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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

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

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Uber is expected to raise $10 billion later this year in one of the largest U.S. initial public offerings in history. The float will value the ride-hailing giant somewhere between $76 billion — the valuation it garnered with its last private financing — and $120 billion — a sky-high figure assigned by Wall Street bankers that’s had even early Uber investors scratching their heads.

A new report from The Information pegs Uber’s initial market cap at $90 billion. To develop the estimate, the site analyzed undisclosed documents Uber provided creditors in 2017 “in which the company projected it would double net revenue to $14.2 billion by 2019,” ran revenue multiples and compared Uber to GrubHub, which investors say is the business’s closest comparison.

Uber declined to comment on The Information’s analysis.

How we got here

Uber confidentially filed for its long-awaited IPO last month, marking the beginning of a race to the stock markets between it and U.S. competitor Lyft, which filed just hours before, according to a source with knowledge of the situation. Founded in 2009 by Travis Kalanick, Uber has brought in about $20 billion in a combination of debt and equity funding. It counts SoftBank as its largest shareholder in a cap table that also lists Toyota, T. Rowe Price, Fidelity, TPG Growth and many more. As for the skepticism surrounding Uber’s lofty $120 billion valuation, the eye-popping figure seems unachievable considering the company isn’t profitable and has and continues to burn through cash.

An IPO that large would certainly make its investors happy. First Round Capital, for example, seeded Uber with $1.6 million in the company’s first two funding rounds in 2010 and 2011, according to The Wall Street Journal. At a $120 billion valuation, First Round’s shares would be worth some $5 billion. The venture capital firm, however, sold some of its shares to SoftBank alongside Benchmark, which itself would otherwise own shares worth about $14 billion.

Bradley Tusk, an early Uber investor who signed on to help the company surmount political and regulatory barriers in 2011, own shares said to be worth $100 million, though he too gave up 42 percent of his equity in a secondary sale to SoftBank, he recently told TechCrunch.

I’m quite happy with the 120 number,” Tusk said. “But … I am a little surprised by [it], it does seem to be a really aggressive number.”

“Any investment in Uber is obviously a long-term bet on the future, like someone who invested in Amazon in the early days,” Tusk added. “One thing [Uber chief executive officer Dara Khosrowshahi] is doing well is really expanding Uber into a mobility company as opposed to just a ride-hailing company.”

Dara Kowsrowshahi, chief executive officer of Uber, looks on following an event in New Delhi, India, on Thursday, Feb. 22, 2018. Photographer: Anindito Mukherjee/Bloomberg via Getty Images

A long-term bet on the future

Uber has opted to go public in a year poised to see the most high-flying unicorn IPOs in history. As we’ve reported in great detail on this site, both Lyft and Uber are planning to float, as are Slack and Pinterest . Many of these companies, however, made the call to make their public markets debut before the stock market took a quick turn south. Poor performing stocks may discourage unicorns from emerging from their cozy VC-protected stalls.

Uber will garner increased scrutiny from Wall Street investors as they begin to parse out its true value. Fortunately the company, which like Amazon has long prioritized growth over profit, has “’clear levers’ it could pull in order to turn on the cash spigots if it wanted to, by reducing its marketing spending both in the U.S. and developing markets and by finding partners to help finance its self-driving car development,” according to The Information. “Pulling those levers would slow revenue growth by a third—from a 33% growth in net revenue to 22 percent growth in net revenue in 2019 [but] it would save Uber $2 billion annually.”

In its third quarter 2018 financial results, Uber posted a net loss of $939 million on a pro forma basis and an adjusted EBITDA loss of $527 million, up about 21 percent quarter-over-quarter. Revenue for Q3 was up five percent QoQ at $2.95 billion and up 38 percent year-over-year.

“We had another strong quarter for a business of our size and global scope,” Uber chief financial officer Nelson Chai said in a statement. “As we look ahead to an IPO and beyond, we are investing in future growth across our platform, including in food, freight, electric bikes and scooters, and high-potential markets in India and the Middle East where we continue to solidify our leadership position.”

We can speculate on Uber’s valuation for days but ultimately Wall Street will determine just how high Uber will go. For now, all we can do is sit and wait for the company to relinquish its S-1 to the masses.

News Source = techcrunch.com

The Venture Twins

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Justine and Olivia Moore like to introduce themselves together, otherwise, it can be a little confusing.

They live together in an apartment in Menlo Park. They share clothes. They both wear Rothy’s sustainable ballet flats and are big fans of Glossier. Their desks are only inches apart, because yes, they work together too — and because they share a space heater.

The 24-year-old identical twins are venture investors at CRV, a Palo Alto-based venture capital firm they joined a little over a year ago. They call themselves The Venture Twins and they may just be the nearly 50-year-old firm’s secret weapon.

CRV hired Justine and Olivia to work under Saar Gur, a general partner responsible for leading deals in Bird, DoorDash, Patreon, Dropbox and ClassPass, in 2017. He was looking to expand CRV’s consumer team when he found Justine, a recent Stanford economics graduate who was finishing a year-long stint at Goldman Sachs.

It wasn’t long before Justine’s references were urging Saar to hire her twin sister, too. “They are such a good team;” “You should hire both of them;” “They work great together,” they’d tell him.

The Portland natives have an impressive resume. At Stanford, they launched Cardinal Ventures, a first-of-its-kind on-campus startup incubator. Plus, one might say they were bred for venture capital. Their mother, Darcy Moore, was also a VC. She retired when they were just five years old, but the pair remember walking into pitch meetings and observing demo days before starting kindergarten.

“The cool thing to say is ‘oh, I never wanted to be in venture; I stumbled into it,’ but we have always wanted to be in venture,” Justine told TechCrunch. 

Breaking in

Despite long-held ambitions to become venture capitalists, Justine and Olivia enrolled at Stanford in 2012 to study journalism. After some time on The Stanford Daily covering the entrepreneurship beat, they realized journalism wasn’t going to quench their thirst for innovation.

Their junior year, they created Cardinal Ventures. The program gives two cohorts of 12 to 20 startups per year $5,000 in non-dilutive capital and supports them with 10 weeks of mentorship and programming. For the twins, Cardinal granted them access to some of Silicon Valley’s best investors.

Justine (left) and her twin sister Olivia are venture investors at CRV.

By their senior year, they were fielding internship offers from those top-notch VCs. Olivia accepted an internship at First Round Capital, while Justine went to work at Cowboy Ventures. After graduation, they both went to work as analysts at Goldman.

After one year on the public equities team for Olivia and the private equities team for Justine, the twins were ready to transition into venture for good. They had met with CRV’s partners during their Cardinal Ventures days and felt the opportunity to work with Gur on consumer tech investing was something they couldn’t pass up. That, and the firm was willing to give them the freedom they needed to build their personal brand.

Building a brand

In addition to their Twitter account, @VentureTwins, and a very active Medium page, Justine and Olivia have a weekly newsletter called Accelerated that’s racked up some 5,200 subscribers since it launched one year ago.

The newsletter is written for college students. It provides the week’s biggest news in tech, notable internship and job openings, recommended reads and surveys on industry topics and trends for readers to complete.

We are from Oregon and we weren’t engineering majors, so I think the problem we had and part of the reason we went to Goldman was because it’s really hard if you aren’t from here to understand how it works,” Justine said. “Our full-time job is keeping up to date on Silicon Valley, what the hot trends are, who’s hiring, so we decided, why don’t we spend a couple of hours a week creating a newsletter that is the resource we wish we had when we were in college.”

Accelerated has a team of 120 campus ambassadors who Justine and Olivia can text at any time to ask about various topics. “Do you like this company?” “Have you ever heard of this product?” Things like that. So far, the Accelerated network has helped the twins source five potential deals, two of which became CRV portfolio companies. That’s Harper Wilde, a direct-to-consumer bra retailer, and Uppercase, which helps D2C companies open brick-and-mortar stores.

“I think we really underestimated what it would be,” Olivia said. “But being in someone’s inbox every week is this really fun and cool connection.”

CRV isn’t known for its D2C investments; in fact, Harper Wilde was its first ever. With their instincts, youth and network, the twins have quickly proved their value to the firm.

Better together

At this point, you’re probably wondering how two 24-year-old siblings can live and work together and not want to kill each other. And it may sound too cutesy and convenient, but they think they’re better together.

“Honestly, we’ve gotten closer over time,” Olivia said. “Going to Stanford together and as we’ve moved into the professional world, we’ve found we are able to communicate really effectively as a team and get things done because there is less worry about stepping on toes or hurting someone else’s feelings.”

The twins plan to stick together, though it’s not necessarily a requirement. For now, they’ll be keeping their residence in Menlo Park, where they have the space to dog-sit former 23andMe president Andy Page’s Bernedoodle.

In 20 years, who knows, maybe Justine and Olivia will be known as some of the greatest consumer VCs the industry has ever seen. They are smart, refreshingly modest and they seem to know their stuff.

“We’d love to be doing this in the long term if we’re good at it,” Justine said.

Olivia agreed.

News Source = techcrunch.com

Spearhead is transforming founders into angel investors

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Becoming an angel investor is simple in principle: have money and invest. Unfortunately for many of the smartest founders in the startup ecosystem, that requirement can prove a complete block on investing in the companies they see day after day, since early liquidity can be hard to find for founders.

Spearhead was launched earlier this year with a mandate to identify promising startup founders and give them cash to invest in startups autonomously. The brainchild of AngelList’s Naval Ravikant and Accomplice’s Jeff Fagnan, the program identifies promising startup founders and provides them with $200,000 of investible capital, and potentially $1 million. It also sets them up with the right legal entities to invest.

It selected its first cohort — a group of 19 founders selected from 1,500 applications — earlier this year, and the program announced that its second cohort is open for applications today.

Ravikant explained to me that Fagnan and him designed Spearhead to be very different from the scout programs offered by venture firms. “This is the first program that is trying to turn you into a capitalist, and not a laborer,” he explained. “Unlike a traditional scout program, we are not training scouts, we are building full-fledged VCs … [The founders] are not getting a slice of carry in a fund, they are getting carry in their own funds.” He emphasized that “this is really about teaching, learning, and scaling the craft of investing.”

Training founders to be angels is a competitive space, with First Round offering an “Angel Track” program that teaches founders and emerging investors the ropes of investing. What makes Spearhead unique is the program’s capital commitment — you don’t just learn to make investments, you actually get a pool of capital by which to invest from.

Since Spearhead creates independent funds for its members, the founders in Spearhead are free to raise additional capital from outside investors and expand their funds beyond Spearhead’s initial seed capital.

Founders investing in founders

Fagnan noted he had some “sleepless nights” as he and Ravikant designed Spearhead. “Just because we put people in this program, we didn’t know if they are going to write a check,” he said. That was particularly true since “we definitely skewed toward people who didn’t consider themselves angels.” Being an operator and being an angel investor require very different skillsets and knowledge, and it wasn’t clear at all that founders could context-switch easily.

The good news: they can. So far, the first cohort has made roughly 50 seed investments into startups, mostly at the pre-seed and seed stages.

One major surprise with the first cohort is that the founders were much more sophisticated about venture capital dynamics than expected. “What we got wrong, we thought we would spoon-feed venture 101,” Fagnan said. But instead, during office hours, “it’s almost the same level of discussion as the principals and partners at Accomplice.”

I talked with six of the founders in the program about their experience. One pattern that came up consistently in my chats is that these founders have all had to go through their own venture capital fundraises, and they wanted to share their lessons learned with other founders to help them succeed and be the kind of venture capitalist that they needed for their own businesses.

For instance, Alice Zhang at Verge Genomics explained that she hoped to use her angel fund to bridge the gap between traditional life sciences investors and a new wave of healthtech startups that are led by computer scientists. “I have a thesis that there will be an explosion of companies that are going to be at the intersection of technology and the life sciences,” she said, but venture capitalists targeting the industry don’t fully see that emerging pattern yet. “I’m spending a lot of time on weekends helping founders in this space.” So far, she has invested in two companies.

That intention to help other founders in a focused industry also applied to Noah Ready Campbell at Ready Robotics, who says that when it comes to robotics investing, “a lot of things that were impossible five years ago are possible now.” He saw an opportunity to use his fund to “help participate in the robotics community in the Bay Area” and accelerate the industry. He’s invested in four companies so far, typically with $50k checks.

For others though, it’s less about industry and more about who they know. Alex MacCaw, a well-known JavaScript developer, former Stripe engineer, and founder of Clearbit, told me that a large component of his dealflow is “a bunch of ex-Stripes which I call the Stripe mafia.” He invests very early, and “sometimes there isn’t even a domain name, but I do it based on the fact that I know the founder pretty well.” He’s done five deals so far.

Building an affinity network

The founders of Spearhead (Image from Spearhead)

Beyond investing in other startups, the founders in the program also emphasized that they are learning from each other. Spearhead hosts a variety of in-person get-togethers, and also holds regular office hours to allow the founders to ask questions and get feedback on their deals from Ravikant and Fagnan, as well as Accomplice’s Cack Wilhelm and AngeList’s Jake Zeller.

Prasanna Sankar, who was director of engineering at Zenefits and left with Zenefits co-founder Parker Conrad to create Rippling, said that one of the biggest things he has had to learn is the difference between angel investing and stock market investing. “We don’t make an investment for the price, so it is like the opposite of the stock market,” he said. “If you are a new angel, it would take five years to have these experiences… but these guys can fast-track your exposure to these things.” He has invested in five startups, mostly at $25k checks and with one at $50k.

Ankur Nagpal at Teachable emphasized that learning from the other founders in the cohort didn’t just train him on being a better angel investor, but also how to operate his business better. “Everyone operates so differently,” he said, and talking with others helped him learn “not just what you should be doing, but also about how you are different from other businesses.”

Fagnan noted that a large priority in the first cohort was geographical representation, and he expected that Spearhead would design its next cohort to have “fewer people taking deeper accountability to each other.”

The next-generation of venture capitalists?

For Ravikant and Fagnan, the dream of their program was to create the next-generation of competent and committed angel investors scattered around the country. They have certainly gotten that plan underway, but the question is how far will these cohort members go in their investing careers?

Many founders I talked to insisted that their focus remains 100% on their companies, and that angel investing as just a side passion. Outside of MacCaw at Clerabit, almost no one was intending to scale up their funds beyond the initial seed capital, and even MacCaw was just looking to have a little more cash to invest since he has already invested his whole fund.

Ultimately, that might play well for Spearhead, since one of the challenges of traditional venture capital funds is their increasing scale. Ravikant noted that the sort of pre-seed checks that these investors are writing are hard for venture capital firms to do given their size.

Sankar said that “I always thought that Silicon Valley startup as an asset class is one of the most undervalued and underrated.” That seems to match Ravikant’s entire mantra, who told me that “I want to quintuple down on [Spearhead].” He hopes that more of his founders can build distinguished track records, and become the leading angel investors of their generation. We hope that they are “going to be bigger than Naval and Jeff sometime, and if not, then we have failed.”

Spearhead’s first cohort of 19 founders included:

News Source = techcrunch.com

RDMD attacks rare diseases with data mined from health records

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You wouldn’t expect a medical app to get its start as a Snapchat competitor. Neither did video chat startup TapTalk’s founder Onno Faber. But four years ago he was diagnosed with a rare disease called Neurofibromatosis Type 2 that caused tumors leading Onno to lose hearing in one ear. He’s amongst the one in ten people with an uncommon health condition suffering from the lack of data designed to invent treatments for their ails. And he’s now the co-founder of RDMD.

Emerging from stealth today, RDMD aggregates and analyzes medical records and sells the de-identified data to pharmaceutical companies to help them develop medicines. In exchange for access to the data, patients gets their fragmented medical records organized into an app they can use to track their treatment and get second opinions. It’s like Flatiron Health, the Google-backed cancer data startup that just got bought for $2 billion, but for rare diseases.

Now RDMD is announcing it’s raised a $3 million seed round led by Lux Capital and joined by Village Global, Shasta, Garuda, First Round’s Healthcare Coop, and a ton of top healthtech angels including Flatiron investors and board members. The cash will help RDMD expand to build out its product and address more rare diseases.

RDMD founders (from left): Nancy Yu and Onno Faber

We believe that the traditional way rare disease R&D is done needs to change” RDMD CEO Nancy Yu tells TechCrunch. The former head of corp dev at 23andme explains that, “There are over 7,000 rare diseases and growing, yet <5% of them have an FDA-approved therapy . . . it’s a massive problem.” 

While data infrastructure supports development of treatments for more common diseases like cancer and diabetes, rare diseases have been ignored because it’s wildly expensive and difficult to collect the high-quality data required to invent new medicines. But “RDMD generates research-grade, regulatory-grade data from patient medical records for use in rare disease drug R&D” says Yu. The more data it can collect, the more pharma companies can do to help patients.

Trading Utility For Patient Data

With RDMD’s app, a patient’s medical data that’s strewn across hospitals and health facilities can be compiled, organized and synthesized. Handwritten physicians’ notes and faxes are digitized with optical character recognition, structuring the data for scientific research. RDMD lays out a patients’ records in a disease-specific timeline that summarizes their data that can be kept updated, delivered to specialists for consultations, or shared with their family and caregivers.

If users opt in, that data can be anonymized and provided to research organizations, hospitals, and pharma companies that pay RDMD, though these patients can delete their accounts at any time. Since it’s straight from the medical records, the data is reliable enough to be regulation-compliant and research-ready. That allows it to accelerate the drug development process that’s both lucrative and life-saving. “It normally takes millions of dollars over several years to gather this type of data in rare diseases” Yu notes. “For the first time, we have a centralized and consented set of data for use in translational research, in a fraction of the time and cost.”

So far, RDMD has enrolled 150 patients with neurofibromatosis. But the potential to expand to other rare diseases attracted a previous pre-seed round from Village Global and new funding from angels like Clover Health CEO and Flatiron board member Vivek Garipalli, Flatiron investor and GV (Google Ventures) partner Vineeta Agarwala, Twitter CTO Parag Agrawal, former 23andme president Andy Page, and the husband and wife duo of former Instagram VP of product Kevin Weil and 137 Ventures managing director Elizabeth Weil.

“Onno and Nancy realized there’s an opportunity to do in rare diseases what Flatiron has done in oncology — to aggregate clinical data from patients, and to leverage that data in clinical trials and other use cases for biotech and pharma” says Shasta partner Nikhil Basu Trivedi. RDMD will be competing against pharma contract research organizations that incur high costs for collecting data the startup gets for free from patients in exchange for its product. Luckily, Flatiron’s exit paved the way for industry acceptance of RDMD’s model.

“The biggest risk for our company is if we lose our focus on providing real, immediate value to rare disease patients and families. Patients are the reason we are all here, and only with their trust can we fundamentally change how rare disease drug research is done” says Yu. RDMD will have to ensure it can protect the privacy of patients, the security of data, and the efficacy of its application to drug development.

Hindering this process is just one more consequence of our fractured medical records. Hopefully if startups like RDMD and Flatiron can demonstrate the massive value created by unifying medical data, it will pressure the healthcare power players to cooperate on a true industry standard.

News Source = techcrunch.com

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