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June 25, 2019
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Insight Venture Partners

Utah’s Divvy raises $200M to eliminate expense reports

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In February 2016, Blake Murray wrote down an idea for a business expense and budgeting platform on the back of a napkin. Today, that’s Divvy, a tech-enabled replacement of monthly expense reports.

The company, not to be confused with Divvy Homes or Divvy Bikes, has raised an additional $200 million in venture capital funding as part of Series C financing led by NEA with participation from Pelion Venture Partners and Insight Venture Partners. Murray, Divvy’s co-founder and chief executive officer, declined to disclose Divvy’s valuation though he did confirm it’s grown 4x from the company’s $35 million Series B. According to PitchBook, the Series B financing valued Divvy at $173 million, suggesting a new valuation of nearly $700 million.

For a business headquartered in Lehi, Utah — for a Silicon Valley startup even — that’s a seriously rapid growth rate. Divvy only launched its platform, which allows customers to send and request funds, create virtual credit cards, manage team spending and more, in January 2018. Its valuation has grown 1000 percent since then across three rounds of equity funding. Murray tells TechCrunch the business hasn’t adopted a hypergrowth strategy, opting instead to spend nearly two years carefully crafting and iterating the product before its public launch.

Divvy co-founders Alex Bean (left) and Blake Murray.

“We aren’t taking the route of build fast and break fast,” Murray said. “If you want to disrupt a market you have to be very deliberate in your approach and you have to build powerful experiences that really pull the rug out from under your competition.”

Divvy’s expense tools are free. The business makes money from every transaction thanks to a fee paid by the merchant. That fee is split between Divvy, MasterCard and the issuing bank. The company’s key competitors are legacy expense system Concur and Expensify, a decade-old fellow venture-backed expense manager. Divvy, however, sets itself apart with a user-friendly mobile app and its corporate credit card, features that allow customers real-time visibility into their spending.

“It doesn’t take a genius to recognize that there’s been incredible innovation with B2B software that gives you real-time data,” Murray said. “Whether intentional or not, Divvy is creating a new category. Divvy took what looked like a bunch of disparate ideas, combined them and said holy crap that all makes a lot of sense.”

The company currently counts 200 employees and 3,000 customers on revenue growth of 30 percent quarter-over-quarter. Divvy plans to use the latest investment to bolster product and engineering teams, as well as launch a bill pay product. Next year, Divvy will expand internationally.

The round brings Divvy’s total raised to $245.5 million, not including a $250 million credit facility it secured in January. NEA managing general partner Scott Sandell is joining Divvy’s board of directors as part of the transaction.

The company has previously landed financial support from Utah’s tech unicorn CEOs Domo founder Josh James and Pluralsight co-founder Aaron Skonnard .

 

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.


Here’s your weekly reminder to send me tips, suggestions and more to kate.clark@techcrunch.com or @KateClarkTweets


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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Startups are giving writers and filmmakers more ways to make it in Hollywood

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On May 11 Netflix released the teen dramedy “The Kissing Booth” just as the school year was wrapping up for teens across the country.

By June, the company had a smash hit among the tweenage set, and Wattpad, the company which owned the rights to the The Kissing Booth, had its first true breakout vehicle. The story, written on Wattpad’s publishing platform by Beth Reekles, was a proof point for the company’s thesis pitching a new twist on the old model of discovering stories and creative talent for the entertainment industry.

Behind the success of the film is a nascent movement among startup companies that are trying to open the doors of Hollywood’s dream factory to a broader group of creative professionals by riding the wave of fan fiction and user generated content all the way to the Paramount lot (or the Disney lot, or Sony Studios).  

“In this obvious period of disruption in the entertainment industry how we’re finding stories is evolving,” said Wattpad Studios chief Aron Levitz.

YouTube, the short-lived Vine app, and Instagram have all created new platforms for discovering potential on-camera talent, and Amazon, Apple, Facebook, Instagram (again), Netflix, and YouTube (again) have smashed the distribution system for television and movies. But these platforms and the traditional studios they’d like to supplant have a voracious appetite for stories to tell and (many) are reluctant to risk millions of dollars behind something unproven.

Hollywood has always borrowed (or stolen) from other media to entertain the masses, but it seems like the fields it’s foraging in for new stories have narrowed to a few serialized playgrounds (comic books, old television shows and movies, and wildly successful young adult genre fiction).

While there are thousands of flowers to be found there, new tech-enabled companies are suggesting there might be other patches where new talent can be discovered, harvested and leveraged for corporate gain and viewer delight.

Startups like Wattpad and Tongal (for directors and cinematographers), and new financing platforms like Legion M (for producing features) are aiming to elevate new talent and provide what the companies hope will be built-in audiences for successful new programming on platforms like Netflix, Apple, and others — and the hundreds of networks that are vying for attention in an increasingly fragmented media landscape.

It wasn’t always this way. When Tongal was created, roughly a decade ago. the entertainment industry looked much, much differently than it does now.

Ten years ago that Netflix announced it would let its DVD subscribers watch streaming video as well — mostly old movies and syndicated shows that had already made their millions for the big networks and studios. That was the starting gun of what would become a race to roll up talent and gain audience in a creative landscape that was becoming increasingly competitive. With new entrants joining at every new lap.

At the time, Tongal was a discovery mechanism for new talent and a way for brands to pay for user generated content they liked. The company raised $15 million from Insight Venture Partners to harness the growing popularity of social media reach to create potentially viral videos for brands.

Tongal is still working under the thesis of user generated content, but the difference now is the millions of dollars these videos and their creators can bring in — and the ability o energize and inspire a fan base to connect more directly and engage more frequently with new titles. All the while Tongal gives studios a window into a wider world of talent.

One creator on the platform, Tucker Barrie, has gone from making short videos for social media for IAMS to a career as an animator on projects like Isle of Dogs. “Tongal is a good spot for people who don’t have a lot of experience to gain a lot of experience and make a name for themselves,” Barrie said.

In the past year the company has inked a deal with National Geographic to produce a series called WILD After Dark. The first late-night series from National Geographic WILD, the new episodes will feature shorts from members of the Tongal platform on animal-related subjects. It launched with an open call for submissions in February.

More recently Tongal has linked up with Wattpad to call on its network of creators to pitch a treatment for Wattpad’s wildly successful science fiction thriller Expiration Date. In July, Tongal issued its call to filmmakers for submissions from which the partners will pick three finalists. Those finalists will receive funding to produce a “proof-of-concept” series trailer.

Then, Wattpad, Tongal and their distribution partner SYFY will award a grand prize winner additional funding to create a digital pilot episode with the potential to go on to develop the entire series for SYFY.com as part of its fan creators program.

“The partnership between Tongal and Wattpad flips the script on Hollywood by changing the how and who of content creation through our open platforms for talent,” said James DeJulio, Tongal’s co-founder and President, in a statement at the time. “These new global communities are made up of diverse and passionate creators, and now they’re actually developing the shows they want to watch. I’m thrilled that SYFY.com has opened the door for this innovative, by the fans, for the fans shift.”

This marks the second collaboration between Tongal and Wattpad on project development for a network. The two companies, which have a natural affinity as creative platforms focused on the visual and storytelling elements of a production (respectively), had worked on a similar competition for the CW Seed, and its production of Cupid’s Match, another popular Wattpad story (spoiler: it’s not very good).

“It’s one of those great proof points for Wattpad and Wattpad studios,” said Levitz, the head of Wattpad Studios in a February interview. “I think it’s the first public one that we’re talking about in a strong way.”

On Wattpad, Cupid’s Match had 32 million reads, and it was that kind of viral popularity that piqued the interest of the CW Network. “We can use the strength of an audience and get someone like CW interested in the output,” Levitz said. “We have 400 million stories on the platform. We’re able to look at the data we have the audience we have and the story we have and use data to choose the right stories for the right partner.”

Partners are lining up. Sony Pictures Television bought the rights to the Wattpad story “Death is my BFF,” and Hulu signed off on an order for “Light as a Feather”. Studios and networks including TurnerUniversal Cable Productions (a division of NBCUniversal), eOne and Paramount Pictures, have also signed on to work with the startup.

Like Tongal, Wattpad also took a circuitous path to becoming a player in Hollywoodland. The company initially started as an e-book community operator sharing fan fiction and classic works. Over time, the fan fiction side of the content marketplace won out and the Toronto-based company went from raising capital from a consortium of angel investors to raising $51 million from a consortium of investors including the Chinese internet giant, Tencent, earlier this year. It’s likely that Tencent (and the studios it’s partnering with) were drawn to Wattpad’s 60 million monthly users.

The foundation for the belief that fan fiction could be leveraged into hundreds of millions for the movie industry was laid by the success of the Fifty Shades franchise. The best-selling books, derived from Twilight fan fiction, were optioned into a series of three films and made for a cool $150 million.

By the time the last movie in the series debuted, the films were on their way to making over $1 billion at the box office.

For the past decade Hollywood has been relying on big franchises and fan-driven stories to create big numbers at the box office or online, said DeJulio.

“Fans are the lifeblood of these franchises,” DeJulio said. “We’re in this weird time right now… where marketing is very expensive and it is in a lot of ways hamstringing entertainment.”

DeJulio sees Tongal as a platform where one can influence and support the other.

“The studios, once they do get a hit… They realize that through fan communities and engaging them they can not only market it but they can actually get the work done too [of creating new content],” DeJulio said.

Mount Lee, Hollywood Hills, Hollywood, Los Angeles, California, USA.

If Wattpad and Tongal are using their network of users to find and promote talent, Legion M is hoping to use the network of fans for genre content to finance new productions.

The startup production studio has raised $3 million in equity crowdfunding over two rounds and has managed to grab a stake in well reviewed indie-projects like Colossal (starring Anne Hathaway and Jason Sudeikis) and Mandy a new Nicolas Cage vehicle already being touted as cult-classic gold. What that means as far as returns go for the shareholders that back the company’s funding campaigns is unclear, especially since the company’s Bad Samaritan project (starring David Tenant, everyone’s favorite of the new Dr. Who) was critically panned.

Founded by two serial internet entrepreneurs Paul Scanlan and Jeff Annison, and backed by partnerships with folks like the Austin-based theater chain Alamo Drafthouse, LegionM’s goal is to bring in 1 million fans as investors to back projects.

The idea is to harness fan support for sales and marketing help and to surface projects that have enough of a built-in audience to generate profits for the company.

“We believe an entertainment company owned by fans is better than one owned by Wall Street,” said Paul Scanlan, Legion M’s cofounder and CEO, in a statement announcing the company’s new crowd funding campaign.

Some of the projects Legion M affiliated itself with are based more around fan engagement than an actual dollar investment. In fact, the company isn’t a producer of the marquee Colossal film, and instead came on to provide marketing support through its network of fans, according to an interview with the director.

Scanlan and Annison launched MobiTV, which was an early developer of technology to stream digital media on mobile devices. The two went on to launch New York Rock Exchange, a company that allows fans to buy illiquid shares in songs they love. It’s like a coin offering, without the upside, and without any legal ramifications because there’s actually nothing of value that acquirers are buying.

Unlike the Rock Exchange, average investors are buying real shares in the crowd funding offerings the two co-founders are selling via the Securities and Exchange Commission’s new crowdfunding regulations. And they’re tapping into the thesis that fans and consumers are driving the creation of commercially viable content now more than ever.

Wattpad, Tongal, and Legion M aren’t alone in their efforts. Companies like Seed&Spark, Coverfly, and The Black List, are also doing their best to uncover new artists and creators for the entertainment industry to develop. While on the financing side, new cryptocurrencies like MovieCoin (which just launched a pre-sale of its tokenized financing offering for producing new movies) and TaTaTu are angling to give the moviegoing public another (ideally more transparent) way to finance movies.

“Hollywood is a notoriously difficult place to traverse in the entertainment business. What we find in content creation, and the investment process as well, is that every project is seeking an audience,” Annison said in an interview with The Niner Times (the local university paper for the University of North Carolina, Charlotte). “Among Hollywood, which is such a massive world to step into, there are limitations along with those huge companies. In essence, it’s a ‘hit-driven’ enterprise, where the lines are drawn between the artistic side of filmmaking and the business side of entertainment. That can be a complicated street to walk down.”

Summer ’17 – A seismic shift for gender diversity in tech

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We may look back on the summer of 2017 as a watershed moment for gender diversity: the lava of simmering issues erupts, and once out, flows to reshape the landscape.

However, what happened this summer to tech giants like Uber and Google is merely a symptom of a gradual change in a shifting landscape, that little-by-little has led to people taking notice of a personal blog from a female engineer, or reacting decisively to a discriminatory memo from a male engineer.

Today, the business value of diversity is clear. Studies have shown that businesses cannot be successful if they systematically exclude talent. There is no longer debate about the rationale for diversity in boardrooms, leadership or team composition.  So why is solving this so difficult?

The issue is a complex one that, over the years, has resisted change. At the risk of over-simplifying, the challenge to get there has, until this recent eruption, been demarcated by both a lack of will and a lack of “know how” – the skills individuals and organizations need to garner greater inclusion across the board.

Emerging from this summer is more will for diversity than ever before. The diversity conversation is in the open with many positive signals of the desire to change. Among others, organizations who have been cultivating STEM talent like Girls Who Code, Anita Borg Institute and Girls Who Invest, are now being embraced by giants like Google.

My own firm, Insight Venture Partners, partnered with Computer Science New York City to mentor teenage women who are learning computer science.

Willingness to increase diversity is also visible in recruiting:  many companies have policies and active plans to increase the pipeline of candidates and hire more females. Leaders recognize that by changing the gender composition of teams through outreach and hiring, the tenor of team dialogue will change.

This said, we can’t hire our way out of a lack of gender diversity. We need to focus on companies’ organizational impediments that lead to low retention – women enter the workforce in equal numbers as men, but for multiple reasons, don’t stay the course. Unless we push boundaries on skill-based organizational programs designed to retain women, we will not move the demographic dial.

As they climb out of the homogeneity crater, larger companies, as a first step, have implemented programs to build their skill muscles that include unconscious bias training, structured performance ratings and grievance systems. However, according to a recent Harvard Business Review analysis, the overall efficacy of HR-based diversity programs is unclear. They may reduce lawsuits, but they’re not increasing diversity.

To cultivate organizational skill, we must focus on inclusion efforts that serve as mechanisms to advance change in day-to-day company culture.

Rather than trying to outlaw bias, companies should engage managers to build teams that demonstrate parity. An organization is the sum of its teams and managers, those who make a difference. We know people don’t leave companies: they leave managers. If a woman’s direct manager is supportive, fair and open-minded, team members will take their cue from this behavior.

Companies should incentivize managers on standards of fairness and parity, engaging them directly in promoting a diverse and inclusive environment, and measuring their success

Secondly, companies should create positive male-female mentoring relationships: the diversity landscape will only reshape if more men get involved. These mentorships would potentially yield stronger results given men dominate leadership roles in tech and venture capital.

Male-female boss-employee relationships are fraught with potential to misconstrue behavior, creating a barrier for male and female co-workers to engage in social activities that foster trust. To paraphrase Kim Elsesser, professor at UCLA who focuses on psychology and gender, as a consequence of social (dis)comfort, men get to know other men much better and women get to know other women.

Since men lead most organizations, it’s easy to see how they’d choose the person they typically have a beer with for a business opportunity – a choice that, over time, can have major organizational repercussions in the composition of team leaders.

By creating an umbrella construct for these male/female relationships to develop, a simple budget and a list of suggested ways to interact, organizations can remove barriers women have in accessing power structures.

Thirdly, adjust the metrics. As the old adage goes, “What gets measured is what gets managed.” This is no different for diversity. It doesn’t mean quotas, but measurable goals. For example, the White House Diversity Initiative from 2016 resulted in nearly 80 companies signing up to measure progress against diversity goals. Progress against such a public pledge is a brand issue in the PR domain, and hence more powerful.

In the VC industry, metrics that will drive change include tracking the dollars invested in diverse management teams, number of deals sourced by minorities, and number of investment partners that are female or minorities.  VCs should be cautious of only considering the number of closed deals for advancement.

Effective investing requires pattern recognition. A woman can demonstrate this skill whether or not she has taken time off for parenting. We should acknowledge the playing field is not even to start, and create measures that project diverse talent outcomes, knowing this yields greater alpha.

As we head into Fall 2017, the way forward after the eruption is becoming clear. I’m a strong believer that where there is a will, there is a way.  This summer, industry will has gathered momentum – it’s a red-hot topic that leaders know they need to deal with.  The path is starting to take shape, as organizations engage in deliberate skill-improvement activities to get us there.

The possibilities for business upside from greater inclusion is powerful, even greater than the negative forces that recently exploded. There is a new landscape, and while we don’t know what it looks like, we know it will be better, and necessarily different, than the current one.

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