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Remembering the startups we lost in 2020

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Even in a non-hell year, running a successful startup is a tremendous lift. After the events of 2020, however, no doubt many already lean businesses are hanging on by the skin of their teeth. For every company that saw increased interest in their offerings during the pandemic, there were several that simply couldn’t make it through the finish line.

We’ve put this list together for several years now. It’s not a fun task, but it seems worthwhile to commemorate the startups that have closed up shop over the past 12 months. (Some of them were acquired by larger companies before shutting down, but all of them began their life as startups, and it still felt worthwhile to mark the end of their stories.) It also offers an opportunity to examine those issues from a bit of distance to see if there are any broader takeaways for the community at large.

This year’s list is among the most diverse we’ve done, ranging from standard smaller-name closures to big blockbuster crashes like Quibi and Essential . For some, the pandemic was the final nail in the coffin, but in many cases, cracks in business models were already starting to surface well before COVID-19 ground the global economy to a screeching halt.

Atrium (2017-2020)

Total Raised: $75 million

Atrium, a 100-person legal tech startup founded by Justin Kan, shut down in March after failing to find an efficient way to replace the arduous systems of law firms. The startup even returned some of its $75.5 million in funding to its investors, including Andreessen Horowitz.

The shutdown comes after the platform had pivoted just months earlier, laying off in-house lawyers and turning into a clearer SaaS play. Ultimately, Atrium’s failure shows how difficult and unprofitable it could be to disrupt a traditional and complicated system.

The closure came just three years after it launched with the goal to build software for startups to navigate fundraising, hiring, acquisition deals and collaboration with their legal team.

Essential (2017-2020)

Total Raised: $330 million

Image Credits: Darrell Etherington

Big plans, big names and a boatload of money should have been enough to buy Essential a lengthy runway. Sure, Essential was entering a mature and oversaturated market, but the Playground-backed startup was doing so with $330 million in funding, a team of top industry executives and some genuinely innovative ideas.

When I spoke to the company at launch, an executive outlined a 10-year plan to become a major player in both the mobile and smart home categories. Ultimately, the company was able to eke out just under three years of life after coming out of stealth. And while it did give the world a promising handset, its connected home hub never arrived.

Timing, broader marketing issues and troubling allegations of sexual misconduct were all contributing factors that stopped Essential’s big plans dead in their tracks.

HubHaus (2016-2020)

Total Raised: $11.4 million

Image Credits: HubHaus

HubHaus, founded by Shruti Merchant, was a long-term housing rental platform rooted in the belief that adult dormitories would take off. The startup targeted working professionals in cities, and raised only around $11 million in known venture capital. When it came to raising a Series B, Merchant says the company struggled to close and lost investor interest due to WeWork’s failed IPO.

After then pivoting to a self-funded company, HubHaus was just finding footing when the coronavirus pandemic arrived in the United States, drastically hurting the rental market (as shown by Airbnb’s public struggles, as well). The housing company eventually decided to close down in September, leaving landlords, members and vendors in limbo and bringing on a fresh sweep of critique and controversy.

Affordable housing continues to be an issue in the Bay Area, and HubHaus’s departure from the scene underscores this truth.

Hipmunk (2010-2020)

Total Raised: $55 million

Image Credits: Hipmunk

Hipmunk, founded by Adam J. Goldstein and Reddit co-founder Steve Huffman, was one of the first travel aggregation platforms on the market. The company put together information on flights, hotels and car rental all into one place so consumers could compare and contrast prices with ease.

The focus was enough for the platform to get acquired by Concur, but now after four years, the travel startup shut down. Notably, the travel startup’s closure wasn’t necessarily tied to the coronavirus pandemic. The site officially went dark on January 23, months before lockdowns came to the United States.

IfOnly (2012-2020)

Total Raised: $51.4 million

Photo: Thomas Barwick/Getty Images

IfOnly had created a marketplaces of exclusive events — such as “goat yoga” — a business that faced obvious challenges during the pandemic. The startup was actually acquired by one of its investors, Mastercard, late last year, but the acquisition wasn’t announced until IfOnly revealed over the summer that it was shutting down.

Mastercard also said IfOnly’s team and technology are still part of its Priceless experience marketplace: “The IfOnly platform will continue to help advance our Priceless strategy and our combined team will be even better positioned and equipped to deliver exclusive experiences for cardholders globally.”

Mixer/Beam Interactive (2014-2020)

Total Raised: $520,000

Image Credits: Microsoft

Microsoft shut down its Twitch competitor Mixer this year, handing off its partnerships to Facebook Gaming. The service had its roots in the software giant’s acquisition of Beam Interactive shortly after the startup won TechCrunch’s Startup Battlefield in 2016.

Before giving up, Microsoft made some big investments in Mixer’s success, most notably signing streaming superstars Ninja and Shroud to exclusive deals. (They became free agents after the shutdown.) However, Microsoft’s gaming chief Phil Spencer said the company suffered from starting out “pretty far behind” the biggest players in the streaming market.

The Outline (2016-2020)

Total Raised: $10.2 million

Image Credits: The Outline

Despite a busy year of innovation and venture for news media platforms, The Outline, which branded itself as “the next generation version of the New Yorker” was shut down. The media site was started by Josh Topolsky and had an explicit focus on serving millennials with a digital-first news media brand.

The shutdown was part of a broader layoffs at Bustle Digital Group, which acquired the publication in 2019. Pre-acquisition, The Outline had already scaled back its editorial staff and refocused on freelance articles. (Input — a tech site that Topolsky founded for BDG — continues to publish.)

Periscope (2015-2020)

Periscope went out with more of a whimper than a bang. The startup was acquired by Twitter before it had even launched a product. With Meerkat bursting on the scene that year at SXSW, Twitter went on the offensive, buying the startup to build out its own live video offering.

Periscope’s run was decent as far as these things go, and its technology will live on as part of Twitter’s video offerings, even after the app is officially discontinued next March. But in the end, Periscope was a shell of its former self. In fact, this is a rare instance where the pandemic may have actually delayed its shutdown.

The company notes, “We probably would have made this decision sooner if it weren’t for all of the projects we reprioritized due to the events of 2020.”

PicoBrew (2010-2020)

Total Raised: $15.1 million

Image Credits: PicoBrew

The company made beer-brewing machines that used coffee pod-style PicoPaks, then expanded into other categories like coffee and tea, but never quite attracted enough customers to make the business viable. It sold its assets earlier this year to PB Funding Group — a group of lenders recruited by then-CEO Bill Mitchell in 2018 to keep it afloat.

It’s possible that PicoBrew will live on in some form, as PB Funding Group says it’s seeking buyers for the company’s patents and other intellectual property, and that it will keep the website running in the short term so that the machines don’t stop working.

Quibi (2018-2020)

Total Raised: $1.75 billion

Quibi CEO Meg Whitman speaks about the short-form video streaming service for mobile Quibi

Quibi CEO Meg Whitman speaks about the short-form video streaming service for mobile Quibi during a keynote address January 8, 2020 at the 2020 Consumer Electronics Show (CES) in Las Vegas, Nevada. (Photo by ROBYN BECK/AFP via Getty Images)

More so than any tech company in recent memory (with the possible exception of Theranos), Quibi’s existence feels like a fever dream. $1.75 billion in funding later and what do we have to show for it? “Fierce Queens,” a nature documentary about female animals. The HGTV-style program, “Murder House Flip.” And, of course, “The Shape of Pasta.” A show about pasta.

Early reports of the service’s demise seemed premature — if only because there was seemingly no way a company could burn through that much capital that quickly. By late-October, however, it was over. “All that is left now is to offer a profound apology for disappointing you and, ultimately, for letting you down,” founders Jeffrey Katzenberg and Meg Whitman wrote in an open letter.

Sometimes startup failures are bad timing. Sometimes it’s just plain bad luck. With Quibi, the diagnoses of what went wrong can be summed up in one word: everything.

Rubica (2016-2020)

Total Raised: $15 million

Rubica

Image Credits: Rubica

Rubica spun out of security company Concentric Advisors with the aim of offering tools that were more advanced than antivirus software, while still remaining accessible to individuals and small businesses. CEO and co-founder Frances Dewing said that when customers cut back on spending during the pandemic, the company tried to shift its focus to larger enterprise, but it failed to convince investors there was a business there.

“We were all really surprised given how relevant and needed this is right now,” she said. “Investors didn’t agree with that or see it in the same way.”

ScaleFactor (2014-2020)

Total Raised: $104 million

Businessman’s hands with calculator and cost at the office and Financial data analyzing counting on wood desk. Image Credits: Sarinya Pinngam/EyeEm / Getty Images

ScaleFactor was a startup claiming to offer artificial intelligence tools that could replace accountants for small businesses; it blamed the pandemic for cutting its revenue in half and forcing the company to shut down. However, former employees and customers told Forbes a different story — that ScaleFactor actually relied on human accountants (including an outsourced team in the Philippines) to do the work.

While it’s hardly unprecedented for a startup to fudge the truth about their level of automation versus human labor, this reportedly resulted in error-filled accounting for ScaleFactor clients. (Responding to a fact-checking email, former CEO Kurt Rathmann said the email was “filled with numerous factual inaccuracies and misrepresentation” and declined to comment further.)

Starsky Robotics (2015-2020)

Total Raised: $20 million

Self-driving trucks startup Starksy Robotics began with this first, and problematic truck. Image Credits: Starsky Robotics

“In 2019, our truck became the first fully-unmanned truck to drive on a live highway,” Starsky Robotics co-founder and CEO Stefan Seltz-Axmacher wrote in a Medium post in March. “And in 2020, we’re shutting down.” After five years and $20 million in funding, the autonomous trucking company shut its doors that month. It wasn’t for lack of ambition or demand — it seems safe to assume there’s still a bright future for self-driving trucks.

Ultimately, however, Starsky won’t be along for that ride — a fact Seltz-Axmacher blames largely on timing. A crowded market is certainly at play, as well, with countless companies currently pushing to bring autonomous technology to the road.

Stockwell/Bodega (2018-2020)

Total Raised: $10 million

stockwell bodega

Image Credits: Bryce Durbin

Founded in 2018 by ex-Googlers, Stockwell AI shut down after being unable to find business for its in-building smart vending machines that stocked everything from condoms to La Croix. The company blamed the “current landscape” (also known as the global pandemic we are experiencing) for its closure.

Stockwell AI, formerly known as Bodega, was well-funded and well-known, with more than $45 million in funding from investors that included NEA, GV, DCM Ventures, Forerunner, First Round and Homebrew. Still, even venture capital couldn’t make vending machines work well enough.

Trover (2011-2020)

Total Raised: $2.5 million

Image Credits: Trover

Another travel-focused startup bites the dust as the coronavirus limits the chance to safely explore the world (let alone your neighborhood). Trover, a photo-sharing hub for travelers acquired by Expedia, shut down in August. The startup was founded by Rich Barton and Jason Karas and was meant to connect people travelling to the same places. The startup had quite the life: it began out of the remains of TravelPost, a travel review site, and got scooped up by its parent company when it only had $2.5 million in funding. Unfortunately, its nine-year journey is over for now.

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Gillmor Gang: Win Win

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Just finished a Twitter Spaces session. It is an engaging platform, somewhat clunky in feature set but easily a tie overall with Clubhouse. I don’t see this as a horse race, however, more as cooperating teams fleshing out a platform where both will be major players. Like notifications in iOS and Android, the feature set is a push and pull motion where Android delivers deep functionality and Apple alternately pulls ahead and consolidates gains. Though the details can vary, the combined energy of effectively 100 percent of the consumer base mandates best practices and opportunities for innovation.

Something similar is going on in Washington as the Democrats test out their majority of none on the pandemic stimulus bill. The headline in the Times says bipartisanship is dead, but the subheading is the real story. The battle for control of the Senate is closing in on the arcane gerrymandering of the filibuster, or what passes for it after Republican whittling of the original talk ’til you drop croaking of Jimmy Stewart as in Mr. Smith Goes to Washington.

The telltale giveaway is Senator Lindsay Graham, who complains bitterly that the Democrats are steamrolling the COVID Rescue Bill without Republican votes “because they can.” The actual bipartisanship is between the progressives and moderates in the Democratic Party, as the Senator from West Virginia moderates one aspect of the bill to gain the prize of something the President can sign. Not only does it establish Biden’s power to govern but it also provides a roadmap for justifying the necessity of altering the filibuster equation.

Notice how Biden changed the subject from bipartisan negotiations to the power play it turned into. He used the polls to squeeze the Republican moderates where they fear most, the primary battles for control of the House in the midterms. The wave of vaccines are making it almost impossible to put up a political firewall; the anti-mask mandates seem like clueless floundering as people begin to have hope of an exit from the gridlock of partisan obstructionism. It will be hard to run on a platform of denial and death as we reach the end of May.

Governing by success undercuts the argument that government doesn’t work. Breaking the back of the filibuster requires the framing of the issue as finding a way to let government keep working in a bipartisan way. That brings us back to changing the definition of bipartisan as evidenced in the technology arena. In the Apple/Android example, two viable entities bring different strengths to insuring the ability to survive long enough to govern. Google’s lock on the network effect in advertising and “free” services may be challenged by Apple’s focus on privacy and a hardware revenue base, but the net effect is to cancel each other’s vulnerabilities due to the market force of their positions. The bipartisan finesse is that each platform has the other as a dominant customer.

In the same vein, Twitter v. Clubhouse is really not the point. Certainly we can cherrypick the battle as startup v. incumbent: Clubhouse filled with unicorn celebrities and rockstar investors and a builtin tension with the media, Twitter protectively fast following with its natural social graph advantages and struggling with scalability and the fear they’ve sown of abandoning projects before they can thrive. The question begged: what is the nature of the bipartisan compromise that will ensure both end up winners?

The answer is how to make each player the best customer of the other. Twitter’s problem is focus, and harnessing the power of users to hack the system to both theirs and the company’s advantage. The @mention spawned the retweet, providing the analytics that drive Twitter’s indelible social graph. Instagram may be Facebook’s best attempt so far at challenging the fundamental strategic value that the former president used to dominate, but Clubhouse promises to go one big step better with its hybrid of mainstream media and a Warholesque factory engine that creates new stars and the media they generate. This in turn migrates through the entertainment disruption led by the streaming realignment. What exactly is this NFT thing really about?

So Clubhouse has to open up its ability to multitask with Twitter and other curated social graphs. Facebook as a source for Clubhouse notifications and suggested conversations is different than Twitter’s But patching into the sharing icon on iOS will offer substantial access to blunt Twitter’s native integration in Spaces. On the flip side, Twitter’s Revue newsletter tools present an opportunity to mine the burgeoning newsletter surge, using its drag and drop tools to bring not just default social network citations but the implicit social graph of curated editorial rockstars. Not only is the influencer audience rich in signal for advertisers, but these same brands will prove most attractive to Clubhouse listeners looking for value. Win win.

from the Gillmor Gang Newsletter

__________________

The Gillmor Gang — Frank Radice, Michael Markman, Keith Teare, Denis Pombriant, Brent Leary and Steve Gillmor. Recorded live Friday, March 5, 2021.

Produced and directed by Tina Chase Gillmor @tinagillmor

@fradice, @mickeleh, @denispombriant, @kteare, @brentleary, @stevegillmor, @gillmorgang

Subscribe to the new Gillmor Gang Newsletter and join the backchannel here on Telegram.

The Gillmor Gang on Facebook … and here’s our sister show G3 on Facebook.

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The iMac Pro is being discontinued

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Chalk this up to inevitability. The iMac Pro is soon to be no more. First noted by 9to5Mac, TechCrunch has since confirmed with Apple that the company will stop selling the all-in-one once the current stock is depleted.

One configuration of the desktop is still available through Apple’s site, listed as “While Supplies Last” and priced at $5,000. Some other versions can also still be found from third-party retailers, as well, if you’re so inclined.

The space gray version of the popular system was initially introduced in 2017, ahead of the company’s long-awaited revamp of the Mac Pro. Matthew called it a “love letter to developers” at the time, though that particular letter seems to have run its course.

Since then, Apple has revamped the standard iMac, focusing the 27-inch model at those same users. The company notes that the model is currently the most popular iMac among professional users. The system has essentially made the Pro mostly redundant, prefiguring its sunsetting. Of course, there’s also the new Mac Pro at the high end of Apple’s offerings.

And let us not forget that the Apple silicon-powered iMacs should be on the way, as well. Thus far the company has revamped the MacBook, MacBook Air and Mac Mini with its proprietary chips. New versions of the 21.5-inch and 27-inch desktop are rumored for arrival later this year, sporting a long-awaited redesign to boot.

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Investors still love software more than life

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Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. Want it in your inbox every Saturday morning? Sign up here.

Ready? Let’s talk money, startups and spicy IPO rumors.

Despite some recent market volatility, the valuations that software companies have generally been able to command in recent quarters have been impressive. On Friday, we took a look into why that was the case, and where the valuations could be a bit more bubbly than others. Per a report written by few Battery Ventures investors, it stands to reason that the middle of the SaaS market could be where valuation inflation is at its peak.

Something to keep in mind if your startup’s growth rate is ticking lower. But today, instead of being an enormous bummer and making you worry, I have come with some historically notable data to show you how good modern software startups and their larger brethren have it today.

In case you are not 100% infatuated with tables, let me save you some time. In the upper right we can see that SaaS companies today that are growing at less than 10% yearly are trading for an average of 6.9x their next 12 months’ revenue.

Back in 2011, SaaS companies that were growing at 40% or more were trading at 6.0x their next 12 month’s revenue. Climate change, but for software valuations.

One more note from my chat with Battery. Its investor Brandon Gleklen riffed with The Exchange on the definition of ARR and its nuances in the modern market. As more SaaS companies swap traditional software-as-a-service pricing for its consumption-based equivalent, he declined to quibble on definitions of ARR, instead arguing that all that matters in software revenues is whether they are being retained and growing over the long term. This brings us to our next topic.

Consumption v. SaaS pricing

I’ve taken a number of earnings calls in the last few weeks with public software companies. One theme that’s come up time and again has been consumption pricing versus more traditional SaaS pricing. There is some data showing that consumption-priced software companies are trading at higher multiples than traditionally priced software companies, thanks to better-than-average retention numbers.

But there is more to the story than just that. Chatting with Fastly CEO Joshua Bixby after his company’s earnings report, we picked up an interesting and important market distinction between where consumption may be more attractive and where it may not be. Per Bixby, Fastly is seeing larger customers prefer consumption-based pricing because they can afford variability and prefer to have their bills tied more closely to revenue. Smaller customers, however, Bixby said, prefer SaaS billing because it has rock-solid predictability.

I brought the argument to Open View Partners Kyle Poyar, a venture denizen who has been writing on this topic for TechCrunch in recent weeks. He noted that in some cases the opposite can be true, that variably priced offerings can appeal to smaller companies because their developers can often test the product without making a large commitment.

So, perhaps we’re seeing the software market favoring SaaS pricing among smaller customers when they are certain of their need, and choosing consumption pricing when they want to experiment first. And larger companies, when their spend is tied to equivalent revenue changes, bias toward consumption pricing as well.

Evolution in SaaS pricing will be slow, and never complete. But folks really are thinking about it. Appian CEO Matt Calkins has a general pricing thesis that price should “hover” under value delivered. Asked about the consumption-versus-SaaS topic, he was a bit coy, but did note that he was not “entirely happy” with how pricing is executed today. He wants pricing that is a “better proxy for customer value,” though he declined to share much more.

If you aren’t thinking about this conversation and you run a startup, what’s up with that? More to come on this topic, including notes from an interview with the CEO of BigCommerce, who is betting on SaaS over the more consumption-driven Shopify.

Next Insurance, and its changing market

Next Insurance bought another company this week. This time it was AP Intego, which will bring integration into various payroll providers for the digital-first SMB insurance provider. Next Insurance should be familiar because TechCrunch has written about its growth a few times. The company doubled its premium run rate to $200 million in 2020, for example.

The AP Intego deal brings $185.1 million of active premium to Next Insurance, which means that the neo-insurance provider has grown sharply thus far in 2021, even without counting its organic expansion. But while the Next Insurance deal and the impending Hippo SPAC are neat notes from a hot private sector, insurtech has shed some of its public-market heat.

Stocks of public neo-insurance companies like Root, Lemonade and MetroMile have lost quite a lot of value in recent weeks. So, the exit landscape for companies like Next and Hippo — yet-private insurtech startups with lots of capital backing their rapid premium growth — is changing for the worse.

Hippo decided it will debut via a SPAC. But I doubt that Next Insurance will pursue a rapid ramp to the public markets until things smooth out. Not that it needs to go public quickly; it raised a quarter billion back in September of last year.

Various and Sundry

What else? Sisense, a $100 million ARR club member, hired a new CFO. So we expect them to go public inside the next four or five quarters.

And the following chart, which is via Deena Shakir of Lux Capital, via Nasdaq, via SPAC Alpha:

Alex

 

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