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Extra Crunch roundup: 500 Startups’ demo day, smart SaaS pricing and much more

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Demo days at startup accelerators are a pretty big deal around here.

These events aren’t just a chance to review the latest cohort of hopeful entrepreneurs — they also showcase the technology, products and services that will compete for VC and consumer attention over the next few years.

You never know where a hit will come from, which is why these events capture our attention. Here’s just one example from Y Combinator’s Summer 2013 Demo Day:

Positioning itself as the “FedEx of today,” it hopes to provide a logistics framework that goes beyond food and can be used for any type of on-demand order.

That startup was DoorDash, by the way.


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Full disclosure: In 2016, I was 500 Startups’ Journalist-in-residence. I covered one demo day in person, spending most of my time backstage where founder teams practiced their pitches.

It was quite a scene: Several people literally jumped up and down to shake off their nervous energy, but I also recall one who calmly recited their lines while gazing through a window.

Yesterday, Jon Shieber and Alex Wilhelm covered 500 Startups’ 27th virtual demo day and selected eight companies as their favorites:

  • Stack
  • Adapty
  • MightyFly
  • Omnitron Sensors
  • AWSM
  • Memechat
  • Ryu Games
  • Apothecary

Thank you very much for reading Extra Crunch this week! I hope you have a safe, relaxing weekend.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

TechCrunch’s favorite companies from 500 Startups’ latest demo day

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Image Credits: David Malan (opens in a new window) / Getty Images

How the GameStop stonkathon helped Robinhood raise $3.4B last week

I’ve never used “stonkathon” in a headline before, but it’s been that kind of week.

The war between hedge funds and day traders over GameStop vaulted discount trader Robinhood into the headlines for days.

But how did it affect the company’s financial health?

This morning, Alex Wilhelm examined why Robinhood’s investors were willing to inject $3.4 billion more into the company in just one week.

“More trades means more PFOF (payment for order flow) revenue,” says Alex. “And Robinhood effectively doubled in size.”

Udemy’s new president discusses the reskilling company’s future

Electronic signature on laptop. Business Esignature technology, digital form attached to electronically transmitted document, verification of intent to sign agreement, legal deal. Vector illustration

Image Credits: Andrew_Rybalko / Getty Images

Reporter Natasha Mascarenhas interviewed Greg Brown, new president of digital learning platform Udemy, after his company announced that it surpassed $100 million ARR.

A new arm of the company, Udemy for Business, just secured a 100,000-employee contract with Cisco Systems to offer software, business and technology courses.

“The opportunity that the company sees has really forced us to reallocate resources and strategy,” said Brown.

Why one Databricks investor thinks the company may be undervalued

After scaling its ARR to $425 million and reaching a valuation of $28 billion, data analytics company Databricks is clearly IPO-ready.

Battery Ventures has backed Databricks since 2017, so Alex Wilhelm interviewed General Partner Dharmesh Thakker to understand why he thinks the company may be undervalued.

“Whether it’s digital transformation, whether it’s analytics, data is everywhere,” said Thakker. “So the TAM is massive.”

4 strategies for deep tech founders who are fundraising

Laser Light Interrupted by Unfolded Book Shape of Paper.

Image Credits: MirageC (opens in a new window) / Getty Images

Deep tech founders face special challenges when pitching investors: they usually don’t have a product, customers or revenue.

It’s difficult enough to ask a stranger for a check when there’s a beta product, but how do you drum up interest in an unproven idea that may exist largely in your imagination?

“Early-stage investors are in the business of funding dreams,” says angel investor Jessica Li.

“Investors are less interested in the intricacies of your technology and more interested in what impact it can create.”

Step one: use storytelling to highlight your big vision.

Edtech valuations aren’t skyrocketing, but investors see more exit opportunities

Above view of mom working on the laptop computer while her daughter reading the e-learning resources on the digital tablet in the workspace at home

Image Credits: Images by Tang Ming Tung (opens in a new window) / Getty Images

Investors funded edtech startups with $10 billion last year as the pandemic forced widespread adoption of remote learning.

The valuations of these companies aren’t rising at the same rate as SaaS or fintech startups, but “where edtech lacks in impressive valuations, investors see it gaining in exit opportunities,” writes Natasha Mascarenhas.

For this edtech investor survey, she interviewed:

  • Deborah Quazzo, managing partner, GSV Ventures (an education fund backing ClassDojo, Degreed and Clever)
  • Ashley Bittner, founding partner, Firework Ventures (a future-of-work fund with portfolio companies LearnIn and TransfrVR)
  • Jomayra Herrera, principal, Cowboy Ventures (a generalist fund with portfolio companies Hone and Guild Education)
  • John Danner, managing partner, Dunce Capital (an edtech and future-of-work fund with portfolio companies Lambda School and Outschool)
  • Mercedes Bent and Bradley Twohig, partners, Lightspeed Venture Partners (a multistage generalist fund with investments including Forage, Clever and Outschool)
  • Ian Chiu, managing director, Owl Ventures (a large edtech-focused fund backing highly valued companies including BYJU’s, Newsela and MasterClass)
  • Jan Lynn-Matern, founder and partner, Emerge Education (a leading edtech seed fund in Europe with portfolio companies like Aula, Unibuddy and BibliU)
  • Benoit Wirz, partner, Brighteye Ventures (an active edtech-focused venture capital fund in Europe that backs YouSchool, Lightneer and Aula)
  • Charles Birnbaum, partner, Bessemer Venture Partners (a generalist fund with portfolio companies including Guild Education and Brightwheel)
  • Daniel Pianko, co-founder and managing director, University Ventures (a higher-ed and future-of-work fund that is backing Imbellus and AdmitHub)
  • Rebecca Kaden, managing partner, Union Square Ventures (a generalist fund with portfolio companies including TopHat, Quizlet and Duolingo)
  • Andreata Muforo, partner, TLcom Capital (a generalist fund backing uLesson)

Deep Science: AIs with high class and higher altitudes

Artificial Intelligence digital concept

Image Credits: MF3d (opens in a new window) / Getty Images

In his latest recap of recent breakthroughs in applied science, Devin Coldewey looked at how researchers are using AI to:

  • Categorize thousands of pieces of classical music
  • Read MRIs to spot patients with schizophrenia
  • Track elephant herds via satellite
  • Improve accessibility on mobile phones

Spotify Group Session UX teardown: the fails and their fixes

London, UK - July 31, 2018: The buttons of the music streaming app Spotify, surrounded by Podcasts, Apple Music, Facebook and other apps on the screen of an iPhone.

Image Credits: Getty Images

In the latest of a series of articles that examines user experiences for consumer apps, UX expert Peter Ramsey and TechCrunch reporter Steve O’Hear studied Spotify Group Session, the shared-queue feature that permits users to create playlists collaboratively.

“Many of these lessons can be applied to other existing digital products or ones you are currently building,” such as the need to add context for important decisions and how to best use “react and explain” prompts.

Lightspeed’s Gaurav Gupta and Grafana’s Raj Dutt discuss pitch decks, pricing and how to nail the narrative

Gaurav Gupta, Lightspeed Venture Partners + Raj Dutt, Grafana Labs

Extra Crunch Live returned this week with two guests: Lightspeed Venture Partners’ Gaurav Gupta and Raj Dutt, co-founder and CEO of Grafana Labs.

In addition to walking us through the presentation that encouraged Lightspeed to invest in Grafana’s Series A, the duo also gave direct feedback to audience members about their pitch decks.

Watch a video with our complete episode, or read highlights from the chat to get Gupta and Dutt’s insights on what goes into a successful pitch deck.

New episodes of Extra Crunch Live drop each Wednesday at 12 p.m. PST/3 p.m. EST/8 p.m. GMT.

Here’s a breakdown of the complete episode with Gaurav Gupta and Raj Dutt:

  • How they met — 2:00
  • Grafana’s early pitch deck — 12:00
  • The enterprise ecosystem — 25:00
  • The pitch deck teardown — 32:00

Subscription-based pricing is dead: Smart SaaS companies are shifting to usage-based models

paper plane made from a ten dollar bill

Paper plane made from a ten-dollar bill. Image Credits: LockieCurrie (opens in a new window)/ Getty Images

Some IT managers may still be debating the merits of usage-based pricing versus subscription-based models, but SaaS investors have made up their minds.

Compared to their rivals, companies that employ usage-based pricing trade at a 50% revenue multiple premium. You can argue with success, but seven out of the nine IPOs since 2018 with the best net dollar retention offer usage-based models.

If you’re a founder who hopes to break into the $100M ARR club, this guest post can help you identify the right usage metrics for creating a sustainable customer journey.

For more actionable advice regarding SaaS pricing and sales, see these previously published Extra Crunch stories:

Bumble IPO could raise more than $1B for dating service

How many dating networks can the public market support?

In Tuesday’s column, Alex Wilhelm examined the latest IPO filing from relationship-finding service Bumble.

The company set a range of $28 – $30 per share, so Alex set out to find its simple and diluted valuations, how much it expects investors to pay and “how those stack up compared to Match Group’s own numbers.”

Robinhood’s Q4 2020 revenue shows a return to growth

Discount brokerage Robinhood stayed in the news last week as it became a proxy battlefield for institutional and retail investors, but its backers “put in another billion just last week,” says Alex Wilhelm.

Why were investors so bullish after days of screaming headlines?

In yesterday’s column, Alex unpacked Robinhood’s Q4 2020 numbers, “which shows a return to sequential-quarterly growth at the trading upstart.”

Trading app Public drops payment for order flow in favor of tips

close up of man hand with digital tablet analyzing stock market graph at night

Image Credits: Towfiqu Photography / Getty Images

Before Redditors came after GameStop, zero-cost trading service Public says it was seeing “steady ~30%” month-over-month growth.

Last week, however, “new user signups went up 20x,” founders Leif Abraham and Jannick Malling told TechCrunch.

After closing a $65 million Series C, Public announced yesterday that it would “stop participating in the practice of Payment for Order Flow,” replacing PFOF with an “optional tipping feature.”

Customer advisory boards are a gold mine for startup brand champions

People figures with comment clouds above their heads. Commenting on feedback, participation in discussion. Brainstorming, fresh new ideas. Communication in civil society. Cooperation and Collaboration (People figures with comment clouds above their he

Image Credits: Andrii Yalanskyi (opens in a new window) / Getty Images

Startups that don’t directly engage their earliest customers with purpose and intention are leaving money on the table.

Creating a Customer Advisory Board (CAB) is a proven method for soliciting product ideas, testing marketing plans and turning early users into loyal brand advocates.

Before you call a CAB, read this post to find out how to identify customers who’ll contribute real insights, establish goals and “pick members who play well together.”

Best practices as a service is a key investment theme to watch in 2021

Red and white stop sign on the wall. Image Credits: Karl Tapales (opens in a new window)/ Getty Images

Identity and access management company Okta announced in a study last week that its largest customers use an average of 175 different applications to manage their operations.

Managing Editor Danny Crichton says this “explosion of creativity and expressiveness and operational latitude” offers widespread benefits, but it’s “also a recipe for disaster,” since many end users aren’t well-trained when it comes to using these tools.

This enterprise version of the Tower of Babel creates an opening for companies that offer “best practices as a service,” says Danny. “The next generation of SaaS software has to take those abecedarian building blocks and forcibly guide users to using those tools in the best possible way.”

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

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Snowflake latest enterprise company to feel Wall Street’s wrath after good quarter

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Snowflake reported earnings this week, and the results look strong with revenue more than doubling year-over-year.

However, while the company’s fourth quarter revenue rose 117% to $190.5 million, it apparently wasn’t good enough for investors, who have sent the company’s stock tumbling since it reported Wednesday after the bell.

It was similar to the reaction that Salesforce received from Wall Street last week after it announced a positive earnings report. Snowflake’s stock closed down around 4% today, a recovery compared to its midday lows when it was off nearly 12%.

Why the declines? Wall Street’s reaction to earnings can lean more on what a company will do next more than its most recent results. But Snowflake’s guidance for its current quarter appeared strong as well, with a predicted $195 million to $200 million in revenue, numbers in line with analysts’ expectations.

Sounds good, right? Apparently being in line with analyst expectations isn’t good enough for investors for certain companies. You see, it didn’t exceed the stated expectations, so the results must be bad. I am not sure how meeting expectations is as good as a miss, but there you are.

It’s worth noting of course that tech stocks have taken a beating so far in 2021. And as my colleague Alex Wilhelm reported this morning, that trend only got worse this week. Consider that the tech-heavy Nasdaq is down 11.4% from its 52-week high, so perhaps investors are flogging everyone and Snowflake is merely caught up in the punishment.

Snowflake CEO Frank Slootman pointed out in the earnings call this week that Snowflake is well positioned, something proven by the fact that his company has removed the data limitations of on-prem infrastructure. The beauty of the cloud is limitless resources, and that forces the company to help customers manage consumption instead of usage, an evolution that works in Snowflake’s favor.

“The big change in paradigm is that historically in on-premise data centers, people have to manage capacity. And now they don’t manage capacity anymore, but they need to manage consumption. And that’s a new thing for — not for everybody but for most people — and people that are in the public cloud. I have gotten used to the notion of consumption obviously because it applies equally to the infrastructure clouds,” Slootman said in the earnings call.

Snowflake has to manage expectations, something that translated into a dozen customers paying $5 million or more per month to Snowflake. That’s a nice chunk of change by any measure. It’s also clear that while there is a clear tilt toward the cloud, the amount of data that has been moved there is still a small percentage of overall enterprise workloads, meaning there is lots of growth opportunity for Snowflake.

What’s more, Snowflake executives pointed out that there is a significant ramp up time for customers as they shift data into the Snowflake data lake, but before they push the consumption button. That means that as long as customers continue to move data onto Snowflake’s platform, they will pay more over time, even if it will take time for new clients to get started.

So why is Snowflake’s quarterly percentage growth not expanding? Well, as a company gets to the size of Snowflake, it gets harder to maintain those gaudy percentage growth numbers as the law of large numbers begins to kick in.

I’m not here to tell Wall Street investors how to do their job, anymore than I would expect them to tell me how to do mine. But when you look at the company’s overall financial picture, the amount of untapped cloud potential and the nature of Snowflake’s approach to billing, it’s hard not to be positive about this company’s outlook, regardless of the reaction of investors in the short term.

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A first look at Coursera’s S-1 filing

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After TechCrunch broke the news yesterday that Coursera was planning to file its S-1 today, the edtech company officially dropped the document Friday evening.

Coursera was last valued at $2.4 billion by the private markets, when it most recently raised a Series F round in October 2020 that was worth $130 million.

Coursera’s S-1 filing offers a glimpse into the finances of how an edtech company, accelerated by the pandemic, performed over the past year. It paints a picture of growth, albeit one that came at steep expense.

Revenue

In 2020, Coursera saw $293.5 million in revenue. That’s a roughly 59% increase from the year prior when the company recorded $184.4 million in top line. During that same period, Coursera posted a net loss of nearly $67 million, up 46% from the previous year’s $46.7 million net deficit.

Notably the company had roughly the same noncash, share-based compensation expenses in both years. Even if we allow the company to judge its profitability on an adjusted EBITDA basis, Coursera’s losses still rose from 2019 to 2020, expanding from $26.9 million to $39.8 million.

To understand the difference between net losses and adjusted losses it’s worth unpacking the EBITDA acronym. Standing for “earnings before interest, taxes, depreciation and amortization,” EBITDA strips out some nonoperating costs to give investors a possible better picture of the continuing health of a business, without getting caught up in accounting nuance. Adjusted EBITDA takes the concept one step further, also removing the noncash cost of share-based compensation, and in an even more cheeky move, in this case also deducts “payroll tax expense related to stock-based activities” as well.

For our purposes, even when we grade Coursera’s profitability on a very polite curve it still winds up generating stiff losses. Indeed, the company’s adjusted EBITDA as a percentage of revenue — a way of determining profitability in contrast to revenue — barely improved from a 2019 result of -15% to -14% in 2020.

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The owner of Anki’s assets plans to relaunch Cozmo and Vector this year

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Good robots don’t die — they just have their assets sold off to the highest bidder. Digital Dream Labs was there to sweep up IP in the wake of Anki’s premature implosion, back in 2019. The Pittsburgh-based edtech company had initially planned to relaunch Vector and Cozmo at some point in 2020, launching a Kickstarter campaign in March of last year.

The company eventually raised $1.8 million on the crowdfunding site, and today announced plans to deliver on the overdue relaunch, courtesy of a new distributor.

“There is a tremendous demand for these robots,” CEO Jacob Hanchar said in a release. “This partnership will complement the work our teams are already doing to relaunch these products and will ensure that Cozmo and Vector are on shelves for the holidays.”

I don’t doubt that a lot of folks are looking to get their hands on the robots. Cozmo, in particular, was well-received, and sold reasonably well — but ultimately (and in spite of a lot of funding), the company couldn’t avoid the fate that’s befallen many a robotics startup.

It will be fascinating to see how these machines look when they’re reintroduced. Anki invested tremendous resources into bringing them to life, including the hiring of ex-Pixar and DreamWorks staff to make the robots more lifelike. A lot of thought went into giving the robots a distinct personality, whereas, for instance, Vector’s new owners are making the robot open-source. Cozmo, meanwhile, will have programmable functionality through the company’s app.

It could certainly be an interesting play for the STEM market that companies like Sphero are approaching. It has become a fairly crowded space, but at least Anki’s new owners are building on top of a solid foundation, with the fascinating and emotionally complex toy robots their predecessors created.

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