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We surveyed five investors from the Brussels, Belgium ecosystem, and overall the mood was upbeat.
Investors are backing companies in smart living, life sciences (“a really promising sector for Belgium”), B2B, “industry 4.0,” fintech, mobility, health and music tech. Food tech appears “an overcrowded space.” Another says: “COVID confirmed our strategy to invest in local companies and with a sector focus on smart living life science and tech.”
Belgium has a “dynamic ecosystem of health actors, from biotech firms, universities and startups and scaleups. We follow the #BeHealth initiative, which unites the various parts of the Belgian health sector.”
Belgium is “not a market for B2C startups” as it has a “small but complex market with different regions/cultures/languages.” They are focusing on Belgium and neighboring countries for investing.
However, finding funding for startups is still a “difficult task today” said one, as it suffers from a lack of “scale capital” for later rounds.
How should investors in other cities think about the overall investment climate and opportunities in the city? “As a well-educated environment, multicultural, multilingual,” says one. “The ecosystem is very dynamic, with great opportunities. While valuations are usually lower compared to other hubs in Europe, there is quite some money available on the market,” says another.
Brussels’ geography makes it “very well-connected to Europe and international by nature.” It is multicultural and multilingual, so as a result startups position themselves for international expansion, “whether first to France or the Netherlands or beyond. For investors that are scoping opportunities in Belgium, they should recognize that Belgian startups are well-suited for international growth.”
As a small and very dense country, Belgium “already has a distributed founder geography.”
Investors have also been advising companies “to make sure that they have enough cash to last until the end of next 2021 at least.”
We spoke to the following:
- Pauline Brunel, partner, BlackFin
- Xavier de Villepin, partner, TheClubDeal
- Frederic Convent, partner, TheClubDeal
- Alexandre Dutoit, partner, Scale Fund
- Olivier de Duve, partner, Inventures Investment Partners
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Pauline Brunel, partner, BlackFin
What trends are you most excited about investing in, generally?
Fintech, insurtech
What are you looking for in your next investment, in general?
Outstanding team, big opportunity.
Xavier de Villepin, partner, TheClubDeal
What trends are you most excited about investing in, generally?
Smart living, life sciences and tech.
What’s your latest, most exciting investment?
Univercells — Series C.
Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
More startups needed in the smart living sector. In general, companies with international ambitions maintaining local sticky jobs.
What are you looking for in your next investment, in general?
Daring entrepreneurs within growing markets.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
We are wary of blockchain and crypto currencies.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
More than 50%.
Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Life sciences, including biotech, is a really promising sector for Belgium. On the contrary, Belgium is not a market for B2C startups (small but complex market with different regions/cultures/languages).
How should investors in other cities think about the overall investment climate and opportunities in your city?
They feel Brussels is one of the main tech hubs in Belgium. Though the private equity and risk-on mentality is still not here. Finding funding for startups is still a difficult task today.
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
I don’t think it will have a substantial impact, as many startups were already favoring remote work and flexible working hours.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19?
Definitely travel and hospitality (part of smart living). It suffered a lot. But it’s a good time to invest. It’s an opportunity for startups to rethink their model and challenge the way they were seeing things before.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
COVID-19 confirmed our strategy was right … to focus on local competitiveness in the backbones of our economy: smart living, life sciences and tech. But within each sector, each company may be impacted differently. So a case-by-case analysis and in-depth due diligence is a necessity more than ever. Our advice to startups is to consider this environment will stay for another year and to plan the cash flows very carefully.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
The last lockdown giving much more freedom to companies to continue to operate and witness that many of them adapted their way of working to stay operational.
Frederic Convent, partner, TheClubDeal
What trends are you most excited about investing in, generally?
Smart living, life sciences, tech.
What’s your latest, most exciting investment?
Univercells Series C.
What are you looking for in your next investment, in general?
More companies active in smart living, life sciences and tech.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Blockchain and crypto.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
50%.
Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Fintech is doing well in Brussels. We like an Antwerp mortgage B2B fintech: Oper.
How should investors in other cities think about the overall investment climate and opportunities in your city?
As a well-educated multicultural, multilingual environment.
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
Most startups are already used to working remotely so the impact for the hubs is less, as they and their clients proved able to work elsewhere.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19?
Travel and hospitality will suffer a lot in this COVID crisis. Life sciences are well-positioned to address the crisis.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
COVID confirmed our strategy to invest in local companies and with a sector focus on smart living, life sciences and tech.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
In medtech, essential medical intervention some green shoots benefit from the crisis.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
The last lockdown pushed companies to adapt their business model and to focus on the new situation.
Alexandre Dutoit, partner, ScaleFund
What trends are you most excited about investing in, generally?
We aim at bridging the equity gap between seed rounds and Series A.
What’s your latest, most exciting investment?
Kaspard, a silver economy company having developed a fall-detection technology.
Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
We like B2B. Industry 4.0 type of deals lack a bit in our opinion.
What are you looking for in your next investment, in general?
Above all, we need a great team. Then we want to see some commercial traction, being POCs, first contracts.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Food tech appears to us as an overcrowded space. A lot of B2C entrepreneurs are doing “more of the same.”
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
We focus on Belgium and neighboring countries.
Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Biotech is definitely a hit in Belgium. Fintech and music tech are also growing.
How should investors in other cities think about the overall investment climate and opportunities in your city?
The ecosystem is very dynamic, with great opportunities. While valuations are usually lower compared to other hubs in Europe, there is quite some money available on the market.
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
I don’t see that coming, especially as entrepreneurs like to network, share experiences and be in an emulative environment.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
Very few, as great teams are able to adapt. We have in our portfolio a company closely tied to events that has been able to rethink its business model and is now even more profitable compared to before the crises. Besides, companies that foster remote work or can install service at a distance will be short-term winners.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
COVID has not impacted our strategy. Entrepreneurs are afraid of the uncertainty and lack of perspective. We encourage them to prepare themselves for the next opened window and to work on tech and processes, while reassuring them on the financing side.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Utopix, a startup linked to the event industry, has been able to rethink its business model as their sales were falling down. They have down their best month ever since then.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
I have seen hope after the summer period when companies were angry to do business again. Unfortunately, that hasn’t lasted very long. We try to remain positive and focus on important things.
Any other thoughts you want to share with TechCrunch readers?
Brussels is a growing scene for startups, very well-connected to Europe and international by nature.
Olivier de Duve, partner, Inventures Investment Partners
What trends are you most excited about investing in, generally?
At Inventures, we invest in a range of startups that have strong financial returns and a measurable social and environmental impact. Looking to 2021, we’re most excited about the mobility sector, HR tech, the blue economy (investing in technologies around water and ocean health) and the circular economy. These sectors started to grow rapidly in Europe, and we’re excited to source some great deals in the coming year.
What’s your latest, most exciting investment?
We just led a round in MySkillCamp, a Belgian HR tech company that equips SMEs and corporates with an adaptable platform for employee learning. MySkillCamp has been stunning us with their rapid growth, even during the pandemic, and it’s a testament to the fact that companies need solutions for upskilling and reskilling their workforce.
Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
I’ll flip this question to be investor-centric. We’d really like to see more impact venture capital firms that are active in the Series B and beyond stage in Europe. For now, the largest impact VCs are concentrated in the US — having that source of capital here in Brussels or in neighboring ecosystems will help earlier-stage European VCs continue to scale and support their portfolio companies in later rounds. Having that access to capital is key for making a sustainable ecosystem.
What are you looking for in your next investment, in general?
Our investment thesis is to find startups that are financially strong and tackle one of the 17 United Nations Sustainable Development Goals (SDGs). Broadly that has meant companies in health, mobility, renewable energy, climate and more. As we’re rounding out our second fund, our next investment has to hit our sweet spot of clear commercial traction, a stellar team and solid plans for scaling internationally.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about?
Several markets are oversaturated like shared light vehicle scooters or telemedicine solutions. D2C medical devices is also a tough market to break into. Given the pandemic situation, startups active in the recreational sector like tourism and sport are struggling more than ever. All products or services that are not digital are less resilient and will need to shift as soon as possible.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
About half of our startups are coming from Belgium. We’ve historically invested in the U.K., France, the Netherlands and Luxembourg, however we’re open to investing across the EU.
Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders?
Two sectors that come to mind are mobility and health. Belgium is a hyperconnected country, and mobility startups that address user needs for a more sustainable and efficient transportation will do well here. As for health, Belgium has a dynamic ecosystem of health actors, from biotech firms, universities, and startups and scaleups. We follow the #BeHealth initiative, which unites the various parts of the Belgian health sector. One company that we wanted to highlight is Citizen Lab — they are a digital democracy platform that helps local governments organize voting, participatory budgeting and more. They’re setting the conversation around civic tech and we’re so excited to see what the founders Wietse Van Ransbeeck and Aline Muylaert have in store for 2021.
How should investors in other cities think about the overall investment climate and opportunities in your city?
Belgium is a multicultural, multilingual country — so startups that are grown here naturally are positioning themselves for international expansion, whether first to France or the Netherlands or beyond. For investors that are scoping opportunities in Belgium, they should recognize that Belgian startups are well-suited for international growth and a role that they could play as investors is helping to introduce Belgian startups to other markets.
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work?
As a small and very dense country, Belgium already has a distributed founder geography. In Brussels we have Co.Station, which is home to dozens of startups. However, we also see strong growth in innovation coming from Leuven, Ghent, Antwerp, Liege — and these cities are maximum two hours away by train. Our latest investment, MySkillCamp, for example, is based in Tournai, with an office in Brussels.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times?
We found out in our portfolio that companies are quite resilient to the crisis because they are addressing societal issues like health, climate and energy. SaaS companies or other digital services are also less exposed, which points out that digitalization is key to survive. Companies that are highly dependent on large governmental contracts could be more exposed to shifts in spending patterns due to COVID.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
COVID-19 has not impacted our investment strategy so much as our post-investment strategy. Since the pandemic started, we’ve been “all hands on deck” with helping our portfolio companies weather the storm — from organizing new fundraising to scoping out new markets and helping on strategic growth projects. We’ve been advising our companies to make sure that they have enough cash to last until the end of next 2021 at least. What we’re seeing is that contracts are taking longer to be signed, especially for our companies looking to partner with governments that are more cash strapped and limited because of the pandemic.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
Definitely! On the ecosystem level, we’ve seen a lot of fundraising activity in the last six months, particularly in the health and biotech sector — one example of that is Belgium-based Univercells. For our portfolio, we’ve seen that tools that serve governments and the transition to a more digital economy has created enormous opportunities for our B2B and B2G companies to thrive during this time.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two.
A few moments have given us hope during 2020. Seeing the racial reckoning in the U.S. spark conversations in Europe about justice and D&I has given me a lot of hope around the role of the venture capital and startup sector in creating a more equal society. Initiatives like Diversity VC are helping us to do that. Also, the sheer number of startups with climate benefits, from cultured meat to sustainable packaging and more, has showcased the financial viability and the demand for expanding the world’s options for sustainability — another large societal challenge.
Any other thoughts you want to share with TechCrunch readers?
Belgium is home to a vibrant, active and fast-growing startup scene!
Tony Florence isn’t as well known to the public as other top investors like Bill Gurley or Marc Andreessen, but he’s someone who founders with SaaS and especially marketplace e-commerce companies know — or should. He’s responsible for the global tech investing activities for NEA, one of the world’s biggest venture firms in terms of assets under management (it closed its newest fund with $3.6 billion last year).
Florence has also been involved with a long list of e-commerce brands to break through, including Jet, Gilt, Goop, Casper, Letgo, and Moda Operandi.
It’s because we talked earlier this week with one of his newer e-commerce bets, Maisonette, that we wanted to ask him about brand building more than a year into a pandemic that has changed the world in both fleeting and permanent ways. We wound up talking about how customer acquisition has changed; what he thinks of the growing number of companies trying to roll up third-party sellers on Amazon; and how upstarts can maintain momentum when even younger companies become a shiny new fascination for customers.
Note: one topic that he couldn’t and wouldn’t comment on is the future of one founder who Florence has backed twice, Marc Lore, who stepped down from Walmart last month to begin building what he recently told Vox is a multi-decade project to build “a city of the future.” (More on this to come, evidently.)
Part of our chat with Florence, lightly edited for length and clarity, follows:
TC: You’ve funded a number of very different businesses that have managed to grow even as Amazon has eaten up more of the retail market. Is there any sector or vertical you wouldn’t back because of the company?
TF: You have to be thoughtful about Amazon. I wouldn’t say there’s one particular area that you either can ignore or feel like you’re completely comfortable and open to, given the scale of their platform. At the same time, there are founding principles and fundamentals that we think about as they relate to companies being able to compete and operate successfully.
TC: And these are what? You’ve backed Marc Lore, Philip Krim (of Casper), Sylvana and Luisana of Maisonette. Do they have something in common?
TF: Sometimes [founders] come at the problem organically; they’re living it [and want to solve it]. Other times, somebody like Marc sees a business opportunity and just attacks it. But there are commonalities. These are folks who are very customer centric, who are focused on good, fundamental unit economics, and who are obsessive about their people, their teams. It takes a village to build a young successful company, and all of those founders you mentioned are great at recruiting world-class people. There’s a sense of vision and mission and culture.
When you wake up and decide to do something, the majority of people you talk to just want to tell you the reasons why it can’t work, so it also takes a certain [wherewithal] to have such conviction around what you’re doing that you’re kind of all in on it, and you’re going to break through no matter what.
TC: Maisonette was going to open a brick-and-mortar store but put a pin in that plan because of COVID. Will we go back to seeing direct-to-consumer brands opening real-world locations when this is over? Has the pandemic permanently changed that calculation?
TF: Leading up to the pandemic, a lot of the young DTC companies that were direct-to-consumer brands, and even the traditional e-commerce marketplaces, were experimenting with offline. Some of it was out of necessity, frankly. Sometimes [customer acquisition costs] became so expensive that it was actually cheaper for them to go offline. In other cases, it was done because the customer wanted that closed loop experience, as with [mattress maker] Casper.
A lot of companies [opened these stores] in a contained way it worked really well. It’s very accretive financially to the overall business contribution, margin wise. It was accretive for the overall customer experience. And in many cases, it didn’t cannibalize anything. It just expanded the [total addressable market].
We’re spending a lot of time right now continuing to think through what are the permanent changes that are going to come out of the pandemic, but I would say the omnichannel model has really has started to take shape and succeed if you look at big retailers like Walmart and Target, so I think there will be an omnichannel dynamic to many of these companies that we’re talking about. Also, over the last 12 months, the cost of acquisition and the efficacy of marketing has swung back in the favor of these young companies. It’s improved to a point where we don’t really even need to think about offline.
TC: I know it had become expensive to acquire customers digitally because it was so crowded out there. Did it become less crowded?
TF: There were very few platforms that these companies could use pre pandemic that weren’t oversaturated . . . it was just very competitive, and that would bid up the cost of acquisition. In the last 12 months, you’ve seen big parts of that market go away. With airlines and financial services and a lot of the spend going way down, it’s become a lot cheaper for companies to market digitally.
TC: Still, it feels at times that it’s hard to maintain a brand’s momentum over time; there’s always some new outfit nipping at its heels. How does a brand itself fresh and relevant in 2021?
TF: There’s a hits dynamic — a fad dynamic — in the consumer space, so that’s always a challenge. You [compete by] continually reinventing and adding [to your offerings]. You see that in social categories, you see that in marketplaces [where they add] managed services and other components [like] payments, and you clearly see it in the way some of the direct-to-consumer companies continue to add new products to the mix.
You focus on the core aspects of your brand and its mission and vision and make sure that the customers really feel that. There’s a community dynamic that has really occurred the last four or five years around e-commerce companies. Glossier is a great example of a company that built a great community around a core set of product offerings, and that has really propelled that company beyond its core customer customer base.
There’s also a contextual commerce opportunity. Goop is a great example this; Gwyneth [Paltrow] brilliantly came up with [an effective way] to merge content and commerce, and that’s something a lot of companies in the commerce space have started to invest in.
TC: Content, community and not necessarily speed, so focusing on what Amazon does not. Can I ask: do you think Amazon needs to be reigned in?
TF: If you’re competing with them [in the] cloud market or a commerce market, they’re a very formidable competitor, and you got to take them very, very seriously. They’re at a scale that’s just incredibly impressive. But I do think you’re seeing a lot of innovation around the edges and companies finding areas that Amazon maybe can’t focus on or isn’t focusing on.
TC: What do you think of these Amazon Marketplace roll-ups that we’re seeing? There’s been at least a half of dozen of them that already, including Thrasio, which announced $750 million this week. All are raising money hand over first.
TF: We haven’t made an investment in the area, though we’re watching very closely. It can be a very capital intensive strategy to execute on because you’re buying brands and then bringing them onto the platform to consolidate and grow, but there’s just an enormous long tail to the e-commerce space and this is an opportunity to consolidate that.
TC: Like, an infinite opportunity? How many roll-ups can the market support?
TFL I do think that we’ll see a handful of these companies get to decent scale. The question will be whether you’ve got more of an arbitrage going on [by] buying companies and generating synergies or there’s some fundamental bigger breakthrough. If you could use AI [and] machine learning to understand how to better serve customers and think about customer acquisition a little bit better, that would be really interesting. If there are real economies of scale to the supply chains [or] baseline infrastructure, that would certainly be interesting.
It’s early on. It remains to be seen how this is gonna play out.
Pictured above, left to right: NEA’s global managing director, Scott Sandell, and Florence, who is the head of global tech investing activities at NEA and who works alongside Mohamad Makhzoumi, who oversees the firm’s healthcare practice.
I’m very proud of the work we’re doing here at Extra Crunch, so it gives me great pleasure to announce that today is our second anniversary.
Thanks to hard work from the entire TechCrunch team, authoritative guest contributors and a very engaged reader base, we’ve tripled our membership in the last 12 months.
As Extra Crunch enters its third year, we’re putting our foot on the gas in 2021 so we can bring you more:
- Fresh analysis about today’s most dynamic tech industries.
- Surveys of top investors about trends in your sector.
- In-depth profiles of top companies from their earliest days.
- Expanded live programming.
Full Extra Crunch articles are only available to members
Use discount code ECFriday to save 20% off a one- or two-year subscription
To be completely honest: Eric and I wavered about posting this announcement. Both of us would prefer to show the results of our work than make a list of future-looking statements, so I’ll sum up:
I’m proud of the work we’re doing because people around the world use the information they find on Extra Crunch to build and grow companies. That’s big!
Thanks very much for reading Extra Crunch; have a great weekend.
Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist
Image Credits: Bryce Durbin
Will ride-hailing profits ever come?
Image Credits: Nigel Sussman (opens in a new window)
Before the pandemic began, I took about seven or eight hailed rides each month. Since I began physically distancing from others to stem the spread of the coronavirus in March 2020, I’ve taken exactly 10 hailed rides.
Your mileage may vary, but last year, Uber and Lyft both reported steep revenue losses as travelers hunkered down at home. Today, Alex Wilhelm says both transportation platforms plan to reach adjusted profitability by Q4 2021.
He unpacked the numbers “to see if what the two companies are dangling in front of investors is worth desiring.” Since he usually doesn’t focus on publicly traded stocks, I asked Alex why he focused on Uber and Lyft today.
“Utter confusion,” he replied.
“Investors have bid up their stocks like the two companies are crushing the game, instead of playing a game with their numbers to reach some sort of profit in the future,” Alex explained. “The stock market makes no sense, but this is one of the weirder things.”
TechCrunch’s favorites from Techstars’ Boston, Chicago and workforce accelerators
Image Credits: Techstars (opens in a new window)
In the theater, a “four-hander” is a play that was written for four actors.
Today, I’m appropriating the term to describe this roundup by Greg Kumparak, Natasha Mascarenhas, Alex Wilhelm and Jonathan Shieber that recaps their favorite startups from Techstars accelerators.
The quartet selected four startups each from Chicago, Boston and Techstars Workplace Development.
“As always, these are just our favorites, but don’t just take our word for it. Dig into the pitches yourself, as there’s never a bad time to check out some super-early-stage startups.”
As more insurtech offerings loom, CEO Dan Preston discusses Metromile’s SPAC-led debut
Image Credits: Nigel Sussman (opens in a new window)
Neoinsurance company Metromile began trading publicly this week after it combined with a special purpose acquisition company.
Metromile will likely be one of 2021’s many SPAC-led debuts, so Alex interviewed CEO Dan Preston to learn more about the process and what he learned along the way.
A notable takeaway: “Preston said SPACs are designed for a specific class of company; namely those that want or need to share a bit more story when they go public.”
Adtech and martech VCs see big opportunities in privacy and compliance
Image Credits: alashi (opens in a new window) / Getty Images
Senior Writer Anthony Ha and Extra Crunch Managing Editor Eric Eldon surveyed three investors who back adtech and martech startups to learn more about what they’re looking for and whether deal flow has recovered at this point in the pandemic:
- Eric Franchi, partner, MathCapital
- Scott Friend, partner, Bain Capital Ventures
- Christine Tsai, CEO and founding partner, 500 Startups
Commercializing deep tech startups: A practical guide for founders and investors
Image Credits: VCG (opens in a new window) / Getty Images
I have a hard time envisioning all of the hurdles deep tech founders must overcome before they can land their first paying customer.
How do you sustainably scale a company that probably doesn’t have revenue and isn’t likely to for the foreseeable future? How big is the TAM for an unproven product in a marketplace that’s still taking shape?
Vin Lingathoti, a partner at Cambridge Innovation Capital, says entrepreneurs operating in this space face a unique set of challenges when it comes to managing growth and risk.
“Often these founders with Ph.D.s and postdocs find it hard to accept their weaknesses, especially in nontechnical areas such as marketing, sales, HR, etc.,” says Lingathoti.
How will investors value Metromile and Oscar Health?
Image Credits: Nigel Sussman (opens in a new window)
This week, auto insurance startup Metromile completed its combination with SPAC INSU Acquisition Corp. II.
Last Friday, health insurance company Oscar Health announced its plans to launch an initial public offering.
As the saying goes: Past performance is no guarantee of future results, but using 2020 debuts by neoinsurance firms Lemonade and Root as a reference point, Alex says the IPO window is wide open for other players in the space.
“All the companies in our group are pretty good at adding customers to their businesses,” he found.
Dear Sophie: How can I improve our startup’s international recruiting?
Image Credits: Bryce Durbin/TechCrunch
Dear Sophie:
We’ve been having a tough time filling vacant engineering and other positions at our company and are planning to make a more concerted effort to recruit internationally.
Do you have suggestions for attracting workers from abroad?
— Proactive in Pacifica
5 creator economy VCs see startup opportunities in monetization, discovery and much more
Image Credits: ALLVISIONN (opens in a new window) / Getty Images
The people who produce viral TikTok duets, in-demand Substack newsletters and popular YouTube channels are doing what they love. And the money is following them.
Many of these emerging stars have become media personalities with full-fledged production and distribution teams, giving rise to what one investor described as “the enterprise layer of the creator economy.”
More VCs are backing startups that help these digital creators monetize, produce, analyze and distribute content.
Natasha Mascarenhas and Alex Wilhelm interviewed five of them to learn more about the opportunities they’re tracking in 2021:
- Benjamin Grubbs, founder, Next10 Ventures
- Li Jin, founder, Atelier Ventures
- Brian O’Malley, general partner, Forerunner Ventures
- Eze Vidra, managing partner, Remagine Ventures
- Josh Constine, principal, SignalFire
Are SAFEs obscuring today’s seed volume?
Image Credits: Nigel Sussman (opens in a new window)
Simple agreements for future equity are an increasingly popular way for startups to raise funds quickly, but “they don’t generate the same paperwork exhaust,” Alex Wilhelm noted this week.
This creates cognitive dissonance: Investors see a hot market, while people who rely on public data (like journalists) get a different picture.
“SAFEs have effectively pushed a lot of public signal regarding seed deals, and even smaller rounds, underground,” says Alex.
Container security acquisitions increase as companies accelerate shift to cloud
Image Credits: Andriy Onufriyenko / Getty Images
Many enterprise companies were snapping up container security startups before the pandemic began, but the pace has picked up, reports Ron Miller.
The growing number of companies going cloud-native is creating security challenges; the containers that package microservices must be correctly configured and secured, which can get complicated quickly.
“The acquisitions we are seeing now are filling gaps in the portfolio of security capabilities offered by the larger companies,” says Yoav Leitersdorf, managing partner at YL Ventures.
Two $50M-ish ARR companies talk growth and plans for the coming quarters
Image Credits: Bryce Durbin / TechCrunch
In December 2019, Alex Wilhelm began reporting on startups that had reached the $100M ARR mark. A year later, he decided to reframe his focus.
“Mostly what we managed was to collect a bucket of companies that were about to go public,” he said.
Since then, he has recalibrated his sights. In the latest entry of a new series focusing on “$50M-ish” companies, he studies SimpleNexus, which offers digital mortgage software, and photo-editing service PicsArt.
Alex has more interviews and data dives coming on other companies in this cohort, so stay tuned.
With a higher IPO valuation, is Bumble aiming for Match.com’s revenue multiple?
Image Credits: Nigel Sussman (opens in a new window)
Dating platform Bumble initially set a price of $28 to $30 for its upcoming IPO, but at its new range of $37 to $39, Alex calculated that it could reach a max valuation of $7.4 billion to $7.8 billion.
Extrapolating revenue from its Q3 2020 numbers, he attempted to find the company’s run rate to see if it’s overpriced — and how well it stacks up against rival Match.
Oscar Health’s IPO filing will test the venture-backed insurance model
Mario Schlosser (Oscar Health) at TechCrunch Disrupt NY 2017
Jon Shieber and Alex Wilhelm co-bylined a story about Oscar Health, which filed to go public last week.
Although the health insurance company claims 529,000 members and a compound annual growth rate of 59%, “it’s a deeply unprofitable enterprise,” they found.
Jon and Alex parsed Oscar Health’s 2019 comps and its 2020 metrics to take a closer look at the company’s performance.
“Both Oscar and the high-profile SPAC for Clover Medical will prove to be a test for the venture capital industry’s faith in their ability to disrupt traditional healthcare companies,” they write.
SoftBank and the late-stage venture capital J-curve
Image Credits: Tomohiro Ohsumi (opens in a new window) / Getty Images
Managing Editor Danny Crichton filed a column about Softbank’s Vision Fund that tried to answer a question he asked in 2017: “What does a return profile look like at such a late stage of investment?”
Softbank’s recent earnings report shows that its $680 million bet on DoorDash paid off handsomely, bringing back $9 billion. Compared to its competition, “the fund is actually doing quite decent right now,” he wrote. But Softbank has invested $66 billion in 74 unexited 74 companies that are worth $65.2 billion today.
“SoftBank quietly chopped half of the performance fees for its VC managers, from $5B to $2.5B, which led us to ask: are the best investments in the fund already in SoftBank’s rearview mirror? One upshot: WeWork seems to have turned something of a corner, with some improvements in its debt profile portending more positive news post-COVID-19.”
Tony Florence isn’t as well known to the public as other top investors like Bill Gurley or Marc Andreessen, but he’s someone who founders with SaaS and especially marketplace e-commerce companies know — or should. He’s responsible for the global tech investing activities for NEA, one of the world’s biggest venture firms in terms of assets under management (it closed its newest fund with $3.6 billion last year).
Florence has also been involved with a long list of e-commerce brands to break through, including Jet, Gilt, Goop, Casper, Letgo, and Moda Operandi.
It’s because we talked earlier this week with one of his newest e-commerce bets, Maisonette, that we wanted to ask him about brand building more than a year into a pandemic that has changed the world in both fleeting and permanent ways. We wound up talking about how customer acquisition has changed; what he thinks of the growing number of companies trying to roll up third-party sellers on Amazon; and how upstarts can maintain momentum when even younger companies become a shiny new fascination for customers.
Note: one topic that he couldn’t and wouldn’t comment on is the future of one famed founder who Florence has backed twice, Marc Lore, who stepped down from Walmart last month to begin building what he recently told Vox is a multi-decade project to build “a city of the future” supported by “a reformed version of capitalism.”
Part of our chat with Florence, lightly edited for length and clarity, follows:
TC: You’ve funded a number of very different businesses that have managed to grow even as Amazon has eaten up more of the retail market. Is there any sector or vertical you wouldn’t back because of the company?
TF: You have to be thoughtful about Amazon. I wouldn’t say there’s one particular area that you either can ignore or feel like you’re completely comfortable and open to, given the scale of their platform. At the same time, there are founding principles and fundamentals that we think about as they relate to companies being able to compete and operate successfully.
TC: And these are what? You’ve backed Marc Lore, Philip Krim (of Casper), Sylvana and Luisana of Maisonette. Do they have something in common?
TF: Sometimes [founders] come at the problem organically; they’re living it [and want to solve it]. Other times, somebody like Marc sees a business opportunity and just attacks it. But there are commonalities. These are folks who are very customer centric, who are focused on good, fundamental unit economics, and who are obsessive about their people, their teams. It takes a village to build a young successful company, and all of those founders you mentioned are great at recruiting world-class people. There’s a sense of vision and mission and culture.
When you wake up and decide to do something, the majority of people you talk to just want to tell you the reasons why it can’t work, so it also takes a certain [wherewithal] to have such conviction around what you’re doing that you’re kind of all in on it, and you’re going to break through no matter what.
TC: Maisonette was going to open a brick-and-mortar store but put a pin in that plan because of COVID. Will we go back to seeing direct-to-consumer brands opening real-world locations when this is over? Has the pandemic permanently changed that calculation?
TF: Leading up to the pandemic, a lot of the young DTC companies that were direct-to-consumer brands, and even the traditional e-commerce marketplaces, were experimenting with offline. Some of it was out of necessity, frankly. Sometimes [customer acquisition costs] became so expensive that it was actually cheaper for them to go offline. In other cases, it was done because the customer wanted that closed loop experience, as with [mattress maker] Casper.
A lot of companies [opened these stores] in a contained way it worked really well. It’s very accretive financially to the overall business contribution, margin wise. It was accretive for the overall customer experience. And in many cases, it didn’t cannibalize anything. It just expanded the [total addressable market].
We’re spending a lot of time right now continuing to think through what are the permanent changes that are going to come out of the pandemic, but I would say the omnichannel model has really has started to take shape and succeed if you look at big retailers like Walmart and Target, so I think there will be an omnichannel dynamic to many of these companies that we’re talking about. Also, over the last 12 months, the cost of acquisition and the efficacy of marketing has swung back in the favor of these young companies. It’s improved to a point where we don’t really even need to think about offline.
TC: I know it had become expensive to acquire customers digitally because it was so crowded out there. Did it become less crowded?
TF: There were very few platforms that these companies could use pre pandemic that weren’t oversaturated . . . it was just very competitive, and that would bid up the cost of acquisition. In the last 12 months, you’ve seen big parts of that market go away. With airlines and financial services and a lot of the spend going way down, it’s become a lot cheaper for companies to market digitally.
TC: Still, it feels at times that it’s hard to maintain a brand’s momentum over time; there’s always some new outfit nipping at its heels. How does a brand itself fresh and relevant in 2021?
TF: There’s a hits dynamic — a fad dynamic — in the consumer space, so that’s always a challenge. You [compete by] continually reinventing and adding [to your offerings]. You see that in social categories, you see that in marketplaces [where they add] managed services and other components [like] payments, and you clearly see it in the way some of the direct-to-consumer companies continue to add new products to the mix.
You focus on the core aspects of your brand and its mission and vision and make sure that the customers really feel that. There’s a community dynamic that has really occurred the last four or five years around e-commerce companies. Glossier is a great example of a company that built a great community around a core set of product offerings, and that has really propelled that company beyond its core customer customer base.
There’s also a contextual commerce opportunity. Goop is a great example this; Gwyneth [Paltrow] brilliantly came up with [an effective way] to merge content and commerce, and that’s something a lot of companies in the commerce space have started to invest in.
TC: Content, community and not necessarily speed, so focusing on what Amazon does not. Can I ask: do you think Amazon needs to be reigned in?
TF: If you’re competing with them [in the] cloud market or a commerce market, they’re a very formidable competitor, and you got to take them very, very seriously. They’re at a scale that’s just incredibly impressive. But I do think you’re seeing a lot of innovation around the edges and companies finding areas that Amazon maybe can’t focus on or isn’t focusing on.
TC: What do you think of these Amazon Marketplace roll-ups that we’re seeing? There’s been at least a half of dozen of them that already, including Thrasio, which announced $750 million this week. All are raising money hand over first.
TF: We haven’t made an investment in the area, though we’re watching very closely. It can be a very capital intensive strategy to execute on because you’re buying brands and then bringing them onto the platform to consolidate and grow, but there’s just an enormous long tail to the e-commerce space and this is an opportunity to consolidate that.
TC: Like, an infinite opportunity? How many roll-ups can the market support?
TFL I do think that we’ll see a handful of these companies get to decent scale. The question will be whether you’ve got more of an arbitrage going on [by] buying companies and generating synergies or there’s some fundamental bigger breakthrough. If you could use AI [and] machine learning to understand how to better serve customers and think about customer acquisition a little bit better, that would be really interesting. If there are real economies of scale to the supply chains [or] baseline infrastructure, that would certainly be interesting.
It’s early on. It remains to be seen how this is gonna play out.
Pictured above, left to right: NEA’s global managing director, Scott Sandell, and Florence, who is the head of global tech investing activities at NEA and who works alongside Mohamad Makhzoumi, who oversees the firm’s healthcare practice.
Jack Dorsey and Jay Z create a bitcoin endowment, Datadog acquires a Startup Battlefield company and BuzzFeed experiments with AI-generated quizzes. This is your Daily Crunch for February 12, 2021.
Oh, and before we get started: Consider applying to the Early Stage pitch off and submitting a pitch deck for feedback on Extra Crunch Live!
The big story: Jack Dorsey and Jay Z invest in bitcoin development
The Twitter founder and rapper/entrepreneur have put 500 bitcoin (currently worth more than $23 million) into an endowment called ₿trust, which Dorsey said is being set up as a blind trust.
He also said the endowment will focus initially on bitcoin development in Africa and India — India’s government has been reluctant to embrace cryptocurrencies thus far, while Africa (especially Nigeria) has had a surge in transactions.
A job description for ₿trust’s board members says that the organization’s mission is to “make bitcoin the internet’s currency.”
The tech giants
Datadog to acquire application security management platform Sqreen — Originally founded in France, Sqreen participated in TechCrunch’s Startup Battlefield in 2016.
BuzzFeed uses AI to create romantic partners in its latest quiz — Director of Product for Quizzes Chris Johanesen said he’s hoping this will be the first in a series of “stunt-y experiments.”
Startups, funding and venture capital
Online workspace startup Notion hit by outage, citing DNS issues — Notion’s service was not loading as of around 9 a.m. ET on Friday.
Ember names former Dyson head as consumer CEO, as the startup looks beyond the smart mug — Ember is best known for its smart, heated mugs.
Advice and analysis from Extra Crunch
2 years in, Extra Crunch is helping readers build and grow companies around the world — You don’t need a membership to read about what Extra Crunch has accomplished and what’s next.
Felicis’ Aydin Senkut and Guideline’s Kevin Busque on the value of simple pitch decks — Even though Busque is a co-founder of TaskRabbit, he didn’t get the response he was hoping for the first time he pitched Senkut.
Will ride-hailing profits ever come? — A detour into Uber and Lyft’s numbers.
(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)
Everything else
Minneapolis bans its police department from using facial recognition software — Thirteen members of the city council voted in favor of the ban, with no opposition.
Use today’s tech solutions to meet the climate crisis and do it profitably — As we enter the most crucial decade of climate action, we need to ensure that clean technologies become the only acceptable norm.
Sweden’s data watchdog slaps police for unlawful use of Clearview AI — Earlier this month Canadian privacy authorities found Clearview had breached local laws.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.
Source: https://techcrunch.com/2021/02/12/daily-crunch-jack-dorsey-and-jay-z-invest-in-bitcoin-development/
