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January 18, 2019
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Startups Weekly: Will Trump ruin the unicorn IPOs of our dreams?

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The government shutdown entered its 21st day on Friday, upping concerns of potentially long-lasting impacts on the U.S. stock market. Private market investors around the country applauded when Uber finally filed documents with the SEC to go public. Others were giddy to hear Lyft, Pinterest, Postmates and Slack (via a direct listing, according to the latest reports) were likely to IPO in 2019, too.

Unfortunately, floats that seemed imminent may not actually surface until the second half of 2019 — that is unless President Donald Trump and other political leaders are able to reach an agreement on the federal budget ASAP.  This week, we explored the government’s shutdown’s connection to tech IPOs, recounted the demise of a well-funded AR project and introduced readers to an AI-enabled self-checkout shopping cart.

1. Postmates gets pre-IPO cash

The company, an early entrant to the billion-dollar food delivery wars, raised what will likely be its last round of private capital. The $100 million cash infusion was led by BlackRock and valued Postmates at $1.85 billion, up from the $1.2 billion valuation it garnered with its unicorn round in 2018.

2. Uber’s IPO may not be as eye-popping as we expected

To be fair, I don’t think many of us really believed the ride-hailing giant could debut with a $120 billion initial market cap. And can speculate on Uber’s valuation for days (the latest reports estimate a $90 billion IPO), but ultimately Wall Street will determine just how high Uber will fly. For now, all we can do is sit and wait for the company to relinquish its S-1 to the masses.

3. Deal of the week

N26, a German fintech startup, raised $300 million in a round led by Insight Venture Partners at a $2.7 billion valuation. TechCrunch’s Romain Dillet spoke with co-founder and CEO Valentin Stalf about the company’s global investors, financials and what the future holds for N26.

4. On the market

Bird is in the process of raising an additional $300 million on a flat pre-money valuation of $2 billion. The e-scooter startup has already raised a ton of capital in a very short time and a fresh financing would come at a time when many investors are losing faith in scooter startups’ claims to be the solution to the problem of last-mile transportation, as companies in the space display poor unit economics, faulty batteries and a general air of undependability. Plus, Aurora, the developer of a full-stack self-driving software system for automobile manufacturers, is raising at least $500 million in equity funding at more than a $2 billion valuation in a round expected to be led by new investor Sequoia Capital.


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5. A unicorn’s deal downsizes

WeWork, a co-working giant backed with billions, had planned on securing a $16 billion investment from existing backer SoftBank . Well, that’s not exactly what happened. And, oh yeah, they rebranded.

6. A startup collapses

After 20 long years, augmented reality glasses pioneer ODG has been left with just a skeleton crew after acquisition deals from Facebook and Magic Leap fell through. Here’s a story of a startup with $58 million in venture capital backing that failed to deliver on its promises.

7. Data point

Seed activity for U.S. startups has declined for the fourth straight year, as median deal sizes increased at every stage of venture capital.

8. Meanwhile, in startup land…

This week edtech startup Emeritus, a U.S.-Indian company that partners with universities to offer digital courses, landed a $40 million Series C round led by Sequoia India. Badi, which uses an algorithm to help millennials find roommates, brought in a $30 million Series B led by Goodwater Capital. And Mr Jeff, an on-demand laundry service startup, bagged a $12 million Series A.

9. Finally, Meet Caper, the AI self-checkout shopping cart

The startup, which makes a shopping cart with a built-in barcode scanner and credit card swiper, has revealed a total of $3 million, including a $2.15 million seed round led by First Round Capital .

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News Source = techcrunch.com

Women-only co-working space The Wing is launching an app to help its members stay connected

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The Wing is bringing the physical world it’s created for professional women to the digital world with the launch of a social networking app, slated to become available later this month.

The co-working company created the app to connect its members and keep them up to date on The Wing’s programming. For now, the app will only be available to paying Wing members.

“Our team has been hard at work on ways for members to carry the connections they make with them wherever they go,” The Wing co-founder and CEO Audrey Gelman told TechCrunch. “Through the app, members will have access to features that make The Wing experience even more valuable and efficient and will have access to thousands of incredible women at their fingertips.”

Founded in 2016, The Wing provides co-working and community space to women. It’s raised $40 million in venture capital backing from top-tier investors like Kleiner Perkins and NEA. WeWork has also noticed the value in The Wing’s female-first model; the co-working behemoth led its $32 million Series B last November. As it stands, the company has just four locations in two states: New York and Washington, DC. A San Francisco location is expected this October, and West Hollywood, London, Toronto, Seattle and Chicago locations are all in the pipeline.

To enjoy The Wing’s many perks—brass & millennial pink decor, shelves of color-coordinated books and exclusive access to events featuring Hillary Clinton or New York Senator Kirsten Gillibrand, for example—it’s not cheap. Wing members pay $215 per month for access to a single location. But compare that to the price of a desk at a San Francisco WeWork, about $400, and it’s not so bad.

The Wing also provides lactation rooms, “beauty rooms,” a library, food and drinks, and more.

In addition to being founded by two women, Gelman and Lauren Kassan, the company also boasts an all-female staffa rarity for a company backed by venture capitalists. That includes Lina Dorkhman, who The Wing hired six months ago to lead development on the app. She’d spent the last 3.5 years at BlackRock as an associate.

“I was actually a member first and when I saw that they were hiring a product manager I thought it was a perfect fit,” Dorkhman told me.

She says The Wing wanted to create a product that recognized women as not only professionals, or parents or friends or siblings, but all of those things.

“With products like Linkedin, there is this separation of this is my personal self and my professional self,” Dorkhman said. “What we see at The Wing is there isn’t necessarily a separation of your personal self and your professional self. We want to acknowledge that—that is the future of work. You bring your whole self to work.”

The idea for the app stemmed from member feedback, which asked that the company provide more digital components.

“We hear from our members that there is this really special feeling of entering The Wing,” Dorkhman added. “That feeling that you get in the physical space is something we really wanted to translate into the product.”

News Source = techcrunch.com

BlackRock pushes for separation of powers at Tesla

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The world’s largest investor is joining the chorus of voices pushing for a separation of powers at the electric vehicle, solar panel and battery manufacturer, Tesla.

Funds managed by BlackRock, a top 10 shareholder in the electric vehicle company run by Elon Musk (and the manager of roughly $6.3 trillion in global assets), joined calls for the creation of an independent chairman position at Tesla.

The shareholder initiative, which was solidly defeated, would not have affected Musk’s standing as chief executive.

News of BlackRock’s push comes as a new article in The Wall Street Journal further underscores the autocratic ways in which Musk manages his electric vehicle startup, and highlights the singular grip Musk has on his companies and the public’s perception of them.

While the technology industry is famously known for catering to the whims of authoritarian executives, Musk’s recent behavior on social media, with the press and in private has damaged the company’s stock price and caused some concern even within his own boardroom.

Warren Buffett has even weighed in on Musk’s social media use.

In an emailed statement to Reuters, which first noticed the filing, a BlackRock spokesperson said:

BlackRock’s approach to investment stewardship is driven by our fiduciary duties to our clients, the asset owners. Our approach to engaging with companies and proxy voting activities is consistent with our commitment to drive long term shareholder value for our clients.

Musk has had a particularly rough August since he first floated on Twitter, and then rescinded, a plan to take Tesla private.

Tesla shares are down roughly 1% in midday trading on the Nasdaq.

News Source = techcrunch.com

Titan launches its mobile ‘not a hedge fund’

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What Robinhood did to democratize buying individual stocks, Titan wants to do for investing in a managed portfolio. Instead of being restricted to rich accredited investors willing to pour $5,000 or even $500,000 into a traditional hedge fund that charges 2 percent fees and 20 percent of profits, Titan lets anyone invest as little as $1,000 for just a 1 percent fee while keeping all the profits. Titan picks the top 20 stocks based on data mined from the most prestigious hedge funds, then invests your money directly in those with personalized shorts based on your risk profile.

Titan has over $10 million under management after quietly spinning up five months ago, and this week the startup graduates from Y Combinator. Now Titan ready to give upscale millennials a more sophisticated way to play the markets.

This startup is hot. It refused to disclose its funding, likely in hopes of not tipping off competitors and incumbents to the opportunity it’s chasing. But it’s the buzz of YC, with several partners already investing their own money through Titan. When you consider Stanford-educated free stock trading app Robinhood’s stunning $5.6 billion valuation thanks to its disruption of E*Trade, it’s easy to imagine why investors are eager to back Titan’s attack on other financial vehicles.

“We’re all 28 to 30 years old, says co-founder Clayton Gardner about his team. “We want to actively invest and participate in the market but most of us who don’t have experience have no idea what we’re doing.” Most younger investors end up turning to family, friends, or Reddit for unreliable advice. But Titan lets them instantly buy the most reputable stocks without having to stay glued to market tickers, while using an app to cut out the costs of pricey brokers and Wall Street offices.

Titan co-founders (from left): Max Bernardy, Clayton Gardner, Joe Percoco

“We all came from the world of having worked at hedge funds and private equity firms like Goldman Sachs and Blackstone. We spent five years doing that and ultimately were very frustrated that the experiences and products we were building for wealthy people were completely inaccessible to people who weren’t rich or didn’t have a fancy suit” Gardner recalls. “Instead of charging high fees, we can use software to bring the products directly to consumers.”

How Titan Works

Titan wants to build BlackRock for a new generation, but its origin is much more traditional. Gardner and his co-founder Joe Percoco met on their first day of business school at UPenn’s Wharton (of course). Meanwhile, Titan’s third co-founder Max Bernardy was studying computer science at Stanford before earning a patent in hedge fund software and doing engineering at a few startups. The unfortunate fact is the world of finance is dominated by alumni from these schools. Titan will enjoy the classic privilege of industry connections as it tries to carve out a client base for a fresh product.

“We were frustrated that millenniala only have two options for investing: buying and selling stocks themselves or investing in a market weighted index” says Gardner. “We’re building the third.”

Titan’s first product isn’t technically a hedge fund but it’s built like one. It piggybacks off of the big hedgies that have to report their holdings. Titan uses its software to determine which are the top 20 stocks across these funds based on turnover, concentration, and more. All users download the Titan iOS app (no Android for now), fund their account, and are automatically invested into fractional shares of the same 20 stocks.

Titan keeps 1 percent of whatever you earn in profit. There is a minimum $1000 investment, so some younger adults may be below the bar. “We’re targeting a more premium millennial for start. A lot of our early users are in the tech field and are already investing” says Gardner.

For downside protection, Titan collects information about its users to assess their risk tolerance and hedge their investment by shorting the bottom 0 to 20 percent of the market so they’ll earn some if eveything crashes. Rather than Titan controlling the assets itself, an industry favorite custodian called Apex keeps them secure. The app uses 256bit encryption and SSL for data transfers, and funds are insured up to $500,000.

How have its bets and traction been doing? “We’ve been pleasantly surprised so far” Gardner beams, noting Titan’s thousands of clients. It claims its up 10 percent year-to-date and up 33 percent in one year compared to the S&P 500’s 2 percent year-to-date and 22 percent in one year. Charging a fee on profits rather than on how much users invest aligns Titan and its clients around success.

But beyond the demographic and business model, it’s the educational elements that set Titan apart. Users don’t have to hunt online for investment research. Titan compiles it into deep dives into top stocks like Amazon or Comcast, laying out investment theses for why your should want your money in “the everything store” or “a toll road for the Internet”. Through in-app videos, push notifications, and reports, Titan tries to make its users smarter, not just richer.

With time and funding, “Eventually we hope to launch other financial products, including crypto, bonds, international equities, etc” Percoco tells me. That could put Titan on a collision course with the Wealthfront, Coinbase, and the recently crypto-equipped Robinhood as well as direct competitors like asset managers BlackRock and JP Morgan.

“If we fast forward 10 to 20 years in the future, millennials will have inherited $10 trillion, and at this rate they’re not equipped to handle that money” says Gardner. “Financial management isn’t something taught in school.”

Worryingly, when I ask what they see as the top threats to Titan, the co-founders exhibited some Ivy League hubris with Gardner telling me “Nothing that jumps out…” Back in reality, building software that reliably prints money is no easy feat. A security failure or big drop could crater the app’s brand. And if its education materials are too frothy, they could instill blind confidence in younger investors without the cash to sustain sizable losses.

Hopefully if finance democratization tools like Titan and Robinhood succeed in helping the next generations gather wealth, a new crop of families will be able to afford the pricey tuitions that reared these startups’ teams.

News Source = techcrunch.com

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