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The public markets have been so active lately that it’s hard to drum up excitement for yet another company making its way to the bull market. But, in the case of Bumble, a dating app where women message first, next week’s public debut is worth paying attention to.
The market for dating startups has long had an 11-year-old elephant in the room: Match Group. The Dallas company owns popular dating brands including Tinder, Hinge, OkCupid, and more, which some saw as the singular exit point for startups that help people meet.
Bumble, founded by Whitney Wolfe Herd, will change that narrative with its entrance into the public markets. Bumble is seeking to raise more than $1 billion upon debut. The company could be worth between $5.73 billion and $6.14 billion, looking at a diluted valuation.
Bumble’s choice to swipe past the classic route to sell to Match Group tells us that Wolfe Herd is bullish that the exit environment is strong for dating apps, as loneliness amid the pandemic continues to impact the masses.
Cleo Capital’s Sarah Kunst, a former senior adviser to Bumble, tells me that Bumble is making history in a few ways, and “may well unleash a tidal wave of new funding and startups in the space.”
“As the youngest woman to ever take a company public, Whitney has proven that dating, a category long shunned by venture investors, is a highly lucrative and fast growing sector,” Kunst said. “She also is at the vanguard of several dawning realizations in tech: companies founded outside of Silicon Valley, companies founded by women, and gender parity on boards.”
We’ll be all over this on TechCrunch and Extra Crunch next week, but in the meantime, let’s get through the other news of the week. Make sure to follow me on Twitter so I can bother you the remaining six days of the week.
Pandemic-era valuations
Valuations are simply the price that an investor thinks a startup is worth — nothing more, nothing less. When a big event happens in the world of startups, such as a massive exit or blockbuster IPO, startups within the sector-of-interest often enjoy a boom in valuations.
Here’s what to know: This week, we explored whether edtech enjoyed that same burst of energy. According to over a dozen investors, edtech isn’t seeing skyrocketing valuations. It’s a surprise to me, but venture capitalists have their theories as to why (and seemingly are energized enough by exit opportunities in the meantime).
Etc: Beyond edtech, this survey can give us key intel on how sectors that faced a pandemic lift, such as fintech and e-commerce, are valued and ranked by investors. It might suggest that the noise is louder than the actual dollars and cents.
- Why one Databricks investor thinks the company may be undervalued
digitally generated image of money tornado.
Carta tackles the startup liquidity problem
Don’t let the Demo Days fool you: Venture capital is getting bigger, faster, and older. But if you’re an angel who invested in a startup that was meant to go public in 2014, you might be getting a little bit impatient and want your capital back.
Carta is trying to create a solution to help startups trade secondary shares, pre-exit events, to bring liquidity earlier on in a startup’s life.
Here’s what to know: The tool, CartaX, finally launched this week after being teased out for months. Upon launch, Carta sold nearly $100 million of its own shares on its own cap table, at more than double its last valuation post-Series F round.
Etc: Carta is, of course, hoping that its cap-table management business will help it pull off the operation unlike others who have tried and failed. Here is some context from Danny Crichton:
That wave of liquidity startups ran into two problems: One was regulatory, and the other was a lack of company information about cap tables and that company’s current financial picture. Stock buyers were essentially flying blind while buying into companies, which some investors were more than willing to do, but that blindness limited the market demand for secondary shares significantly.
Image: JaaakWorks/iStock/Getty Images
The art of a startup narrative
It’s normal if sculpting a story out of the hot mess that is your day-to-day doesn’t feel natural. It’s like writing a story before you know exactly what you want to accomplish with each and every word. The difficulty doesn’t diminish the necessity, though.
Here’s what to know: Whether it’s pitching for a story or for millions of dollars, founders need to know how to nail their startup’s narrative. We got into the nuts in bolts in the latest edition of Extra Crunch Live, a virtual event series for early-stage founders.
We were very heads down, building these open-source projects and trying to create good software, and we just hadn’t thought a lot about the narrative. Over the years, that’s gotten a lot better, but it’s also become a lot more self-evident to us and much clearer as we write and build the business,” said Raj Dutt, Grafana’s co-founder and CEO.
Etc: Speaking of advice, here’s one warning story by Silicon Valley editor Connie Loizos about how an insurtech startup got their idea swiped (and funded) by their own venture backer. And to offset that stress, here’s one inspiring story, by yours truly, about how one woman went from user to chief executive of a startup in less than a year.
detail of a microphone with some bokeh on background
Work with really cool people, and me
Extra Crunch is now hiring for reporter, editor and project manager positions
It’s almost our second birthday, and in lieu of presents, want to send us candidates? The Extra Crunch team, which I’m a part of, is hiring for new contract positions to help us dig out what’s really going on in the world of startups.
Check out the amazing speakers joining us on Extra Crunch Live in February
Our live, virtual event series is back and better than ever with a stacked lineup and a ton of advice for early-stage startup folks.
Plus, a new gift for your inbox:
Wrapping up this week, TechCrunch has a new newsletter coming out on apps that is going to rule. Sarah Perez is writing it. You can sign up here, it’s free!
Across the week
Seen on TechCrunch
New antitrust reform bill charts one possible path for regulating big tech
The cloud infrastructure market hit $129B in 2020
A growing number of startups are creating APIs to assess and offset corporate carbon emissions
China’s national blockchain network embraces global developers
Seen on Extra Crunch
Udemy’s new president discusses the re-skilling company’s future
4 strategies for deep tech founders who are fundraising
Spotify Group Session UX teardown: The fails and their fixes
Dear Sophie: What’s the recipe for an H-1B
@EquityPod: A lake house architect, Miami VC, and homeowner walk into a wine bar
In this week’s podcast, the Equity team got their west coast correspondent back (aka me) and had a good ol’ time talking about everything from Miami to millennial homes.
Listen to the podcast to hear us chat about Drizly’s new parent, a new Nellie Levchin-backed startup, and UiPath’s big new valuation. We, of course, got into off topic conversations such as a sommelier that hates people and the lake house dynamic.
Until next week,
Source: https://techcrunch.com/2021/02/06/bumbles-first-date-with-the-public-markets/
The SPAC mania continues unabated, with new SPACs being filed with the SEC on an almost hourly basis at times.
SoftBank, the Japanese telecom conglomerate which has also been running the gigantic Vision Fund and its successor, doesn’t want to be left out. Yesterday, it filed back-to-back SPAC registration statements for two new blank-check companies.
SVF Investment Corp 2 is $200 million and SVF Investment Corp 3 is a $350 million vehicle. Both SPACs have a standard roughly 15% over-allotment option, which means that their final sizes will likely end up at $230 million and $400 million respectively assuming that the underwriters take their option (number three has a slightly smaller over-allotment if you’re checking my math).
One interesting component of both SPACs is that they have what is known as a forward purchasing agreement connected to SoftBank’s Vision Fund 2. That agreement allows the second Vision Fund to purchase shares into these SPACs when they begin their business combinations with their target startups, essentially giving it the right to buy into the mergers. The Vision Fund has a $100 million agreement with SVF 2, and a $150 million agreement with SVF 3.
As with all SPACs, a registration statement is merely a filing of an intention to raise money, although these days, the vast majority of filings are later consummated.
As the numbering indicates, SoftBank had an earlier SPAC that it filed in December and officially closed on January 7 of this year. That vehicle targeted a total fundraise of $604 million including the underwriters’ over-allotment option. It also included a $250 million forward purchase agreement with the second Vision Fund similar to these latest two vehicles.
What are these SPACs looking for? Well, according to the filings, “We intend to identify, acquire and manage a business in a technology-enabled sector where our management team have differentiated experience and insights. Relevant sectors may include, but are not limited to, mobile communications technology, artificial intelligence, robotics, cloud technologies, software broadly, computational biology and other data-driven business models, semiconductors and other hardware, transportation technologies, consumer internet and financial technology.”
That seems to cover a lot, but just in case, the filings note that “However, we may consummate a transaction with a business in a different or related industry.” So basically anything.
There is no timeline yet for when the SPACs could potentially close, but typical timing is 4-8 weeks given market averages.
Source: https://techcrunch.com/2021/02/06/softbank-files-for-a-double-scoop-of-spac/
Police in Minneapolis obtained a search warrant ordering Google to turn over sets of account data on vandals accused of sparking violence in the wake of the police killing of George Floyd last year, TechCrunch has learned.
The death of Floyd, a Black man killed by a white police officer in May 2020, prompted thousands to peacefully protest across the city. But violence soon erupted, which police say began with a masked man seen in a viral video using an umbrella to smash windows of an auto-parts store in south Minneapolis. The AutoZone store was the first among dozens of buildings across the city set on fire in the days following.
The search warrant compelled Google to provide police with the account data on anyone who was “within the geographical region” of the AutoZone store when the violence began on May 27, two days after Floyd’s death.
These so-called geofence warrants — or reverse-location warrants — are frequently directed at Google in large part because the search and advertising giant collects and stores vast databases of geolocation data on billions of account holders who have “location history” turned on. Geofence warrants allow police to cast a digital dragnet over a crime scene and ask tech companies for records on anyone who entered a geographic area at a particular time. But critics say these warrants are unconstitutional as they also gather the account information on innocent passers-by.
TechCrunch learned of the search warrant from Minneapolis resident Said Abdullahi, who received an email from Google stating that his account information was subject to the warrant, and would be given to the police.
But Abdullahi said he had no part in the violence and was only in the area to video the protests when the violence began at the AutoZone store.
The warrant said police sought “anonymized” account data from Google on any phone or device that was close to the AutoZone store and the parking lot between 5:20pm and 5:40pm (CST) on May 27, where dozens of the people in the area had gathered.
When reached, Minneapolis police spokesperson John Elder, citing an ongoing investigation, would not answer specific questions about the warrant, including for what reason the warrant was issued.
According to a police affidavit, police said the protests had been relatively peaceful until the afternoon of May 27, when a masked umbrella-wielding man began smashing the windows of the AutoZone store, located across the street from a Minneapolis police precinct where hundreds of protesters had gathered. Several videos show protesters confronting the masked man.
Police said they spent significant resources on trying to identify the so-called “Umbrella Man,” who they say was the catalyst for widespread violence across the city.
“This was the first fire that set off a string of fires and looting throughout the precinct and the rest of the city,” the affidavit read. At least two people were killed in the unrest. (Erika Christensen, a Minneapolis police investigator who filed the affidavit, was not made available for an interview.)
Police accuse the Umbrella Man of creating an “atmosphere of hostility and tension” whose sole aim was to “incite violence.” (TechCrunch is not linking to the affidavit as the police would not say if the suspect had been charged with a crime.) The affidavit also links the suspect to a white supremacist group called the Aryan Cowboys, and to an incident weeks later where a Muslim woman was harassed.
Multiple videos of the protests around the time listed on the warrant appear to line up with the window-smashing incident. Other videos of the scene at the time of the warrant show hundreds of other people in the vicinity. Police were positioned on rooftops and used tear gas and rubber bullets to control the crowds.
Law enforcement across the U.S. are increasingly relying on geofence warrants to solve crimes where a suspect is not known. Police have defended the use of these warrants because they can help identify potential suspects who entered a certain geographic region where a crime was committed. The warrants typically ask for “anonymized information,” but allow police to go back and narrow their requests on potential suspects of interest.
When allowed by law, Google notifies account holders of when law enforcement demands access to the user’s data. According to a court filing in 2019, Google said the number of geofence warrants it received went up by 1,500% between 2017 and 2018, and more than 500% between 2018 and 2019, but has yet to provide a specific number of warrants
Google reportedly received over 180 geofence warrants in a single week in 2019. When asked about more recent figures, a Google spokesperson declined to comment on the record.
Read more on TechCrunch
Civil liberties groups have criticized the use of dragnet search warrants. The American Civil Liberties Union said that geofence warrants “circumvent constitutional checks on police surveillance.” One district court in Virginia said geofence warrants violated the constitution because the majority of individuals whose data is collected will have “nothing whatsoever” to do with the crimes under investigation.
Reports in the past year have implicated people whose only connection to a crime is simply being nearby.
NBC News reported the case of one Gainesville, Fla. resident, who was told by Google that his account information would be given to police investigating a burglary. But the resident was able to prove that he had no connection to the burglary, thanks to an app on his phone that tracked his activity.
In 2019, Google gave federal agents investigating several arson attacks in Milwaukee, Wis. close to 1,500 user records in response to geofence warrant, thought to be one of the largest grabs of account data to date.
But lawmakers are beginning to push back. New York state lawmakers introduced a bill last year that would, if passed, ban geofence warrants across the state, citing the risk of police targeting protesters. Rep. Kelly Armstrong (R-ND) grilled Google chief executive Sundar Pichai at a House Judiciary subcommittee hearing last year. “People would be terrified to know that law enforcement could grab general warrants and get everyone’s information everywhere,” said Armstrong.
Abdullahi told TechCrunch that he had several videos documenting the protests on the day and that he has retained a lawyer to try to prevent Google from giving his account information to Minneapolis police.
“Police assumed everybody in that area that day is guilty,” he said. “If one person did something criminal, [the police] should not go after the whole block of people,” he said.
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Source: https://techcrunch.com/2021/02/06/minneapolis-protests-geofence-warrant/
On Friday just past midnight, I stumbled across a Clubhouse room hosted by a well-known figure in the Chinese startup community, Feng Dahui. At half-past midnight, the room still had nearly 500 listeners, many of whom were engineers, product managers, and entrepreneurs from China.
The discussion centered around whether Clubhouse, an app that lets people join pop-up voice chats in virtual rooms, will succeed in China. That’s a question I have been asking myself in recent weeks. Given the current hype swirling in Silicon Valley about the audio social network, it’s unsurprising to see well-informed, tech-savvy Chinese users start flocking to the platform. Demand for invitations in China runs high, with people paying as much as $100 to buy one from scalpers.
Many users I talked to believe the app won’t reach its full potential or even just find product-market fit in China before it gets banned. Indeed, a handful of well-attended Chinese-language rooms touch on topics that are normally censored in China, from crypto trading to protests in Hong Kong.
If it’s of any consolation, Clubhouse clones and derivatives are already in the making in China. A Chinese entrepreneur and blogger who goes by the nickname Herock told me he is aware of at least “dozens of local teams” that are working on something similar. Moreover, voice-based networking has been around in China for years, albeit in different forms. If Clubhouse is blocked, will any of its alternatives go on to succeed?
Information control
A direct Clubhouse clone probably won’t work in China.
A few factors dim its prospects in the country, which has nearly one billion internet users. The major appeal of Clubhouse is the organic flow of conversations in real time. But “how could the Chinese government allow free-flowing discussions to happen and spread without control,” a founder of a Chinese audio app rhetorically asked, declining to be named for this story. Video live streaming in China, for example, is under close regulatory oversight limiting who can speak and what they can say.
The founder then cited a famous online protest back in 2011. Thousands of small vendors launched a cyber attack on Alibaba’s online mall over a proposed fee hike. The tool they used to coordinate with one another was YY, which started out as a voice-based chatting software for gamers and later became known for video live streaming.
“The authorities dread the power of real-time audio communication,” the founder added.
There are signs that Clubhouse may already be the target of censorship. While Clubhouse works perfectly in China without the need for a virtual private network (VPN) or other censorship-circumvention tools (at least for the moment), the iOS-exclusive app is unavailable on China’s App Store. Clubhouse was removed there shortly after its global release in late September, app analytics firm Sensor Tower said.
Currently, in order to install Clubhouse, Chinese users need to install the app by switching to an App Store located in another country, which further limits the product’s reach to users who have the means of using a non-local store.
It’s unclear whether Apple preemptively delisted Clubhouse in anticipation of government action, given that any later removal of a major foreign app in China could stir up accusations of censorship. Alternatively, Clubhouse might have voluntarily pulled the app itself knowing that any form of real-time broadcasting won’t go unchecked by Chinese regulators, which would inevitably compromise user experience.
Entering China could be way down on Clubhouse’s to-do list given the traction it is gaining elsewhere. The app has seen about 3.6 million worldwide installs so far, according to Sensor Tower estimates. The majority of its lifetime installs originate in the United States, where the app has seen nearly 2 million first-time downloads, followed by Japan and Germany both with over 400,000 downloads.
Clubhouse elites
Clubhouse room hosted by Feng Dahui, a respected figure in China’s startup world. (Screenshot by TechCrunch)
The improbability of uncensored and open discussions on the Chinese internet may explain why the market hasn’t seen its own Clubhouse. But even if an app like Clubhouse is allowed to exist in China, it may not reach the same massive scale across the country as Douyin (TikTok’s Chinese version) and WeChat did.
The app is “elitist,” sort of like a voice version of Twitter, said Marco Lai, CEO and founder of Lizhi, a NASDAQ-listed Chinese audio platform. So far, Clubhouse’s invite-only model has confined its American user base largely to the tech, arts and celebrity circles. Herock observed that its Chinese demographics mirror the trend, with users concentrated in fields like finance, startup and product management, as well as crypto traders.
Even among these users though, there is the question of free time. The other night, I was up at midnight eavesdropping on a group of ByteDance employees. In fact, I’ve mostly been on Clubhouse in the late evenings after work, because that’s when user activity in China appears to peak. “Who in China has that much time?” said Zhou Lingyu, founder of Rainmaker, a Chinese networking community for professionals, when I asked whether she thinks Clubhouse will attract the masses in China.
While her remark may not apply to everyone, the tech-centric, educated crowds in China — the demographic that Clubhouse appears to be targeting or at least attracting — are also those most likely to work the notorious “996” schedule, the long hours practice common in Chinese tech companies. The type of “meaningful conversations” that Clubhouse encourages is desirable, but the app’s real-time, spontaneous nature is also a lot to ask of 996 workers, who likely prefer more efficient and manageable use of time.
Moderators may also need material incentives to remain active aside from the pure passion in connecting with other human beings. One potential solution is to turn quality conversations into podcast episodes. “Clubhouse is for one-off, casual conversations. Those who produce high-quality content would want to record the conversation so it could be for repeatable consumption later on,” said Zhou.
Chinese counterparts
In China, audio networking has played out in slightly different shapes. Some companies place a great deal of focus on gamification, filling their apps with playful, interactive features.
Lizhi’s social podcast app, for example, is not just about listening. It also lets listeners message hosts, tip them through virtual gifts, record themselves shadowing a host who is reading a poem, compete in online karaoke contests, and more.
Interaction between hosts and listeners happens in a relatively orchestrated way, as Lizhi’s operational staff design campaigns and work with content creators behind the scenes to ensure content quality and user engagement. Clubhouse growth, in comparison, is more organic.
“The Chinese products focus more on spectatorship and performance, not so much translating natural social behavior in real life into a product. Clubhouse features are simple. It’s more like a coffee shop,” Lai said.
Lizhi’s other voice product Tiya is considered a close answer to Clubhouse, but Tiya’s users are young — the majority of whom are 15-22 years old — and it focuses on entertainment, letting users chat via audio while they play games and watch sports. That also feeds the need for companionship.
Dizhua, which launched in 2019, is another Chinese app that’s been compared to Clubhouse. Unlike Clubhouse, which relies on people’s existing networks for room discovery, Dizhua matches anonymous users based on their declared interests. Clubhouse conversations can start and die off casually. Dizhua encourages users to pick a theme and stay engaged.
“Clubhouse is a pure audio app, with no timeline, no comment, et cetera,” said Armin Li, an expert in residence with a venture capital firm in China. “It’s a kind of casual and drop-in style for the scenarios where user needs are not clear like hangout or multitasking … Its high community participation, content quality, and user quality are unseen in Chinese voice products.”
The bottom line is: The conversations that happen on Chinese platforms are monitored by content auditors. User registration requires real-name verification on internet platforms in China, so there’s no real anonymity online. The topics that users can discuss are limited, often leaning towards the fun and innocuous.
Why do people in China join Clubhouse anyway? Some, like me, joined out of FOMO. Entrepreneurs are always scouring for the next market opportunity, and product managers from internet giants hope to learn a thing or two from Clubhouse that they could apply to their own products. Bitcoin traders and activists, on the other hand, see Clubhouse as a haven outside the purview of Chinese regulators.
Technical support
One thing I find impressive about Clubhouse is how smoothly it works in China. Even when a foreign app isn’t banned in China, it often loads slowly due to its servers’ distance from China.
Clubhouse doesn’t actually build the technology supporting its enormous chat groups that sometimes reach thousands of participants. Instead, it uses a real-time audio SDK from Agora, two sources told me. The South China Morning Post also reported that. When asked to verify the partnership, Agora CEO Tony Zhao said via email he can’t confirm or deny any engagement between his company and Clubhouse.
Rather, he emphasized Agora’s “virtual network,” which overlays on top of the public internet running on more than 200 co-located data centers worldwide. The company then uses algorithms to plan traffic and optimize routing.
Noticeably, Agora’s operations teams are mainly in China and the U.S., a setup that inevitably raises questions about whether Clubhouse data are within the scope of Chinese regulations.
With real-time voice technology providers like Agora, opportunists are able to build Clubhouse clones quickly at low costs, Herock said. Chinese entrepreneurs are unlikely to copy Clubhouse directly due to local regulatory challenges and different user behavior, but they will race to crank out their own interpretations of voice networking before the hype around Clubhouse fades away.
Source: https://techcrunch.com/2021/02/06/will-the-clubhouse-model-work-in-china/
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