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February 24, 2019
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Y Combinator

Startups Weekly: Flexport, Clutter and SoftBank’s blood money

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The Wall Street Journal published a thought-provoking story this week, highlighting limited partners’ concerns with the SoftBank Vision Fund’s investment strategy. The fund’s “decision-making process is chaotic,” it’s over-paying for equity in top tech startups and it’s encouraging inflated valuations, sources told the WSJ.

The report emerged during a particularly busy time for the Vision Fund, which this week led two notable VC deals in Clutter and Flexport, as well as participated in DoorDash’s $400 million round; more on all those below. So given all this SoftBank news, let us remind you that given its $45 billion commitment, Saudi Arabia’s Public Investment Fund (PIF) is the Vision Fund’s largest investor. Saudi Arabia is responsible for the planned killing of dissident journalist Jamal Khashoggi.

Here’s what I’m wondering this week: Do CEOs of companies like Flexport and Clutter have a responsibility to address the source of their capital? Should they be more transparent to their customers about whose money they are spending to achieve rapid scale? Send me your thoughts. And thanks to those who wrote me last week re: At what point is a Y Combinator cohort too big? The general consensus was this: the size of the cohort is irrelevant, all that matters is the quality. We’ll have more to say on quality soon enough, as YC demo days begin on March 18.

Anyways…

Surprise! Sort of. Not really. Pinterest has joined a growing list of tech unicorns planning to go public in 2019. The visual search engine filed confidentially to go public on Thursday. Reports indicate the business will float at a $12 billion valuation by June. Pinterest’s key backers — which will make lots of money when it goes public — include Bessemer Venture Partners, Andreessen Horowitz, FirstMark Capital, Fidelity and SV Angel.

Ride-hailing company Lyft plans to go public on the Nasdaq in March, likely beating rival Uber to the milestone. Lyft’s S-1 will be made public as soon as next week; its roadshow will begin the week of March 18. The nuts and bolts: JPMorgan Chase has been hired to lead the offering; Lyft was last valued at more than $15 billion, while competitor Uber is valued north of $100 billion.

Despite scrutiny for subsidizing its drivers’ wages with customer tips, venture capitalists plowed another $400 million into food delivery platform DoorDash at a whopping $7.1 billion valuation, up considerably from a previous valuation of $3.75 billion. The round, led by Temasek and Dragoneer Investment Group, with participation from previous investors SoftBank Vision Fund, DST Global, Coatue Management, GIC, Sequoia Capital and Y Combinator, will help DoorDash compete with Uber Eats. The company is currently seeing 325 percent growth, year-over-year.

Here are some more details on those big Vision Fund Deals: Clutter, an LA-based on-demand storage startup, closed a $200 million SoftBank-led round this week at a valuation between $400 million and $500 million, according to TechCrunch’s Ingrid Lunden’s reporting. Meanwhile, Flexport, a five-year-old, San Francisco-based full-service air and ocean freight forwarder, raised $1 billion in fresh funding led by the SoftBank Vision Fund at a $3.2 billion valuation. Earlier backers of the company, including Founders Fund, DST Global, Cherubic Ventures, Susa Ventures and SF Express all participated in the round.

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

Menlo Ventures has a new $500 million late-stage fund. Dubbed its “inflection” fund, it will be investing between $20 million and $40 million in companies that are seeing at least $5 million in annual recurring revenue, growth of 100 percent year-over-year, early signs of retention and are operating in areas like cloud infrastructure, fintech, marketplaces, mobility and SaaS. Plus, Allianz X, the venture capital arm attached to German insurance giant Allianz, has increased the size of its fund to $1.1 billion and London’s Entrepreneur First brought in $115 million for what is one of the largest “pre-seed” funds ever raised.

Flipkart co-founder invests $92M in Ola
Redis Labs raises a $60M Series E round
Chinese startup Panda Selected nabs $50M from Tiger Global
Image recognition startup ViSenze raises $20M Series C
Circle raises $20M Series B to help even more parents limit screen time
Showfields announces $9M seed funding for a flexible approach to brick-and-mortar retail
Podcasting startup WaitWhat raises $4.3M
Zoba raises $3M to help mobility companies predict demand

Indian delivery men working with the food delivery apps Uber Eats and Swiggy wait to pick up an order outside a restaurant in Mumbai. ( INDRANIL MUKHERJEE/AFP/Getty Images)

According to Indian media reports, Uber is in the final stages of selling its Indian food delivery business to local player Swiggy, a food delivery service that recently raised $1 billion in venture capital funding. Uber Eats plans to sell its Indian food delivery unit in exchange for a 10 percent share of Swiggy’s business. Swiggy was most recently said to be valued at $3.3 billion following that billion-dollar round, which was led by Naspers and included new backers Tencent and Uber investor Coatue.

Lalamove, a Hong Kong-based on-demand logistics startup, is the latest venture-backed business to enter the unicorn club with the close of a $300 million Series D round this week. The latest round is split into two, with Hillhouse Capital leading the “D1” tranche and Sequoia China heading up the “D2” portion. New backers Eastern Bell Venture Capital and PV Capital and returning investors ShunWei Capital, Xiang He Capital and MindWorks Ventures also participated.

Longtime investor Keith Rabois is joining Founders Fund as a general partner. Here’s more from TechCrunch’s Connie Loizos: “The move is wholly unsurprising in ways, though the timing seems to suggest that another big fund from Founders Fund is around the corner, as the firm is also bringing aboard a new principal at the same time — Delian Asparouhov — and firms tend to bulk up as they’re meeting with investors. It’s also kind of time, as these things go. Founders Fund closed its last flagship fund with $1.3 billion in 2016.”

If you enjoy this newsletter, be sure to check out TechCrunch’s venture capital-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and I discuss Pinterest’s IPO, DoorDash’s big round and SoftBank’s upset LPs.

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News Source = techcrunch.com

Startups Weekly: Is Y Combinator’s latest cohort too big?

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Greetings from Chittorgarh, one of my stops on a two-week excursion through Goa and Rajasthan, India. I’ve been a little too busy exploring, photographing cows and monkeys and eating a lot of delicious food to keep up with *all* the tech news, but I’ve still got the highlights.

For starters, if you haven’t heard yet, TechCrunch launched Extra Crunch, a paid premium subscription offering full of amazing content. As part of Extra Crunch, we’ll be doing deep dives on select businesses, beginning with Patreon. Read Patreon’s founding story here and learn how two college roommates built the world’s leading creator platform. Plus, we’ve got insights on Patreon’s product, business strategy, competitors and more.

Sign up for Extra Crunch membership here.

On to other news…

Y Combinator’s latest batch of startups is huge

So huge the Silicon Valley accelerator had to move locations and set up two stages at its upcoming demo days (March 18-19) to accommodate the more than 200 startups ready to pitch investors (who will have to hop between stages at the event). There will also be a virtual demo day live-streamed for some investors to watch “because there are so few seats.” Here’s what I’m wondering… At what point is a YC cohort too big? If investors aren’t even able to view all the companies at Demo Day, what exactly is the point? Send me your thoughts.

Deal of the week

Another week, another SoftBank deal. The Vision Fund’s latest bet is autonomous delivery. The Japanese telecom giant has invested $940 million in Nuro, the developer of a custom unmanned vehicle designed for last-mile delivery of local goods and services. The startup, also backed by Greylock and Gaorong Capital, will use the cash to expand its delivery service, add new partners, hire employees and scale up its fleet of self-driving bots. And while we’re on the subject of autonomous, TuSimple, a self-driving truck startup, has raised a $95 million Series D at a unicorn valuation.

Mamoon Hamid and Ilya Fushman

The future of KPCB

TechCrunch’s Connie Loizos spoke with Mamoon Hamid and Ilya Fushman, who joined Kleiner Perkins from Social Capital and Index Ventures, respectively. The pair talked about Kleiner Perkins, touching on people who’ve left the firm, how its decision-making process now works, why there are no senior women in its ranks and what they make of SoftBank’s Vision Fund.

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

Facebook almost bought Unity

Facebook CEO Mark Zuckerberg considered a multi-billion-dollar purchase of Unity, a game development platform. This is according to a new book coming out next week, “The History of the Future,” by Blake Harris, which digs deep into the founding story of Oculus and the drama surrounding the Facebook acquisition, subsequent lawsuits and personal politics of founder Palmer Luckey. Here’s more on the acquisition-that-could-have-been from TechCrunch’s Lucas Matney.

Venture capital funds

Indonesia-focused Intudo Ventures raised a new $50 million fund this week to invest in the world’s fourth most populated country; InReach Ventures, the “AI-powered” European VC, closed a new €53 million early-stage vehicle; and btov Partners closed an €80 million fund aimed at industrial tech startups.

Xiaomi-backed electric toothbrush startup Soocas raises $30M

Startup cash

Jobvite raises $200M+ and acquires three recruitment startups to expand its platform play
Opendoor files to raise another $200M
DriveNets emerges from stealth with $110M for its cloud-based alternative to network routers
Figma gets $40M Series C to put design tools in the cloud
Xiaomi-backed electric toothbrush Soocas raises $30 million Series C
Malt raises $28.6 million for its freelancer platform
Elevate Security announces $8M Series A to alter employee security behavior
Massless raises $2M to build an Apple Pencil for virtual reality

Subscription scooters

Just when you thought the scooter boom and the subscription-boom wouldn’t intersect, Grover arrived to prove you wrong. The startup is launching an e-scooter monthly subscription service in Germany. Their big idea is that instead of purchasing an e-scooter outright, GroverGo customers can enjoy unlimited e-scooter rides without the upfront costs or commitment of owning an e-scooter.

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and General Catalyst’s Niko Bonatsos chat startups.

Want more TechCrunch newsletters? Sign up here.

News Source = techcrunch.com

Postscript wants to be the Mailchimp for SMS

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Email is certainly not dead, despite many such exclamations, but there’s no question that it’s a bloated, seeping hog of a platform on which it’s incredibly difficult for businesses to develop meaningful relationships with customers.

Postscript, a startup launching out of Y Combinator’s latest class, wants to learn from what email marketing got right and translate that to the next frontier of B2C communications: SMS. It basically wants to be the Mailchimp for texts.

“We are witnessing the decay of email,” Postscript president Alex Beller tells TechCrunch. “User behavior is all SMS now and e-commerce traffic and web traffic, in general, are so heavily mobile.”

The startup specifically wants to focus on shaping how consumers and businesses engage in the relationship around online commerce. Do you have a subscription to some cook-at-home meal startup? Then maybe they’ll shoot you a message asking if you want to add a new dessert option to your meal this week. Reply “YES” to add. That’s it.

The startup handles ensuring that businesses have proper consent from users to get text messages sent to them. From there businesses are able to segment users, plan SMS campaigns with text and media and have everything backed up by a decent analytics suite so that customers can see what happens on the other end of the texts. Beyond campaigns, communications can be automated based on customer actions so they get some feedback after they make a purchase or other action.

Being at the forefront of a new frontier for communicating with customers seems to have its advantages. Postscript claims a 95+ percent open rate and 35 percent click-through rate, numbers that are pretty wild for marketers that have dealt with the stats on email campaigns.

Given that people are used to SMS as a means of conversation, people are also a lot more likely to respond and ask questions inside the chain, something the Postscript founders were a bit surprised by but soon built into their feature set alongside integrations with customer support platforms.

“We rushed out this inbound feature when we realized how much [communication] we had coming in from users,” Postscript CEO Adam Turner told TechCrunch. “It’s all about engagement, not just clicks… and a one-way communication channel.”

As a consumer, the idea that my text messages are soon going to be inundated by #brands elicits a gut reaction to burn it all down, but there’s an air of inevitability that SMS will become the next place that businesses want to infiltrate. We’re already getting updates from food delivery services and UPS; Postscript wants their platform to let people expand and manage these relationships.

There are a few reasons why you don’t have to gravely fear your texting app turning into a corporate dump. The opt-in process for phone communications is already a bit more codified in the U.S., and as companies attempt to stay in the good graces of GDPR for fear of the EU god, it might be more likely they tread carefully. Additionally, while SMS fees aren’t substantial, there’s certainly a more baked-in cost than with forwarding an offer to a huge bank of emails. Lastly, users just have to punch out a quick “UNSUBSCRIBE” to get out of messages from which they’ve gotten their fill, a standard across carriers.

Right now the company is closely integrated with Shopify so users can add this to their storefronts. Pricing varies based on the amount of messages you’re sending. There’s a free tier for sending 100 messages per month, $50/month for sending 1,000 and a few more tiers topping out at a 40,000 SMS per month/$1,500 tier.

News Source = techcrunch.com

Y Combinator’s latest batch of startups is too big for one Demo Day stage

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Y Combinator has been steadily ushering in more and more startups into its classes, but this year the poll position accelerator is having to make some major logistical adjustments to accommodate just how massive its group of startups has become.

YC has more than 200 startups in their winter 2019 batch (!!) By comparison, the spring 2018 group was just 132 teams. (For the statistically inclined, that’s at least a 51 percent increase batch-over-batch.) In order to accommodate this truly wild amount of elevator pitches, the accelerator is moving to a new venue in San Francisco for its Demo Day event March 18 and 19.

Yes, this means that the days of investors vainly searching for parking spots for their Teslas at the Computer History Museum in Mountain View or taking hour-long Ubers from SF may be behind them. The new location, Pier 48, (we hosted Disrupt SF 2017 here) boasts over 120,000 square feet of space — though YC Demo Days will almost certainly be utilizing a small portion of that total area. Indeed, Y Combinator will be hosting a “Virtual” Demo Day online stream for some investors to watch “because there are so few seats.”

Photo: Max Morse for TechCrunch

What’s more notable than the move from Mountain View to San Francisco, is the move from one stage where all the presenting founders shared their pitches, to two stage locations where founders will pitch simultaneously across the two days.

YC Demo Days brings a fairly ridiculous amount of Sand Hill star power under one roof and the fact that YC is opting to make investors choose which stage to direct their attention towards probably isn’t the most ideal situation for founders. It is a logistical reality that investors and founders are just going to have to accept comes with having this massive of a batch though. A YC spokesperson tells us that they’ll be releasing the list of companies and the time and location of their pitch so everyone has a few hours to plan where exactly they want to situate themselves.

The Computer History Museum during S14 YC Demo Days

Y Combinator will also interestingly be ditching Investor Day, which was an opportunity for investors to schedule meetings with individual startups, YC’s FAQs page note that “after analyzing its effectiveness, we will no longer be hosting Investor Day (as of the W19 batch).”

We’ll be at Demo Days this year as always, and we’ll be typing a little more furiously to ensure that you’re up to date on the latest from this gargantuan accelerator class.

News Source = techcrunch.com

Taali takes its popped water lily snacks from Y Combinator to the world

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Aditya and Aarti Kochhar Kaji didn’t set out to start the snack food business Taali Foods when they were studying for their business degrees at Harvard.

The couple both hail from Mumbai and met at the University of Pennsylvania . They were married before starting at Harvard’s Business School and initially were interested in other areas — Aarti was exploring a career in venture capital and Aditya Kaji was looking at the food and beverage industry broadly in his classes at Harvard, Kochhar Kaji said.

Addicted to snack foods like chips and popcorn to fuel her Harvard study sessions, Kochhar Kaji started making popped water lily seeds as a snack — a food both she and her husband had grown up eating in India, she said.

The seeds, which are high in anti-oxidants, low in fat, have been a staple of Ayurvedic medicine — thank to their purported  anti-inflammatory properties and are a staple of Indian snacking traditions. Now, with American consumers on the hunt for healthier snacks, they’re becoming a big business in the U.S. as well.

Y Combinator is very on trend, with its decision to invest and accelerate Taali as part of its most recent cohort of startups. But in this instance you may call the accelerator a fast follower rather than a progenitor of this trend.

No less auspicious a food tastemaker than Whole Foods named water lily seeds as one of the top ten new food trends of 2019. With that attention competitors to Taali abound.

Bohana and AshaPops are just two new snack food companies floating on the popped water lily seed movement. Bohana even managed to nab the attention of PepsiCo’s Nutrition Greenhouse competitive accelerator.

It’s no secret that technology investors are investing more heavily in consumer businesses — everything from snack foods to period products and baby formula — and startups need only point to the success of Amazon as the everything store to show that there’s always money to be made in the category.

Indeed, at $1.47 trillion, the consumer packaged goods industry dwarfs technology as a share of the nation’s economy.

As Ryan Caldbeck, the head of the consumer-focused investment firm CircleUp noted last year.

The uptick in tech VC dollars going to the CPG market is partly because tech investing is brutally competitive and saturated, and largely because these VCs are awakening to the strong historical returns in CPG, especially with the trend leaning towards small brands stealing market share.

Consumer is a massive market – about 3x the size of tech, as seen below.

Despite the size of the market, the early-stage has historically been underserved by investors due to market inefficiencies like the geographic dispersion of brands and a lack of structured information sources (i.e. there is no Silicon Valley for consumer, and certainly no Crunchbase equivalents – yet).

Strong exits are already possible for consumer brands — and not necessarily from the big ticket, headline grabbing acquisitions like Dollar Shave Club. Last week This is L — the condom and period product retailer — sold for roughly $100 million after raising seed funding from investors including 500 Startups and Y Combinator.

Taali was similarly bootstrapped before it was accepted into Y Combinator . The company is already selling its snacks through Amazon and in retail locations like Fairway in New York and Central Market in Texas. The founders expect to be in stores in California in the next few months.

News Source = techcrunch.com

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