s to their 30s and unfortunately, one thing that has not changed in that time is the biological clock.”

Hogarty explained Extend’s fertility services are more affordable than other options because the service was built specifically with egg freezing in mind, and the company later expanded to offer infertility treatments, whereas other services were established to provide IVF and other infertility treatments and integrated cryopreservation tools later.

“We are really purpose-built to be an egg-freezing-first company, where many legacy institutions that were providing infertility services have legacy costs that come with … inefficiencies bred over decades and outmoded technology in their labs that may not be the most efficient and effective,” she said. “We have a state of the art lab with the latest equipment.”

“It’s the classic innovator dilemma,” she added. “Infertility services are extraordinarily expensive and reproductive endocrinology is a new area of medicine. There are a lot of people and institutions that have been taking inordinate amounts of money for their infertility services so they weren’t looking to serve this population of women looking to preserve their fertility.”

One egg-freezing cycle with Extend costs women $5,500, and additional cycles come at a sticker price of $4,000. Each cycle includes a fertility assessment, private consultation, anesthesia and any monitoring a patient may need during their cycle. The costs don’t include medication, however. Extend can prescribe medications — which typically cost between $2,000 and $5,000 for fertility patients — but they still need to go through a third party to get their prescriptions filled and paid for. 

For reference, FertilityIQ, an online platform for researching fertility care providers and treatments, says the typical cost per cycle for egg freezing is more than $17,000 in New York City or $15,600 in San Francisco. Most egg-freezing services, including Extend, do not accept insurance, as most insurance providers don’t cover the steep costs of fertility or infertility treatments.

Some companies, however, are beginning to offer benefits that cover these costs. Facebook and Apple, for example, began subsidizing egg-freezing procedures for employees in 2014. Spotify and eBay, for their part, will pay for an unlimited number of IVF cycles.

Hogarty said Extend’s price point makes it one of the lowest-cost players in the market.

“We want as many women as possible to benefit from the advances from egg-freezing technology,” she said.

Extend Fertility, which has previously raised $10 million, plans to use the latest investment to open labs in new markets and expand its infertility services.

It’s the morning after the night before for AMI.

And what a night it was. The company is officially in damage control mode after it released a short statement defending its communication and behavior with Amazon CEO Jeff Bezos, who published evidence of blackmail that used leaked messages and nude photos of the billionaire that AMI had acquired.

AMI today defended its efforts. It claimed it had “acted lawfully” with its reporting of Bezos and that it engaged in “good faith negotiations” with him. Still, despite those claims, it said it has launched an investigation into the incident.

Here’s the statement:

American Media believes fervently that it acted lawfully in the reporting of the story of Mr. Bezos. Further, at the time of the recent allegations made by Mr. Bezos, it was in good faith negotiations to resolve all matters with him. Nonetheless, in light of the nature of the allegations published by Mr. Bezos, the Board has convened and determined that it should promptly and thoroughly investigate the claims. Upon completion of that investigation, the Board will take whatever appropriate action is necessary.

The company, which owns the National Enquirer among other media businesses, was accused of blackmail in an explosive essay that Bezos published on Thursday. In it, the Amazon CEO detailed AMI’s apparent offer of a ‘deal’ that would see it drop the publishing of naked selfies of the billionaire, sent to his new partner, in exchange for The Washington Post — the newspaper he owns — walking back its investigation into AMI’s connections in Saudi Arabia and relationship with President Trump.

This battle isn’t going anyway any time soon — watch this space for more updates.

While it’s true that it’s going to take some time before most of us will actually be able to enjoy the benefits of 5G, that doesn’t mean you can’t sit back and enjoy the fireworks right now. AT&T’s adoption of the “5G Evolution” label has already been controversial among industry followers and fellow carriers alike, for watering down the meaning of next-gen connectivity — and now Sprint is looking to do something about it.

The carrier filed suit against what it called “false advertising and deceptive acts” relating to AT&T’s 5G E. The suit notes, rightly, that Sprint, AT&T and other major carriers are all jostling to be first to market, “but calling its network 5G E […] does not make it a 5G network.” In fact, the network is more akin to advanced LTE.

AT&T called itself “[the] first U.S. mobile company to introduce mobile 5G service in a dozen markets by late 2018” courtesy of the label, in a much maligned attempt to plant its flag. It’s similar to tactics used by the carrier ahead of the rollout of LTE. AT&T has largely waved away criticism, stating that it’s happy that such moves have gotten it into the heads of the competition.

That may be true, but anyone who’s watched the industry with even passing interest knows that real network advances take time, and this sort of branding goes a ways toward muddying up consumer understanding. The suit goes on to claim that the 5GE label violates state and federal false advertising laws and does damage to competitors like Sprint, who are invested in the slower roll out of true 5G.

Opera became the first browser-maker to bundle a VPN with its service, and now that effort is expanding to mobile.

The company announced today that its Android browser app will begin offering a free VPN. The feature will be rolled out to beta users on a gradual basis. The VPN is free and unlimited, and it can be set to locations in America, Europe and Asia as well as an ‘optimal’ setting which hooks up the faster available connection. Switching on the VPN means that user traffic data isn’t collected by Opera, while it makes it harder for websites to track location and user data.

There are granular settings too, which include limiting VPN usage to private tabs and switching it off for search engines to get more local results.

Opera previously offered a free VPN app for Android and iOS but that project was closed last year. The new strategy, it seems, was to bake that technology directly into the browser to give it a more competitive advantage and use the tech to bring more users into the Opera ecosystem. There’s no word on an iOS launch.

“The reason why we are including this built-in VPN in our Android browser is because it gives you that extra layer of protection that you are searching for in your daily mobile browsing,” the company — which listed on the Nasdaq last year — said in a blog post.

The VPN — which is powered by a 2015 acquisition — is one of a number of privacy features that Opera offers. Others include cookie dialogue box blocking, cryptojacking and ad blocking. The company has also offered support for crypto with the addition of a crypto wallet, support for Web 3 apps and — as of this week — a feature that lets users buy crypto from inside their browser.

Besides its core apps, Opera also offers a ‘Touch’ browser that is optimized for devices that don’t have a home button. It launched on Android and expanded to iOS late last year.

Hello, and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

This week Kate Clark and I sat down to get through the biggest news in the venture and startup world. This is our regular episode of the week after a shot focused on the Slack IPO, and an interview concerning Facebook. So, back to our roots. And as has been the case for months and months now, there was a lot to get through.

Podcasting took center stage this week, with music giant Spotify snapping up podcasting tool startup Anchor and podcast production company Gimlet. The latter was expected, but the combined $230 million pricetag may have come as a surprise to some.

Spotify says that it isn’t done investing in the space. It won’t be alone, however, in hoping to drive big dollars with original audio shows. Himalaya raised a pocket of money — $100 million — to build out its own podcasting world.

Moving to other huge rounds, Calm picked up $88 million in a new round, pushing its valuation to the $1 billion threshold. That makes Calm, probably, the first mental-health focused startup to make it into unicorn territory. Reddit is also scoping a nine-figure round (Kate isn’t a fan), which could just about double its valuation to $3 billion.

Databricks raised a bunch of money this week at a similar, $2.75 billion valuation. It does big data analytics.

Lastly on the funding front, Lime did close that big round we’ve been expecting it to. What does that mean? It could be that Lime’s latest capital shows that there isappetite  for risk left in the market. Or that a lot of folks need to tell their LPs that they have acquired exposure to the scooter market. Who knows.

We also hit on an LA venture summit and wrapped. We’ll be back in a week!

Security researchers have found thousands of exposed internet-connected industrial refrigerators that can be easily remotely instructed to defrost.

More than 7,000 vulnerable temperature controlled systems, manufactured by U.K.-based firm Resource Data Management, are accessible from the internet and can be controlled by simply plugging in its default password found in documentation on the company’s website, according to Noam Rotem, one of the security researchers who found the vulnerable systems.

Many of these vulnerable units are found in industrial refrigerators in restaurants, hospitals, and supermarkets and grocery stores from the U.K., Ireland, and as far away as Sweden, Germany and China. The researchers also found a pharmaceutical company in Malaysia and a cooling facility in Germany.

Defrosting the refrigerators could lead to untold water damage, financial losses, and the destruction of inventory. In the case of high-value industries, that could amount to hefty losses.

“The systems can be accessed through any browser,” said Rotem in his write-up. shared with TechCrunch before his public disclosure. “All you need is the right URL, which as our tests show, isn’t too difficult to find.”

Rotem said defrosting a machine takes only a “click a button and enter the default username and password,” both of which are near-universal across the company’s devices. TechCrunch found several hundred refrigerators on Shodan, a search engine for publicly available devices and databases, confirming the researchers’ findings, but did not use the credentials as doing so would be unlawful.

It’s also possible to modify user settings, alarms, and other features on the exposed devices, said Rotem.

In an email, a representative from Resource Data Management said: “We clearly state in our documentation that the default passwords must be changed when the system is installed.” However, the change isn’t mandatory. According to Rotem, many device owners don’t bother. The company also distanced itself from its own security practices. “We have no control over how our systems are set up by the installer and we suggest your article is directed at the users and installers of our equipment,” the representative said. “We will inform owners that we have new software available with new functions and features but ultimately it is up to them to request an upgrade.”

The company said it will write to all its known customers “reminding them of the importance of changing the default user names and passwords.”

Starting next year, California will ban internet-connected devices manufactured or sold in the state if they contain a weak or default password that isn’t unique to each device.