Connect with us

Uncategorized

How did Atlanta become a top breeding ground for billion-dollar startups in the Southeast?

Published

on

Over the past five years, the Southeastern region, led by Atlanta, has gone from being “one of the best kept secrets” in tech, to a vibrant ecosystem teeming with a herd of the billion dollar tech businesses that are referred to in the investment world as “unicorns” (thanks to their supposed rarity).

In those five years venture capital investments surged to $2.1 billion in the region, with $1 billion invested in the last year alone, according to Lisa Calhoun, a partner with the Atlanta based investment firm, Valor Ventures.

It’s indicative of the entrepreneurial talent coming from the network of private and public schools across the region like Georgia Tech, the University of Alabama, Auburn, the University of Georgia, Vanderbilt, Emory, and the historically black colleges and universities like Morehouse, Spelman, and Xavier. And it’s also a sign of a reinvestment in local entrepreneurship — a decades-long campaign to turn Atlanta into the center of a hub-and-spoke network of startup cities that spans Miami to Atlanta, with stops in Birmingham, Nashville, New Orleans,

“Atlanta is what a next generation, global, post-Silicon Valley tech hub looks like. Our demographics are ten years ahead of the U.S.’s transformation into a majority minority society,” wrote Calhoun in an email. “With over 40% of the U.S. population in the Southeast, the greatest density of founders and executives of color, rafts of tech companies like AirBnB locating here, and our own legacy of top tech and talent, Atlanta sets the tone for what’s next. We have the growing, diverse population base all strong founders need to scale.”

There’s still a lot of work to be done for the region to establish itself as one of the next engines of economic return for the venture capital and investment business, though.

“The Southeast is 24% of the US GDP, but only accounts for 7% of the venture investment,” noted Blake Patton, the founder and general partner of the Atlanta-based investment firm, Tech Square Ventures. “With the recent momentum in the region, that is changing and investors are taking notice and backing local managers who in turn are investing the region’s best and brightest entrepreneurs.”

The Internet boom and bust in Atlanta

In the years after the 1996 Olympics, Atlanta was a high-flying contender for the title of one of the next big startup hubs in the United States.

The Olympics had put the city on the world’s stage, and seeing the wave of activity, excitement, and investment that came with the advent of internet companies like Virginia’s America Online, Atlanta’s city council and mayor were making a push for the city to become a telecom and startup hub in the early days of the first Internet boom.

“Something happened in the mid-90s driven by the Olympics where Atlanta hit the map worldwide. It wasn’t just that we were a supply and logistics hub. In the late 90s as the dot-com boom really evolved, things happened underground that aren’t as transparent as they should be. Atlanta Gas Light had the largest dark fiber ring in the country surrounding Atlanta. That was built solely with the olympics in mind. We had Georgia Tech working on the next generation of aerospace, and they added computer engineering,” said Christy Brown, the founder of the Atlanta based non-profit Launchpad2X and a serial entrepreneur and executive with deep ties to the Atlanta ecosystem.  

Atlanta also had its fair share of early successes — high flying telecom and networking companies that were critical to the evolution of the first dot com era whose later years were either mired in scandal or who were acquired by much larger entities. These are companies like MCI Worldcom and Airtouch Cellular, which was gobbled up by Singular Wireless and would eventually become part of a restructured AT&T.

“There were all kinds of tech things happening in the city. A lot of these founders were getting venture on paper which evolved into the dot-bomb,” said Brown. “All of this was happening mid to late nineties, when the dot-bomb happened there was a lot of failure in the Atlanta area.”

The implosion of early internet companies that came with the bursting of the dot-com bubble in 2000 reverberated through Atlanta’s tech ecosystem, erasing the early gains that companies made and setting the stage for a decade-long period of reconstruction punctuated by a few successes from holdouts that managed to make their way through the wreckage.

 

Image Credits: TechCrunch

Through the lean years

One of those companies was MailChimp. Launched in 2001, in the early aftermath of the bursting of the tech bubble, the privately held email marketing startup was one of a number of projects at Ben Chestnut’s and Dan Kurzius’ web development firm.

The two men met at Cox Interactive Media to work on an early MP3 product. When that fizzled both men eventually lost their jobs and went into business together. They built MailChimp off of revenue, bootstrapping the business without venture capital in a model that many other tech founders in the area would seek to replicate.

A few years later, in 2003, another entrepreneur named John Marshall began installing internet hotspots at hospitality businesses, eventually expanding his Wandering WiFi service to include monitoring and managing other kinds of network infrastructure. This foray into startup land would eventually create another big Atlanta tech exit in AirWatch.

For the first six years MailChimp remained a side hustle, a product that the two co-founders continued to work on, but didn’t devote themselves to full time. It wasn’t until 2007, when the service hit 10,000 users, that the company became the full-time job for both founders.

Their once-scrappy startup turned them into billionaires. A 2018 Forbes profile put the company’s valuation at $4.2 billion on roughly $600 million in revenue.

If there was a starting gun for the Atlanta tech renaissance, it might be 2006, a few years before the global financial crisis and a time when the broader tech industry was finding itself a less financially precarious prospect for investors. Internet Security Systems, an Atlanta area dot-com darling that held an initial public offering in the late 90s sold to IBM for $1.3 billion that year.

Tom Noonan and Chris Klaus, the co-founders at Internet Security Systems, had an equally long road. What had started out as a company built when Klaus lived above Noonan’s garage in Atlanta in the mid-90s, morphed into a company pulling in $400 million in annual revenue before its acquisition by IBM.

As capital started flowing into Atlanta and the city regained some of its footing in the tech world, founders who had exited their companies began to reinvest money locally. And the city moved to create more events to foster entrepreneurship. 2006 saw the launch of Venture Atlanta, a conference designed to showcase early talent and startups coming from the region that served as a launchpad for several entrepreneurs that would shape the future of the city’s technology industry.

Image Credits: TechCrunch

Setting a new scene

If 2006 was a big year for exits in Atlanta, it also proved to be the year that opened the floodgates on new entrepreneurial activity, which would give rise over the next decade to what’s now a thriving startup scene, pumping out a record number of billion dollar tech businesses.

It was the year that David Cummings and Adam Blitzer founded Pardot, a marketing and sales automation software developer that grew quickly and attracted the attention of big industry players like ExactTarget. It was also the year that Manhattan Associates executive Alan Dabbiere joined Marshall and Wandering WiFi became AirWatch, a company providing management and security tech for mobile enterprise networks.

Over the next few years MailChimp would become more active; Cloud Sherpas, founded by the entrepreneurs Michael Cohn and Sean O’Brien (who are now founders of the investment firm Overline Ventures) would launch and so would companies like the video streaming tech developer, ClearLeap (bought by IBM in 2015 and valued at over $110 million); the security company Damballa would launch (later acquired by Atlanta neighbor Core Security); and the service powering many of the major banks customer rewards programs, Cardlytics (now trading on the Nasdaq with a $4 billion market cap).

Buoyed by these emerging tech companies, other entrepreneurs would join the fray, with Kabbage (acquired for $850 million), Calendly (a $3 billion business as of this year) and the voice identification technology developer Pindrop (which raised $90 million back in 2018) emerging onto the scene at around the same time.

These companies set the table for what would become a buffet of startups focused primarily on payments and financial services, cloud-based business solutions, and internet security. Gone were the hardware heavy telecom companies and networking companies like Scientific Atlanta, whose business is compared to Hewlett Packard for having brought a high tech industry to the city in the 1950s — much like HP did in Silicon Valley.

Meanwhile, a new generation of investor was moving into the Atlanta orbit, presaged by the 2006 launch of BIP Capital — an event that also proved meaningful for the city’s budding entrepreneurs.

Staking claims for Atlanta’s future

The rising tide of entrepreneurs coming out of Atlanta also served to revitalize the city’s moribund investment community. Hit hard by the bursting of the dot-com bubble, the Atlanta-area firms that managed to survive the crash began to look to later stage businesses and outside of the Atlanta tech ecosystem for startups to back, according to data from CrunchBase and several interviews with investors and founders.

Noro-Moseley Partners, for instance, is by far the most active investor hailing from Atlanta. Over it’s long history the firm has done over 123 deals according to Crunchbase, but in the last five years, data indicates only four investment from the firm were made into Atlanta-based companies.

By contrast, the arrivistes at BIP have been deploying capital and raising successively larger funds since they first came to town. Over the last five years the firm has invested in at least 15 Atlanta-area deals, and now, under the moniker of Panoramic Ventures, the firm is targeting a $300 million early stage fund to invest across the southeast and midwest.

“Traditionally, access to capital was challenging for founders in Atlanta and the Southeast. In the past, it was considered a disadvantage for a tech business to be based outside of the traditional innovation hubs [in] Silicon Valley or the Northeast because it was more difficult to secure investment capital. This was because the large funds were located inside the hubs and had plenty of opportunities right on their doorsteps for investment,” wrote Mark Buffington, the co-founder and chief executive of BIP Capital, in an email to TechCrunch. “While the traditional hubs are still key in terms of aggregate capital, the requirement for startups to also be inside the hubs has changed. Increasingly, venture funds are locating themselves in other areas of the country where innovation is occurring. At the same time, the amount of capital available from local and regional investors is growing, in large part due to the influx of dollars into the private markets.”

Another member of the new school of investors that’s changing Atlanta’s investment scene is Patton; whose work with Tech Square Ventures and Engage, the corporate venture capital investment firm and startup initiative harnessing the power of a number of the biggest companies in Atlanta, also galvanized entrepreneurship and the newfound interest in startup tech companies.

“The recent momentum in the region is driven by increased connectivity across the innovation ecosystem and a critical mass of entrepreneurs and talent coming out of the region’s many successful startups. With corporations focused on digital transformation and innovation, all large companies have to a degree become tech companies and that drives connectivity as talent moves across both startups and tech companies,” Patton said. “Perhaps our greatest strength is our diversity and being home to four leading HBCUs, and I hope in the next 5 years the Southeast will emerge as a leader in producing successful startups founded by diverse entrepreneurs and built with diverse teams. It’s not just a moral imperative – with half the nation’s black population, the Southeast must succeed in engaging under-served entrepreneurs to lead – and you can’t tackle diversity nationally without tackling it in the Southeast.”

Still, other ingredients were needed for the resurgence of startup activity in the city. These would be co-workings spaces like David Cummings’ launch of the Atlanta Tech Village in 2012; the continuing relevance of the Atlanta Tech Development Center; the Venture Atlanta conference and the co-working space around Hypepotamus — which remains the go-to publication for Southern startup activity.

Every entrepreneur and investor mentioned Cummings’ decision to reinvest in the city and launch the Tech Village near Atlanta’s tony suburb of Buckhead as one of the biggest sparks for the city’s renewed entrepreneurial fervor. Soon after Cummings sold Pardot he and David Lightburn established Atlanta Tech Village as a co-working spot for entrepreneurs. It attracted a number of new startup founders whose businesses would become the next wave of big startups. “When David Cummings sold Pardot he wanted a place for entrepreneurs to have community,” said one longtime player in the Atlanta tech community. “They would do these startup chow down lunches and really support entrepreneurs building businesses.”

And just as key was the longtime hub for Georgia Tech-affiliated startups, the Atlanta Tech Development Center, the entrepreneurs and investors noted. Venture Atlanta had a role to play as well, bringing investors from every corner of the country to the city to showcase top talent. Together with CreateX, and the Venture Atlanta program, the four initiatives and workspaces for early stage entrepreneurs planted a number of seeds that would soon blossom into companies like PartPic, Greenlight Financial (which is now worth $2.3 billion), Kabbage, FullStory and Pindrop.

Image Credits: TechCrunch

A haven for diverse founders and investors

During those early days of the Atlanta startup ecosystem, there was one spot more welcoming than most for diverse and women-led founders — the co-working space and offices for Hypepotamus.

Serial entrepreneur Monique Mills was there. So was Jewel Burks Solomon, who sold her company, PartPic, to Amazon in 2016 and is now the Head of Google for Startups in the U.S.

“My first office was at Hypepotamus because they offered free space,” Burks Solomon recalled. “And at the time I didn’t have much money. Then when I raised some money the next major one was at ATDC — the state of Georgia’s incubator. They offered subsidized space and they had an entrepreneur in residence and they had a whole program to help Atlanta-based startups with some kind of technology.”

It was the Hypepotamus space, and subsequent venues like Opportunity Hub and The Gathering Spot that catalyzed the Black entrepreneurial community in Atlanta, according to several founders and investors.

And if the Hypepotamus space, carved out by National Builder Supply, was one of the catalysts, then the angel investor, Mike Ross, was the other.

“Mike has funded many successful Black-led startups in the Atlanta ecosystem and we wouldn’t be where we are today without him,” entrepreneur Candace Mitchell Harris told UrbanGeekz in a recent profile. “When many have faced the run around of false promises or flat out rejections, Mike confidently put his money in and pushed our founders further.”

Ross, a Morehouse College alumnus, who made his wealth as a consultant in the construction and contracting industry has backed Black founders and investors including: Luma, Partpic, Monsieur, Axis Replay, Myavana, TechSquare LabsOpportunity Hub, and The Gathering Spot.

Investors like Paul Judge and entrepreneurs like Joey Womack, Barry Givens, and Mitchell Harris, all benefited from Ross’ investment largesse.

“Mike was the catalyst for our company’s success as our very first angel investor,” says Mitchell Harris, co-founder and CEO of beauty tech startup Myavana, told UrbanGeekz. “I still remember meeting him for the first time at the Black Founders Conference in June 2012, inquisitive and eager to get behind the movement that was beginning in Atlanta in the tech startup scene.”

And Ross blazed a trail for other investors like the Fearless Fund, a group of women investors led by Arian Simone, Ayanna Parsons, and Keshia Knight Pulliam, who launched their first fund in 2019, and Collab Capital, which launched last year (and is led by Burks Solomon, Justin Dawkins, and Barry Givens) — close to a decade after Ross first began investing.

“Right now women of color are the most founded but the least funded entrepreneurs,” Simone said. “Atlanta is a mecca of black entrepreneurship for us to have a venture capital and tech presence here.. I will charge the city of Atlanta and the state of Georgia and the banks that they need to back what we’re doing here.. It is needed.”

Not only is it needed, but it’s working. Of the 36 venture capital firms identified as part of TechCrunch’s research as having a focus on early stage investments in the Atlanta area, 41% met one or more of the following criteria: identification as having a diversity focus across investments, identification as having a diverse fund management team, or both, according to data from Crunchbase.

And through a sample size of 158 startups spanning Pre-Seed, Seed, or Series A in the Atlanta area, which were included in TechCrunch’s research, 48% met one or more of the following criteria: identification as having a sex-diverse founding team, identification has having a racially-diverse founding team, or both. In many instances, founding teams did not self identify, so the number of diverse founders may be greater than currently documented based on publicly available data.

As UrbanGeekz noted, about 25% of the employees in Atlanta’s tech industry are black. In San Francisco, by contrast, that figure is 6%.

“Ten years ago [the Black tech startup ecosystem] was just starting out,” Ross told UrbanGeekz. “Now Atlanta is one of the top tech hubs in the country and the ecosystem is probably one of the most diverse.”

Looking ahead

“I’m really excited about what’s happening now. It’s much more diverse in terms of the people that have the ability to deploy capital. I’m optimistic about what is to come in the tech space,” said Burks Solomon.

She’s not alone. New firms like Cohn and O’Brien’s Overline Ventures, Panoramic, and Outlander Labs, the firm launched by the former Los Angeles investors Paige and Leura Craig are all signs of investors’ long-term belief in the health of the Atlanta startup ecosystem.

“We think that the Southeast and especially Atlanta has the opportunity to become a key hub for tech startups in the next 5 years. It feels a lot like Los Angeles five years ago. The talent is here but historically the issue has been lack of mentorship, early stage capital, and the later stage capital as they grow and scale,” wrote Outlander co-founder Leura Craig, in an email. “However that is all changing given the fact that so many investors are now moving to all parts of the country and are open to investing in areas that they never invested in before. Covid dramatically accelerated the flight from California and New York and the Southeast’s tech scene is going to be a huge winner as a result of this migration. ”

Major tech companies are also showing their faith in Atlanta’s startup scene through significant investments into the ecosystem. Most recently, Apple has committed nearly $100 million to new projects including the Propel Center, a $25 million bid designed to encourage diversity and entrepreneurship at a site to be built near Atlanta’s Historically Black Colleges and Universities.

It is going to be both a virtual platform and a physical campus in the Atlanta University Center.

Students will be able to follow different educational tracks focused on artificial intelligence, agricultural technologies, social justice, entertainment, app development, augmented reality, design and creative arts and entrepreneurship. This isn’t just a monetary investment for Apple, as employees will help develop curricula and provide mentorship as well. There will be internship opportunities for students.

Apple isn’t the only big tech company to commit to Atlanta’s thriving tech community. Facebook is building out a massive, multi-billion dollar extension to data center facilities near the city, and Google committed that the Atlanta area would receive some fo the planned $9 billion investment in job growth across the U.S.

The current growth that Atlanta’s startup scene is experiencing can serve as a model for other urban areas on the rise. The recipe seems to be a strong technical college, an investment in collaborative startup resources, a network of willing investors to reinvest in the local community, the support of city government through non-profit and promotional activities, and finally an embrace of the diverse history of the city itself. There’s no need to remake Silicon Valley, but the tools of Silicon Valley can be used to make burgeoning tech communities better.

With reporting assistance from TechCrunch analyst Kathleen Hamrick

Some rising stars of the new Atlanta ecosystem

 

 

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

Continue Reading
Comments

Uncategorized

Solana, a blockchain platform followed by top crypto investors, says it’s a lot faster than Ethereum

Published

on

Solana isn’t known yet outside of the crypto community. But insiders think the blockchain platform is interesting for a wide variety of reasons, beginning with its amiable founder, Anatoly Yakovenko, who spent more than a dozen years as an engineer working on wireless protocols at Qualcomm and who says he had a lightbulb moment at a San Francisco cafe several years ago following two coffees and a beer.

His big idea centered on creating an historical record to speed along “consensus,” which is how decisions are made on blockchains, which are themselves peer-to-peer systems. Right now, consensus is reached on various blockchains when members solve a mathematical puzzle, a mechanism that’s called “proof of work.” These miners are rewarded for their efforts with cryptocurrency, but process takes work hours in Bitcoin’s case and days in the case of Ethereum, and it’s insanely energy intensive, which is why neither Bitcoin nor Ethereum has proved very scalable. (Bitcoin’s heavy reliance on fossil fuel is the reason Elon Musk cited earlier this week to explain why Tesla is no longer accepting Bitcoin as payment for the company’s electric cars.)

But there is another way. Indeed, crypto watchers and developers are excited about Ethereum and other currencies that are transitioning to a new system called “proof of stake,” wherein people who agree to lock up a certain amount of their cryptocurrency — say it’s Ether — are invited to activate so-called validator software that enables them to store data, process transactions, and add new blocks to the Ethereum blockchain. Like miners, “validators” do what they do to earn more cryptocurrency, but they need far less sophisticated equipment, which opens up the opportunity to more people. Meanwhile, because more validators can participate in a network, consensus can be reached faster.

Yakovenko is enthusiastic about the shift.  We talked with him yesterday, and he said it would “devastating for the entire industry” if Ethereum weren’t able to pull off its objective, given its mindshare and its roughly $500 billion market cap.

Still, he argues that not even proof of stake is good enough. His biggest concern, he says, is that even with proof of stake, miners — and bots — have advance access to transaction information that allows them to exploit users, or front run transactions, because they can control transaction ordering and profit from that power.

Enter Yakovenko big idea, which he calls “proof of history,” wherein the Solana blockchain has developed a kind of synchronized clock that, in essence, assigns a timestamp for each transaction and disables the ability for miners and bots to decide the order of which transactions get recorded onto the blockchain. It also, says Yakovenko, allows for faster block finalization and much faster consensus because the timestamps of previous transactions no longer need to be computed. “Basically, the speed of light is how fast we can make this network go,” he says.

Certainly, Solana — which has sold tokens to investors but never equity in the company — has many excited about its prospects. In recent interviews with both investor Garry Tan of Initialized Capital and CEO Joe Lallouz of the blockchain infrastructure company Bison Trails, both mentioned Solana as among the projects that they find most interesting right now. (We assume both hold its tokens.)

Others say on background that while they understand the developer benefits and need for more scaleable blockchains than Ethereum — and they think Solana is a contender for this market — Solana still needs to more developer mindshare to prove its long-term worth and it’s not there yet. According to Solana itself, there are currently 608 validators helping secure the Solana Network and 47 decentralized applications (or “dapps”) powered by Solana. Meawhile, they were reportedly 33,700 active validators helping to secure “Eth 2.0” as of late December and 3,000 dapps running on the Ethereum blockchain as of February.

In fairness, the Ethereum network went live in 2015, so it has a three-year head start on Solana. In the meantime, Solana has a lead of its own, says Yakovenko, who is based in San Francisco and has assembled a distributed team of 50 employees, including numerous former colleagues from Qualcomm. Asked about other projects that have embraced a proof of history approach, he says that while it’s “all open source” and “anybody can go do it,” there “isn’t a set of our biggest competitors saying they’re going to rework their system and use this.”

The likely reason is that it’s almost comically complicated. “It just takes a lot of work to build these systems,” Yakovenko says. “It takes two to three years to build a new layer one, and you can’t really take an idea for one and stuff it in the other one. If you try to do that, you’re going to set yourself back by six to nine months at the least and potentially introduce bugs and vulnerabilities.” Either way, he adds, “We’re the only ones that are really building this proof-of-history thing, that use a verifiable delay function as a source of time.”

Either way, Solana, which itself has a $12 billion market cap, isn’t interested in competing with Ethereum and other cryptocurrencies on every front anyway, suggests Yakovenko. All it really wants is to disrupt Wall Street and the rest of the global markets, even if he doesn’t put it that way exactly.

He knows it sounds crazy. But the way he sees it, what Solana is building is “an open, fair, censorship-resistant global marketplace” that’s better than anything inside of the New York Stock Exchange or any other means of settling trades. It’s certainly a much bigger opportunity than he imagined, backed at that cafe. As he said yesterday: “Everything that we do to make this thing faster and faster results in this better censorship resistance, and therefore better markets. And price discovery is what I imagine is the killer use case for decentralized public networks. Can we be the world’s price discovery engine? That’s an interesting question to ask.”

Pointing to the wild swings in cryptocurrency prices right now, he says he suspects that “part of that is just developers and folks discovering the network and building cool applications on it.” It’s exciting when people can “self serve and build stuff that they want to go to market,” he adds. “It’s the secret weapon of decentralized networks versus any incumbents like Bank of America or Visa or whatever. Those big companies can’t iterate and move as fast as global set of engineers who can just come together and code whenever they want to.”

He saw the same dynamics play at Qualcomm. “Working in a big company, it seems like there’s a ton of resources, right? They can accomplish anything. But you saw us working on proprietary operating systems while the Linux guys were just working first for fun, right? And it seemed like it was just a weird hobby that people had; they were coding operating systems at night; they were coding over the weekend. Then all of a sudden, Linux is the de facto mobile iOS for Android.”

If you’re curious to learn more about Solana, we’ll have a podcast coming out soon with our longer conversation with Yakovenko. In the meantime, the outlet Decrypt today published an explainer titled “What is Solana?” that you might check out here.

Continue Reading

Uncategorized

Extra Crunch roundup: Selling SaaS to developers, cracking YC after 13 tries, all about Expensify

Published

on

Before Twilio had a market cap approaching $56 billion and more than 200,000 customers, the cloud-communications platform developed a secret sauce to fuel its growth: a developer-focused model that dispensed with traditional marketing rules.

Software companies that sell directly to end users share a simple framework for managing growth that leverages discoverability, desirability and do-ability — the “aha!” moment where a consumer is able to incorporate a new product into their workflow.

Data show that traditional marketing doesn’t work on developers, and it’s not because they’re impervious to a sales pitch. Builders just want reliable tools that are easy to use.

As a result, companies that are looking to create and sell software to developers at scale must toss their B2B playbooks and meet their customers where they are.


Attorney Sophie Alcorn, our in-house immigration law expert, submitted two columns: On Monday, she analyzed a decision by the U.S. Department of Homeland Security not to cancel the International Entrepreneur Parole program, which potentially allows founders from other countries to stay in the U.S. for as long as 60 months.

On Wednesday, she responded to a question from an entrepreneur who asked whether it made sense to sponsor visas for workers who are working remotely inside the U.S.

Thanks very much for reading Extra Crunch this week, and have a great weekend.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

4 lessons I learned about getting into Y Combinator (after 13 applications)

Image of a chair and a trash can in an office, with the bin surrounded by crumpled paper, representing persistence.

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

Can you imagine making 13 attempts at something before attaining a successful outcome?

Alex Circei, CEO and co-founder of Git analytics tool Waydev, applied 13 times to Y Combinator before his team was accepted. Each year, the accelerator admits only about 5% of the startups that seek to join.

“Competition may be fierce, but it’s not impossible,” says Circei. “Jumping through some hoops is not only worth the potential payoff but is ultimately a valuable learning curve for any startup.”

In an exclusive exposé for TechCrunch, he shares four key lessons he learned while steering his startup through YC’s stringent selection process.

The first? “Put your business value before your personal vanity.”

The Expensify EC-1

The Expensify EC-1

Image Credits: Illustration by Nigel Sussman, art design by Bryce Durbin

In March, TechCrunch Daily Reporter Anna Heim was interviewing executives at Expensify to learn more about the company’s history and operations when they unexpectedly made themselves less available.

Our suspicions about their change of heart were confirmed on May 3 when the expense report management company confidentially filed to go public.

With a founding team comprised mainly of P2P hackers, it’s perhaps inevitable that Expensify doesn’t look and feel like something an MBA might envision.

“We hire in a super different way. We have a very unusual internal management structure,” said founder and CEO David Barrett. “Our business model itself is very unusual. We don’t have any salespeople, for example.”

Similar to the way companies must file a Form S-1 that describes their operations and how they plan to spend capital, TechCrunch EC-1s are part origin story, part X-ray. We published the first article in a series on Expensify on Monday:

We’ll publish the remainder of Anna’s series on Expensify in the coming weeks, so stay tuned.

As Procore looks to nearly double its private valuation, the IPO market shows signs of life

Construction tech unicorn Procore Technologies this week set a price range for its impending public offering. The news comes after the company initially filed to go public in February of 2020, a move delayed by the pandemic.

In March 2021, Procore filed again for a public offering, but its second shot ran into a cooling IPO market. The company filed another S-1/A in April, and then another in early May. This week’s filing is the first that sets a price for the Carpinteria, California-based software upstart.

But Procore is not the only company that filed and later put on hold an IPO to get back to work on floating. Kaltura, a software company focused on video distribution, also recently got its IPO back on track. Are we seeing a reacceleration of the IPO market? Perhaps.

3 golden rules for health tech entrepreneurs

Family physician Bobbie Kumar lays out the golden rules to ensure your healthcare product, service or innovation is on the right track.

Rule 1: “It’s not enough to develop a ‘new tool’ to use in a health setting,” Dr. Kumar writes. “Maybe it has a purpose, but does it meaningfully address a need, or solve a problem, in a way that measurably improves outcomes? In other words: Does it have value?”

Dear Sophie: How does the International Entrepreneur Parole program work?

lone figure at entrance to maze hedge that has an American flag at the center

Image Credits: Bryce Durbin/TechCrunch

Dear Sophie,

I’m the founder of an early-stage, two-year-old fintech startup. We really want to move to San Francisco to be near our lead investor.

I heard International Entrepreneur Parole is back. What is it, and how can I apply?

— Joyous in Johannesburg

Digging into digital mortgage lender Better.com’s huge SPAC

If you have heard of Better.com but really had no idea what it does before this moment, welcome to the club. Mortgage tech is like pre-kindergarten applications — it applies to a very specific set of folks at a very particular moment. And they care a lot about it. But the rest of us aren’t really aware of its existence.

Better.com, a venture-backed digital mortgage lender, announced this week that it will combine with a SPAC, taking itself public in the second half of 2021. The unicorn’s news comes as the American IPO market is showing signs of fresh life after a modest April.

As tech offices begin to reopen, the workplace could look very different

Colleagues in the office working while wearing medical face mask during COVID-19

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

The pandemic forced many employees to begin working from home, and, in doing so, may have changed the way we think about work. While some businesses have slowly returned to the office, depending on where you live and what you do, many information workers remain at home.

That could change in the coming months as more people get vaccinated and the infection rate begins to drop in the U.S.

Many companies have discovered that their employees work just fine at home. And some workers don’t want to waste time stuck on congested highways or public transportation now that they’ve learned to work remotely. But other employees suffered in small spaces or with constant interruptions from family. Those folks may long to go back to the office.

On balance, it seems clear that whatever happens, for many companies, we probably aren’t going back whole-cloth to the prior model of commuting into the office five days a week.

 

For unicorns, how much does the route to going public really matter?

4 progressively larger balls of US $1 bills, studio shot

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

On a recent episode of TechCrunch’s Equity podcast, hosts Natasha Mascarenhas and Alex Wilhelm invited Yext CFO Steve Cakebread and Latch CFO Garth Mitchell on to discuss when companies should go public, the costs and benefits of the process, and when a SPAC can make sense. Yext pursued a traditional IPO a few years back; Latch is now going public via a blank-check company combination.

The chat was more than illustrative, as we got to hear two CFOs share their views on delayed public offerings and when different types of debuts can make the most sense. While the TechCrunch crew has, at times, made light of certain SPAC-led deals, the pair argued that the transactions can make good sense.

Undergirding the conversation was Cakebread’s recent IPO-focused book, which not only posited that companies going public earlier rather than later is good for their internal operations but also because it can provide the public with a chance to participate in a company’s success.

In today’s hypercharged private markets and frothy public domain, his argument is worth considering.

 

The truth about SDK integrations and their impact on developers

Image of three complex light trails converging against a white background to represent integration.

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

Ken Harlan, the founder and CEO of Mobile Fuse, writes about the perks and pitfalls of software development kits.

“The digital media industry often talks about how much influence, dominance and power entities like Google and Facebook have,” Harlan writes. “Generally, the focus is on the vast troves of data and audience reach these companies tout. However, there’s more beneath the surface that strengthens the grip these companies have on both app developers and publishers alike.

“In reality, SDK integrations are a critical component of why these monolith companies have such a prominent presence.”

Don’t hate on low-code and no-code

The Exchange caught up with Appian CEO Matt Calkins after his enterprise app software company reported its first-quarter performance to discuss the low-code market and what he’s hearing in customer meetings. To round out our general thesis — and shore up our somewhat bratty headline — we’ve compiled a list of recent low-code and no-code venture capital rounds, of which there are many.

As we’ll show, the pace at which venture capitalists are putting funds into companies that fall into our two categories is pretty damn rapid, which implies that they are doing well as a cohort. We can infer as much because it has become clear in recent quarters that while today’s private capital market is stupendous for some startups, it’s harder than you’d think for others.

Bird’s SPAC filing shows scooter-nomics just don’t fly

A pair of Bird e-scooters parked in Barcelona. Image Credits: Natasha Lomas/TechCrunch

Historically — and based on what we’re seeing in this fantastical filing — Bird proved to be a simply awful business. Its results from 2019 and 2020 describe a company with a huge cost structure and unprofitable revenue, per filings. After posting negative gross profit in both of the most recent full-year periods, Bird’s initial model appears to have been defeated by the market.

What drove the company’s hugely unprofitable revenues and resulting net losses? Unit economics that were nearly comically destructive.

Dear Sophie: Does it make sense to sponsor immigrant talent to work remotely?

lone figure at entrance to maze hedge that has an American flag at the center

Image Credits: Bryce Durbin/TechCrunch

Dear Sophie,

My startup is in big-time hiring mode. All of our employees are currently working remotely and will likely continue to do so for the foreseeable future — even after the pandemic ends. We are considering individuals who are living outside of the U.S. for a few of the positions we are looking to fill.

Does it make sense to sponsor them for a visa to work remotely from somewhere in the United States?

— Selective in Silicon Valley

The hamburger model is a winning go-to-market strategy

Follow the Hamburger model for your go-to-market strategy

Image Credits: ivan101 / Getty Images

“Today, we live in a world of product-led growth, where engineers (and the software they have built) are the biggest differentiator,” says Coatue Management general partner Caryn Marooney and investor David Cahn. “If your customers love what you’re building, you’re headed in the right direction. If they don’t, you’re not.

“However, even the most successful product-led growth companies will reach a tipping point, because no matter how good their product is, they’ll need to figure out how to expand their customer base and grow from a startup into a $1 billion+ revenue enterprise.

“The answer is the hamburger model. Why call it that? Because the best go-to-market (GTM) strategies for startups are like hamburgers:

  • The bottom bun: Bottom-up GTM.
  • The burger: Your product.
  • The top bun: Enterprise sales.”

Software subscriptions are eating the world: Solving billing and cash flow woes simultaneously

the recycle logo recreated in folded US currency no visible serial numbers/faces etc.

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

Krish Subramanian, the co-founder and CEO of Chargebee, writes that while subscription business models are attractive, there are two major pitfalls: First, payment.

“Regardless of company size, there’s an ongoing need to convince customers to sign up long term,” Subramanian writes. “The second issue: How do businesses cover the funding gap between when customers sign up and when they pay?”

Is there a creed in venture capital?

Scott Lenet, the president of Touchdown Ventures, asks how deal-makers should think about how to handle themselves when counter-parties attempt to change an agreement. “When is it OK to modify terms, and when should deal-makers stand firm?” he asks.

“Entrepreneurs and investors should recognize that contracts are worth very little without the ongoing relationship management that keeps all parties aligned. Enforcement is so unusual in the world of startups that I consider it a mostly dead-end path. In my experience, good communication is the only reliable remedy. This is the way.”

 

Even startups on tight budgets can maximize their marketing impact

Maximize the impact of your marketing strategy

Image Credits: Ray Massey / Getty Images

“Search engine optimization, PR, paid marketing, emails, social — marketing and communications is crowded with techniques, channels, solutions and acronyms,” writes Dominik Angerer, CEO and co-founder of Storyblok, which provides best practice guidance for startups on how to build a sustainable approach to marketing their content. “It’s little wonder that many startups strapped for time and money find defining and executing a sustainable marketing campaign a daunting prospect.

“The sheer number of options makes it difficult to determine an effective approach, and my view is that this complexity often obscures the obvious answer: A startup’s best marketing asset is its story.”

Continue Reading

Uncategorized

Daily Crunch: Stripe buys Y Combinator alum Bouncer for undisclosed sum

Published

on

To get a roundup of TechCrunch’s biggest and most important stories delivered to your inbox every day at 3 p.m. PDT, subscribe here.

Wrapping the week here at Daily Crunch with a big thanks to Henry for taking over yesterday and a fist bump to everyone who has written in with notes on its format. We’re still tinkering, so your notes are read and (mostly) appreciated, even if we can’t respond to everyone.

Stick with us as we get this fully figured out. — Alex

TechCrunch Top 3

Coding school drama: The market for coding schools and bootcamps is not going to go away so long as there is an outsized market demand for developers that current educational methods can’t fulfill. But not every player in the market is doing well. Lambda School, for example, is in even more hot water this week.

VCs love edtech: While private investors are happily pouring capital into the edtech startup market, the share prices of many public edtech companies are under fire. That’s a sentiment gap that TechCrunch is keeping close tabs on. More here on the edtech venture market.

Apply to Startup Battlefield: There’s not a lot of time left to apply to the upcoming Disrupt Startup Battlefield. And we want to hear from you. Really. Many startups that have taken part in our free and fun and very public pitch-off have gone on to raise lots of capital or even go public. So hang out with us; we think you’re great!

Startups and VC

Stripe buys Bouncer: The progress of the yet-private Stripe as an online finance behemoth continued today with its purchase of Bouncer, a startup based in Brooklyn that TechCrunch reports has “built a platform to automatically run card authentications and detect fraud in card-based online transactions.” Fraud detection is a point of product differentiation among online payment companies, so this is a deal to watch.

Why aren’t more African startups going public? The SPAC boom is taking a host of American startups public, but not upstart tech companies from Africa. The real issue could simply be one of scale, it turns out. TechCrunch investigates.

SoftBank makes piles of money: Some of the bets that SoftBank has made on its own, and via its Vision Fund 1 and 2, have been clunkers. WeWork remains a byword for embarrassment. But the teleco and investing powerhouse has been on a heater lately, as TechCrunch’s Equity Podcast explored. How good were its results? Very, very well. More on its investing performance here.

Don’t leak customer account data: An exercise startup that competes with Peloton didn’t have its cybersecurity house in order. Echelon, TechCrunch reports, “had a leaky API that let virtually anyone access riders’ account information.” That’s all kinds of not good. And the news item explains why cybersecurity has been so hot lately. More tech everywhere means more potential vulnerabilities everywhere, as well.

5 ways to raise your startup’s PR game

By now, it’s widely understood that storytelling is the foundation for successful startup PR.

Tech journalists receive more pitches than we can count each day from very early-stage companies seeking to make a name for themselves, and, to be honest, most of them sound like they were written with language-prediction technology.

What most companies fail to grasp is that storytelling is everyone’s job, like product managers who write blog posts that give users real insights into the latest release. The same holds true for founders who take part in Reddit AMAs and engineers who join product Slack chats.

To make a splash and stay relevant, here are five actionable suggestions that won’t cost a dime to implement.

(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)

Big Tech Inc.

Wrapping up news from the biggest tech companies this week, a short digest of earnings results from companies that you care about is in order.

Coinbase met its pre-released Q1 2020 earnings expectations, posting both huge revenue and profit gains. In short, the first quarter was a huge win for the crypto trading house. It had the same sort of quarter that likely led to Robinhood filing to go public.

DoorDash blew the, er, doors off its own quarter, leading to its shares spiking by around 25% in today’s trading. That’s one hell of a result. Sure, DoorDash is worth a lot less than it was at its peak, but the company had a great day all the same.

Airbnb managed a roughly 2.5% gain today after reporting its own earnings yesterday. It also got an analyst upgrade to boot. In short, the company managed year-over-year revenue growth, but also detailed larger-than-anticipated losses thanks to some one-time items. Worth around $85 billion, Airbnb remains richly valued.

And then there was Alibaba, which has lost around a quarter-trillion in value since it got into a scrap with its local administration and swung to a loss after it was served with a multibillion dollar fine by the Chinese government. But the e-commerce giant’s $28.6 billion in total revenue was up 64% compared to its year-ago result. Hot dang.

Now you are all caught up! Have a lovely weekend, and we’ll see you again Monday afternoon.

Continue Reading

Trending