Capchase raises $4.6M to deliver fast cash to SaaS companies

As a business model, SaaS has expanded to epic size. A number of major SaaS companies filed to go public last week, and there are now thousands of SaaS startups growing all around the world. That scale makes it easier for banks and financial institutions to offer tailored solutions to this market around everything from equity to debt.

We’ve talked a bit about SaaS securitization the last few weeks, a crop of new financial products that use the metrics of a SaaS company to underwrite its debt (e.g. better churn = more debt available and at better terms) as opposed to traditional benchmarks like total revenue and company age. We also did a deep dive with Kentik CEO Avi Freedman on how he approached his recent venture debt fundraise and the terms he got across his five term sheets.

SaaS securitization will disrupt VC’s biggest returns this coming decade

Every SaaS company these days is considering its financial options and the tradeoffs between equity and debt. But sometimes, they just need cash, and cash as quickly as possible. Startups sign contracts with customers that might be paid over a year or more, but they want to access that cash now, and at the best terms possible. The product that solves this problem is known as an accounts receivable line, and you can go to many banks to get them, with all the drudgery of that process.

Or, four founders hope, you’ll head to Capchase.

Capchase is an online platform for rapidly getting cash from your accounts receivable. Startups upload key details of their customer contracts and financial history to Capchase, and the company uses its underwriting algorithms to quickly assess the quality of those contracts and extend a debt line. The startup calls itself part of the “non-dilutive revolution,” and it’s headquartered in Boston.

“We’re targeting B2B SaaS or ‘X-as-a-service’ companies with recurring revenue, and we’re targeting companies around the seed to Series B/C stage having more than $1 million of ARR and at least eight months of revenue generating history,” Miguel Fernández, CEO and co-founder, said.

He linked up with three other founders earlier this year to launch Capchase: Luis Basagoiti, Ignacio Moreno, and Przemek Gotfryd. Fernández and Gotfryd met while at Harvard Business School where Fernández was thinking about “working capital and cash conversion cycle optimization” after his previous experiences at SaaS companies. Gotfryd had previously worked at growth investor TCV in London, where he acutely saw the challenges of raising non-dilutive cash.

Capchase’s team. Photo via Capchase.

Despite its early operational history, the company has already raised its own cash quickly. It closed on $4.6 million in VC seed funding led by Caffeinated Capital, Bling Capital, and SciFi VC, along with a number of angels.

To get cash early today, startups often resort to negotiating terms with their customers, offering discounts — sometimes massive discounts — for them to pay an entire contract’s value upfront. Fernández saw an opportunity to arbitrage the difference between interest rates and those discounts with Capchase.

From a user’s perspective, after syncing their startup’s financial data to Capchase, they will see a projection of what their runway extension will look like after selecting a debt line, and then Capchase will extend its terms after going through an underwriting process (“which takes a couple hours now, and is very rapidly decreasing to take minutes” Fernández said). In terms of traction, he said that “we’re working with around 3-4 customers right now.”

Startups are charged a discount on their total contract value, which is where Capchase makes its money. For instance, if $100,000 is going to be paid by a customer over the next twelve months, Capchase may offer $95,000 to the startup upfront, and keep the remaining $5,000 as those payments roll in. That discount fluctuates based on the startup in question and the payment risk of the underlying customer contracts.

Fernández said that venture debt is often cheaper on a pure interest rate basis, but that once additional elements of those products are added in such as warrants, the simplicity of Capchase’s product will prove competitive for founders.

Simpler, easier, and fully digital financial products are always welcome, and Capchase hopes that it will nestle itself in a suite of new financial products for SaaS founders looking to avoid dilution and extend their cash longer.

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Semalytix picks up €4.3M to build the world’s largest patient experience data set

Semalytix, a Bielefeld, Germany-based startup that offers pharmaceutical companies an AI-powered data tool to better understand real-world patient experiences, has raised €4.3 million in Series A funding.

Leading the round is venture capital firm btov Partners, with participation from existing investor Fly Ventures and several unnamed angels. Semalytix will use the injection of cash to expand its business development with pharma companies and the wider healthcare market.

Founded in 2015 as a spin-out of research group Semantic Computing, Semalytix pitches itself as a data and AI analytics startup that wants to bring more real-world evidence to the development of new drugs and treatments. Its flagship product, dubbed “Pharos,” is a patient research tool that pulls in and cleans up various unstructured public data — such as blogs, forums, social media etc. — and then applies algorithms to deliver real-time patient insights into unmet needs, treatment experience and how severely a disease impacts the lives of those who suffer from it.

“Our vision is that we help make patient insights a real Northstar KPI in drug development,” Semalytix co-founder and CEO Janik Jaskolski tells me. “Due to new regulatory initiatives (and public pressure), pharma needs to demonstrate patient-centricity in drug development, [and] include the patient perspective into decision making and produce evidence that their treatments provide value in the real world. For patients, that value usually doesn’t consist of, for example, having their blood sugar lowered by an additional 3%. Instead, they care about improving their quality of life, being able to play longer with their kids or simply having an easier time going about their everyday tasks.”

However, Jaskolski argues that such patient insights and related evidence is difficult to obtain. “If asked, a patient will often tell a different story about how a disease impacts their life and what they need to improve it, compared to what a doctor would say. Which is why we don’t analyse physician or hospital data. Instead, we are looking at already existing public data that patients share online, in their own authentic voice, all around the world.”

Semalytix’s AI claims to be able to identify, read through and summarise millions of online patient journeys in a highly scalable way. The AI is also able to turn this data into online target populations for different diseases, and covers 11 different languages. “It does so by applying WHO, FDA and EMA inspired algorithmic research instruments to make the analysis transparent and scientifically meaningful for pharma,” adds Jaskolski.

Image Credits: Semalytix

Meanwhile, although electronic health records, patient registries and similar data sources are already receiving much attention from startups, Jaskolski argues that the largest source of unstructured patient data that exists today is being overlooked and yet holds a lot of potential to “improve patient care, identify new therapeutic opportunities, inform clinical trial development and even help accelerate development of novel therapies for rare conditions.”

Semalytix’s business model is a tried and tested one. The startup sells enterprise licenses for access to its platform. A company can buy a license for 12 months or more for specific diseases. “Each license enables disease-specific sub-group analyses, assess populations and create cohorts based on the severity of different disease burdens, treatment experiences, and quality of life,” adds the Semalytix CEO.

“Over time, we want to include more and more diseases into the platform and provide a unique patient data stream to pharma but also to the payer and regulator side of healthcare.”

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Chan Zuckerberg Initiative backs Indian education startup Eruditus in $113 million fundraise

Mumbai-based Eruditus, which works with top universities globally to offer more than 100 executive-level courses to students in over 80 nations, said on Monday it has raised $113 million in a new financing round as it looks to further scale its business to reach more learners.

The Series D financing round for the 10-year-old startup was co-led by Leeds Illuminate and Prosus Ventures. Chan Zuckerberg Initiative and existing investors Sequoia India and Ved Capital also participated in the round, which brings Eruditus’ to-date raise to more than $160 million. Eruditus is now valued at over $700 million, a person familiar with the matter said. Avendus Capital was the financial advisor to Eruditus on this transaction.

Eruditus maintains a tie-up with over 30 top-tier universities, including MIT, Harvard, Columbia, Cambridge, INSEAD, Wharton, UC Berkeley, IIT, IIM and NUS. The universities and Eruditus work to develop courses that are aimed at offering higher education to students. These courses cost anything between $5,000 to $40,000.

There’s no shortage of startups that offer similar courses to students for free or at the price of a cup of coffee. At a conference last year, Ashwin Damera, Eruditus co-founder and chief executive of Eruditus, said his startup provides a range of additional offerings, including tailored learning, and tracks the outcome of the course in a student’s life.

The startup, which has offices in six countries and employs more than 650 people, said it has enrolled 50,000 students in the past 12 months.

Eruditus is the second startup that Chan Zuckerberg Initiative has backed in India. Its first investment in the country, Byju’s, also operates in the edtech market. (In fact, it’s grown to become the most valued edtech startup in the world.)

“Eruditus serves as a critical innovation partner for top universities as they expand online course offerings in response to workforce needs and market demand,” said Vivian Wu, managing partner, Ventures, Chan Zuckerberg Initiative, in a statement. “We’re excited to support the growing partnerships between U.S. universities and those in India, China and Latin America that are making truly high-quality education accessible to a broad and diverse range of students.”

Eruditus said it will use the fresh capital to partner with more universities and expand in emerging markets. It said it also wants to invest in developing career-ready courses to help the workforce acquire the skills they need to survive in the post-pandemic world.

“Eruditus’ goals are a great match for ours — democratizing access of quality resources for a much broader audience. The value of the teachings of the great institutions has been rationed to those who can physically and monetarily access their facilities. Eruditus unlocks those assets and enables those institutions to help a whole new cohort of learners around the globe,” said Ashutosh Sharma, head of Investments for India at Prosus Ventures, which has invested in six edtech startups, including Byju’s.

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5 days left to save on early bird passes to TC Sessions: Mobility 2020

TC Sessions: Mobility 2020 kicks off in 37 days, but the countdown clock on early-bird pricing runs out in just five. Engage with the mobility community’s brightest minds, makers, visionaries and investors from around the globe on October 6-7. Buy your early-bird pass before the bird expires September 4 at 11:59 p.m. (PDT), and you’ll save $100 over full price.

Why attend TC Sessions: Mobility 2020? It offers beaucoup benefits, but let’s start here. Whether you’re launching a mobility startup or you’re an established player, you’ll gain valuable insight to help position and grow your business.

“I learned a lot from the breakout sessions. An official from the Los Angeles DOT spoke about the city’s plan to build pathways for micro mobility vehicles. Access to experts sharing that kind of information is essential for anyone launching a micro mobility startup. — Parug Demircioglu, CEO at Invemo and partner at Nito Bikes.”

“As a mobility company, we need to stay on the cutting edge of what’s happening in the space and know what others are doing. TC Sessions: Mobility helps us tap into the latest trends, like which cities are open to new services, which ones are having a harder time and what’s going on with MDS — probably the hottest topic at this point.” — Melika Jahangiri, vice president at Wunder Mobility.

Now that you’ve heard directly from your peers, let’s talk about what’s on the mobility menu. A kickass agenda for starters. Let’s take a peek.

• Setting the Record Straight — Argo AI has gone from unknown startup to a company providing autonomous vehicle technology to Ford and VW — not to mention billions in investment from the two global automakers. Co-founder and CEO Bryan Salesky will talk about the company’s journey, what’s next and what it really takes to commercialize autonomous vehicle technology.
• The Future of Trucking — TuSimple co-founder and CTO Xiaodi Hou and Boris Sofman, former Anki Robotics founder and CEO who now leads Waymo’s trucking unit, will discuss the business and the technical challenges of autonomous trucking.

You’ll hear interviews with top founders, technologists and investors. You’ll also hear from big players, like Lyft and Uber, and household giants like Porsche and Audi who can see the mobile writing on the wall. But we also have plenty of room for newbies and upstarts. In fact, we’ve added a pitch-off to this year’s lineup. We’ll announce more details on how early-stage mobility startup founders can apply to compete, so stay tuned.

Don’t miss out on the mobility event of the year — or miss out on serious savings. You have just five days left to beat the clock and save $100. Buy your pass to TC Sessions: Mobility 2020 before September 4 at 11:59 p.m. (PDT). Don’t let the early bird flip you the worm.

Is your company interested in sponsoring or exhibiting at TC Sessions: Mobility 2020? Contact our sponsorship sales team by filling out this form.

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Frugal startups should pay attention to how JFrog’s IPO prices

In last week’s IPO wave, one company fell a bit by the wayside amongst filings from better-known companies like Asana and Palantir. JFrog, a company that TechCrunch reported helps allows developers and companies deliver application updates “in the background without disturbing the user experience” when it raised $165 million in 2018, is positioned for an exciting debut.

Why? The unicorn — the same 2018 round valued JFrog at around $1.2 billion according to PitchBook data — has a unique blend of growth, margins and profitability that should make its pricing cycle incredibly interesting.

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JFrog will give us an insight into how Wall Street will value a fast-growing, managed software company that also doesn’t lose money. It’s not something we see often, and other market hopefuls like the aforementioned Asana and Palantir are far from similar levels of profitability.

Let’s take a quick look at what JFrog would be worth if it were a more normal — read: less profitable — SaaS company, and then ask what it might be worth as a cash-generating, recently profitable concern. The numbers are pretty surprising.

JFrog

If you want more on the basics of JFrog’s business and why developers and companies care about the company, head here. We’re only doing numbers today.

Back to the basics as a refresher from early last week, here’s what you need to know about JFrog’s business:

• Revenue grew from $63.5 million in 2018 to $104.7 million in 2019 and from $46.1 million to $69.2 million from the first half of 2019 to the first half of 2020. Those gains of 65% and 60.1%, respectively, put JFrog on a comfortable growth pace for a company doing nine-figure revenues.
• JFrog has lost less money as it has grown. From $1.00 per share in 2018 to $0.20 per share in 2019, and from $0.08 per-share in the first half of 2019 to just $0.02 per share in the first half of 2020.
• JFrog’s gross margins have been 81% or better in every mutliquarter period we have record of.
• JFrog’s operating cash flow has improved over time as well, rising from +$8.6 million in 2018 to $10 million in 2019, and from +$0.415 million in the first half of 2019 to +$5.9 million in the first half of 2020.
• And, after some quarters of extremely limited losses, JFrog posted its first known (since Q1 2018) GAAP profitable quarter in Q2 2020, generating $1.7 million in net income off of revenues of $36.4 million in the same period.

Now ask yourself, what is that company worth?

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The New Paper offers a ‘fact-first’ news digest in text message form

Tired of signing up for email newsletters? Then maybe it’s time to try out The New Paper‘s news digest, which arrives in the form of a daily text message rounding up the biggest headlines.

The Indianapolis-based startup is announcing that it’s leaving private beta testing. It raised $300,000 in pre-seed funding last year, including $80,000 from a pitch competition held by Elevate Ventures (the VC fund based by Indiana State).

Founders Michael Aft and John Necef told me that they started The New Paper with the intention of creating  email newsletters at first (something Necef has experience with, having served as head of growth at The Hustle), but they decided that text messages offered the best way to, in Aft’s words, “do daily news right.”

“Think about the volume of email you get everyday,” he continued. “It’s this stressful, noisy, environment where you get spam and e-commerce messages. Text is easy, it’s clean, it’s extremely convenient, it’s intimate.”

In fact, Necef said that “a common anecdote” they’ve heard from early subscribers is the fact that they sign up for email newsletters “with the best of intentions” but then those newsletters end up sitting unread in their inboxes. (Think of it as the digital equivalent of those piles of unread New Yorkers.)

Of course, the fact that text messaging is such a personal channel also means that readers aren’t likely to stick around unless they’re actually getting what they want. But Aft said he embraces the challenge of meeting that higher bar: “You’re never going to forget that you subscribed.”

Image Credits: The New Paper

In fact, The New Paper needs to provide value not just because it’s delivered via text message, but because it’s a paid product — after a weeklong free trial, it costs $5 per month. And more than 7,000 paying subscribers have already signed up.

Currently, the digest consists of six headlines, all linking to reporting from other publications, plus a link to The Daily Dash, which provides a high-level snapshot of stock market performance, the current state of the coronavirus pandemic and more.

Both Aft and Necef emphasized that The New Paper’s approach is “fact first.” Of course, there are plenty of news organizations that tout their objectivity and devotion to accuracy, but the pair seemed particularly determined to present their readers with a “common set of facts” about a story that everyone can agree on, regardless of their political leanings.

To illustrate the company’s approach, Aft pointed to the recent report on Russian election interference by the Senate Intelligence Committee. Rather than trying to make any “second order conclusions” about the report — conclusions that could be influenced by a writer or editor’s political beliefs — he said The New Paper focused on what was factually indisputable, namely that the committee had released its report.

As soon as he said that, I imagined editors past and present tearing their hair out — not because they’re liberals determined to make the Trump Administration look bad, but because the report’s findings (that Russian intelligence worked to interfere with the election, and that members of the Trump campaign were happy to accept the help) is the real news, rather than the simple fact of the report’s release.

Image Credits: The New Paper

In other words, emphasizing objectivity and facts sounds good, but it also risks leaving out crucial context or analysis. Plus, it’s become increasingly clear that facts rarely change people’s minds.

Still, despite my quibbles with the approach, I’m happy to report that I’ve been receiving the digest for the past week, and I’ve found it to be a convenient, comprehensive catch-up on the day’s news, with links that make it easy to learn more.

For now, Aft and Necef are writing the digest themselves, though they said much of the ranking and sorting is done by algorithms. Over time, they’re hoping to hire on both the technology side and the editorial side. They also plan to expand into other channels like email and voice.

Asked whether the subscription business model means that they don’t have to pursue a mass audience, Aft replied, “We think it’s so critically important to give people a common set of information. To make this a viable business model, do we need to be 100 million strong? Of course not. Is that the goal we’re targeting? Absolutely, because we are so passionate about the problem.”

TheSkimm closes its $12M Series C with big names Shonda Rhimes and Tyra Banks on board

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Equity Monday: What if no one gets to buy TikTok?

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.

This is Equity Monday, our weekly kickoff that tracks the latest big news, chats about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here, and myself here, and don’t forget to check out last Friday’s episode.

This weekend was a welcome reprieve from last week’s insane news cycle inside the world of technology and money. If you are still catching your breath from the Great IPO Wave of last Monday, we feel you. Here’s what we got into this morning:

• The TikTok sale could be in trouble, this time due to China changing its rules on sales of tech firms that have certain algorithms. TikTok parent company Bytedance intends to comply with the rules, but what impact the news could have the sale of the social service is unclear as of yet, though the developments are not good if you were in favor of a deal.
• American tech shares are set to rise once again after setting records last week.
• Equity is back on YouTube, hell yeah!
• From the weekend: Medium’s growth in both traffic (pageviews) and income (paying subscribers) is super impressive according to its latest reporting. And the publishing platform and media company is doubling-down on product to fend off upstarts like the popular Substack. Per a Bloomberg report, tech IPO fundraising could set a record in 2020. And, to ground us in a macro-economic sense, Chinese banks are being forced to take a profit hit to support other companies.
• In the funding round domain, Semalytix raised €4.3 million in Series A funding according to TechCrunch for its pharmaceutical-AI service. And India-based Eruditus raised $113 million for its executive-focused education service. That’s a lot of money, but like we’ve been saying, edtech is hot.
• And, finally, will there be enough horns for all these hot SaaS rounds that are getting done in a blur today? What if SaaS revenue multiples slip by 20%? Then what? When deals go so fast that due diligence suffers, the hangover can last a bit.

And that is the week’s Monday ep, thanks for sticking with through our super-busy week last week. Whew!

Equity drops every Monday at 7:00 a.m. PT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

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YC startup SockSoho is using data science in a bid to become the “Uniqlo of India”

SockSoho co-founder Pritika Mehta with some of the company’s socks

SockSoho is a direct-to-consumer brand that aspires to become the “Uniqlo of India.” The company launched sales ten months ago, starting with men’s socks, and recently completed Y Combinator’s Summer 2020 program. Founded by Pritika Mehta, a data scientist who has worked at companies including TripAdvisor, and growth marketer Simarpreet Singh, SockSoho now has more than 30,000 customers, and plans to launch into new menswear verticals soon.

Before launching SockSoho, Mehta and Singh worked together on MindBatteries, a technology and content IP provider whose corporate clients have included The Times of India, The Economic Times, Mercedes, Infosys, the World Economic Forum and Uber.

The two are relying on several factors for SockSoho’s growth: India’s position as one of the largest and fastest-growing e-commerce companies in the world and the company’s in-house technology, which will include proprietary chatbots and AI-based recommendation engines as it scales.

SockSoho launched with a multi-platform distribution strategy, selling on its on site as well as ecommerce platforms. But its main driver is WhatsApp, the most popular messaging app in India with over 400 million users. About 70% of the SockSoho’s sales happen through WhatsApp, and it also uses the messenger for marketing and A/B product testing.

Eric Migicovsky, the Y Combinator partner who invested in SockSoho, told TechCrunch in an email that SockSoho “looks like a fashion brand on the surface but at the backend they operate like a tech company. They’re A/B testing every aspect of the product and ecommerce path, not something every fashion brand does.”

“I think they’re winning strategy here is WhatsApp,” he added. “They have figured out how to acquire and service customers exclusively through the platform.”

One of SockSoho’s gift boxes

Before starting SockSoho, Mehta earned a Master’s in computer science from the University of Buffalo, focusing on artificial intelligence. Then she spent several years in the United States, working at tech companies including TripAdvisor. But she continued keeping an eye on her home country.

“When I saw the growth happening in the Indian market, it looked phenomenal because the population is huge and data was becoming really cheap. There was a huge increase in people shopping online,” she told TechCrunch. “That is when I thought, what the hell am I doing in the U.S. when all the action is happening in India?”

Most online fashion brands in India focus on women, so Mehta and Singh decided to go into menswear. They say there are about 200 million men living in cities in India, representing a potential $8 billion market. Before doing consumer research, the two wrote down a list of 80 items they could launch with. Socks won because they are easy to fit and ship, and have high margins and low rates of return.

Before launching new socks, SockSoho does its version of A/B testing through WhatsApp by sending design ideas to customers and gauging their interest in pre-orders before placing manufacturing orders.

Data analytics is key to reducing the cost of marketing and customer acquisition, a challenge for many direct-to-consumer companies.

“We are basically gathering data points to understand customer behavior and spending patterns, and those insights help us refine every single thing that we are building, from our designs to marketing and inventory planning, and even expanding into future verticals,” said Mehta.

Analyzing data has already revealed a couple surprises. For example, SockSoho expected almost all of its customers to be men, but about 30% of total purchases are made by women buying gifts. SockSoho’s founders also assumed that most of its buyers would live in major cities like Delhi, Mumbai and Bangalore, but its data revealed that smaller cities were major growth drivers. “All these insights came purely from data,” said Singh.

Over the last six months, 58% of SockSoho’s customers have made repeat purchases, and sales grew during India’s COVID-19 lockdown, which started in March.

“COVID has accelerated the shift of people to online shopping,” said Singh. “Like my dad, he never shopped online, but during COVID he’s even buying his toothpaste online. It’s a tectonic shift.”

But many traditional retail brands haven’t nailed the online shopping experience yet, Mehta added.

“With ecommerce, it’s not just about selling the product,” she said.

To keep customers engaged, SockSoho relies on WhatsApp to share new products and customer photos. But that level of personal engagement will become more challenging as the brand grows.

This is where the proprietary technology SockSoho is developing comes into play. This includes AI-based chatbots that can handle simple queries, like exchanges. For example, a customer who receives the wrong item will be able to upload a photo and get a replacement shipped to them. More complicated issues will be be flagged for human customer representatives.

“We are building this proprietary software inside the company, which can actually replicate the human experience. We are collecting all the data, all the interactions that are happening currently with customers to understand the language, the data and the kind of experience they like,” said Mehta.

SockSoho is also developing its own AI-based recommendation engine, that will show customers products they are likely to be interested in based on their browsing and shopping habits. The startup isn’t revealing yet what verticals it will expand into next, but it is already doing A/B testing for its next product lines.

“Once we have built our tech stack, our whole supply chain and nailed down the socks, it will be very easy for us to go into any other vertical and eventually become the Uniqlo of India,” said Singh.

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10 Berlin-based VCs discuss how COVID-19 has changed the landscape

A breeding ground for European entrepreneurs, Berlin has a knack for producing a lot of new startups: the city attracts top international, diverse talent, and it is packed with investors, events and accelerators. Also important: it’s a more affordable place to live and work when compared to many other cities in the region.

Berlin ranked 10th place in the 2019 Global Ecosystem Report, trailing behind only two other European cities: London and Paris. It’s home to unicorns such as N26, Zalando, HelloFresh and pioneers of the scene such as SoundCloud.

Top VCs include Earlybird, Point Nine, Project A, Rocket Internet, Holtzbrinck Ventures and accelerators such as Axel Springer Plug and Play Accelerator, hub:raum and The Family.

To get a sense of how the novel coronavirus has changed the landscape, we asked ten investors to give us an insight into their thinking during these pivotal times:

• Jeannette zu Fürstenberg, founding partner, La Famiglia
• Jorge Fonturbel, associate, Target Global
• Luis Shemtov, founding partner, Lunar Ventures
• Mike Lobanov, founding partner, Target Global
• Ludwig Ensthaler, founding partner, 468 Capital
• Mathias Ockenfels, partner, Speedinvest
• Axel Bard Bringéus, partner, EQT Ventures
• Eckhardt Weber, managing partner, Heal Capital
• Joerg Rheinboldt, managing partner, APX Axel Springer Porsche GmbH & Co. KG
• Christian O. Edler, partner, Christianedler.com

Jeannette zu Fürstenberg, La Famiglia

What trends are you most excited about investing in, generally?
Generally, we believe in a future in which we can leverage technology to free up humans from repetitive and tedious work and to empower them to shift their focus to what they consider more meaningful and impactful: that is creative and interpersonal activities. Thus, we are excited about founders working towards that future and finding answers across multiple industries, such as manufacturing or logistics, across all working-classes, and across different eras – before, during and after COVID.

What’s your latest, most exciting investment?
One of the recent additions of our new fund is Luminovo, a Munich-based company that develops a solution in the electronics industry to reduce the time and resources needed to go from an idea to a market-ready circuit board.

Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now?
So far, we have only scratched the surface of the kind of efficiency gains that can potentially be achieved – particularly in industries that were considered to be boring and sluggish in the past, such as insurance or logistics. Even small improvements driven by technology can have a massive direct impact on P&L.

What are you looking for in your next investment, in general?
In general, we love to back visionary founders in the seed-stage that tap into giant industries with a high potential for digitization across Europe and the US.

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?
COVID has sprung a myriad of companies in the communication and collaboration space into existence. While we believe in a future in which products and processes will be inherently remote-first, we will see a consolidation of that space that only allows for an oligopolistic market structure similar to how there is only one Zoom and Google Meet in the video communication space today.

How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less?
We have always considered ourselves as one of the few funds in Germany with a significant investment footprint both in Europe and the US. COVID has emphasized that we are able to invest entirely remotely and hence we will continue and even increase our activities across multiple hubs, such as Munich, Paris, or London.

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?
Germany’s economy relies on wealthy traditional companies sitting on top of capital to be unlocked which new entrants can make use of. This has been true before 2020, and COVID will only demand more and accelerated innovation across these traditional industries ranging from automotive, manufacturing, to the chemical industry.

How should investors in other cities think about the overall investment climate and opportunities in your city?
Berlin and other German cities have consistently proven to develop and grow new leaders across multiple categories such as banking (N26), mobility (Flixbus and Lilium), or data analytics (Celonis). This is certainly driven by a mix of talents coming out of world-class educational institutions, the relative low cost of living in tech hubs, and large local incumbents with massive capital to invest and spend.

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?
While COVID has accelerated remote-first products and processes, we still believe that people will flock back to startup hubs such as Berlin or Munich, especially given the relatively low cost of living compared to other tech hubs like San Francisco. Nevertheless, we will continue to see an increasing number of companies scattered across multiple time zones building products that are inherently remote first, regardless where the general work environment will shift into.

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 are lucky in that our investment focus has been on sector verticals such as Logistics, Supply chain, manufacturing or the future of work, which have all captured significant tailwind from 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?
While our investment strategy on a high level will not change, we are putting longer sales cycles into consideration as potential customers of our portfolio companies now are focusing on capital efficiency which also holds true for our founders. Thus, we advise them to focus on extending the runway both by increasing capital efficiency as well as taking on additional funding.

Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic?
As our economy is still in the midst of dealing with the effects of COVID, it is too early to tell, but we definitely see positive indications driven by efforts of portfolio companies that could adapt quickly and shipped features catered to the current needs. One example is Personio, which extended their HR offerings with features that solve the need of customers who shifted to short-time work.

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.
What gave me hope was the cohesion of the German economy that fought together for solutions and support during these difficult times. One positive example was the German Startup Association that helped achieve additional governmental financial aid for German SMEs.

Any other thoughts you want to share with TechCrunch readers?
Similar to how the past financial crisis allowed companies such as Stripe or Shopify to become ubiquitous parts of our daily life, these unprecedented times now will also give birth to new forms and shapes in which new ideas will grow into large businesses and we are excited to partner up with founders willing to take a bet on that future.

14 VCs discuss COVID-19 and London’s future as a tech hub

Jorge Fonturbel, Target Global

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The week’s biggest IPO news had nothing to do with Monday’s S-1 deluge

Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. (You can sign up for the newsletter here!)

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

The week’s biggest IPO news had nothing to do with Monday’s S-1 deluge

During Monday’s IPO wave I was surprised to see Asana join the mix. 

After news had broken in June that the company had raised hundreds of millions in convertible debt, I hadn’t guessed that the productivity unicorn wouldn’t give us an S-1 in the very next quarter. I was contentedly wrong. But the reason why Asana’s IPO is notable isn’t really much to do with the company itself, though do take the time to dig into its results and history. 

What matters about Asana’s debut is that it appears set to test out a model that, until very recently, could have become the new, preferred way of going public amongst tech companies. 

Here’s what I mean: Instead of filing to go public, and raising money in a traditional IPO, or simply listing directly, Asana executed two, large, convertible debt offerings pre-debut, thus allowing it to direct list with lots of cash without having raised endless equity capital while private.

The method looked like a super-cool way to get around the IPO pricing issue that we’ve seen, and also provide a ramp to direct listing for companies that didn’t get showered with billions while private. (That Asana co-founder Dustin Moskovitz’s trust led the debt deal is simply icing on this particular Pop-Tart).

This brief column was going to be all about how we may see unicorns follow the Asana route in time, provided that its debt-powered direct listing goes well. But then the NYSE got permission from the SEC to allow companies to raise capital when they direct-list.

In short, some companies that direct-list in the future will be able to sell a bloc of shares at a market-set value that would have previously set their “open” price. So instead of flogging the stock and setting a price and selling shares to rich folks and then finding out what public investors would really pay, all that IPO faff is gone and bold companies can simply offer shares at whatever price the market will bear. 

All that is great and cool, but as companies will be able to direct-list and raise capital, the NYSE’s nice news means that Asana is blazing a neat trail, but perhaps not one that will be as popular as we had expected.

The NASDAQ is working to get in on the action. As Danny said yesterday on the show, this new NYSE method is going to crush traditional IPOs, provided that we’re understanding it during this, its nascent period.

Market Notes

Look, this week was bananas, and my brain is scrambled toast. You, like myself, are probably a bit confused about how it is only finally Saturday and not the middle of next week. But worry not, I have a quick roundup of the big stuff from our world. And, notes from calls with the COO of Okta and the CEO of Splunk, from after their respective earnings report: 

• China-based fintech giant Ant is super profitable and super big and super powerful and is going to have a mega-IPO that matters, even if it isn’t happening Stateside. (This has long been expected.)
• As I write to you, the TikTok saga is not yet over, but between the lawsuits and smokescreens and other crap, it appears that Microsoft and perhaps Walmart are the leading bidding duo. What a year.
• SPACs for real companies are happening, and Boston unicorn Desktop Metal is pushing ahead with one. This is an event to watch, and if it goes well we could see a bunch more in rapid-fire fashion.
• Speaking of which, here’s a run-down of all the companies that filed to go public on Monday. You are welcome, as that post was annoying to compile. (I jest, it was fun as hell.)
• Also this week, Y Combinator had a two-day Demo Day confab that we wrote a lot about. Sure, these are early-stage companies, but their ranks will generate some material winners. So catch up here, with that link containing our chat about the startups and directions to all our coverage.
• And for fun, here are some slightly deeper looks at Snowflake and Sumo Logic’s respective IPO filings, and a contrarian take on why Palantir has problems, but also some merit.

Over to our chats, starting with Okta COO and co-founder Frederic Kerrest:

• Okta had a good quarter. But instead of noodling on just the numbers, we wanted to chat with its team about the accelerating digital transformation and what they are seeing in the market. 
• On the SMB side, Kerrest reported little to no change. This is a bit more bullish than we anticipated, given that it seemed likely that SMB customers would have taken the largest hit from COVID.
• Kerrest also told us some interesting stuff about how the wave of COVID-related spend has changed: “We actually have seen the COVID ‘go home and remote work very quickly’ [thing], we’ve actually seen that rush subside a little bit, because you know now we’re five months into [the pandemic], so they had to figure it out.”
• This is a fascinating comment for the startup world. 
• Okta is big and public and is going to grow fine for a while. Whatever. For smaller companies aka startups that were seeing COVID-related tailwinds, I wonder how common seeing “that rush subside a little bit” is. If it is very common, many startups that had taken off like a rocket could be seeing their growth come back to Earth.
• And if they raised a bunch of money off the back of that growth at a killer valuation, they may have just ordered shoes that they’ll struggle to grow into.

And then there was new McLaren F-1 sponsor Splunk, data folks who are in the midst of a transition to SaaS that is seeing the firm double-down on building ARR and letting go of legacy incomes:

• I spoke with CEO Doug Merritt, kicking off with a question about his use of the word “tectonic” regarding the shift to data-driven decisions from Splunk’s earnings report. (“As organizations continue to adapt to tectonic societal shifts brought on by COVID-19, one thing is constant: the power of data to radically transform business.”)
• I wanted to know how far down the American corporate stack that idea went; are mid-size businesses getting more data-savvy? What about SMBs? Merritt was pretty bullish: “We’re getting to tectonic,” he said during our call, adding that before “it really was the Facebooks, the Googles, the Apples, the DoorDashes, [and] the LinkedIns that were using [Splunk].” But now, he said, even small restaurant chains are using data to better track their performance. 
• Relating this back to the startup world, I’ve been curious if lots of stuff that you and I think is cool, like low-code business app development, will actually find as wide a footing in the market as some expect. Why? Because most small and medium-sized businesses are not tech companies at all. But if Merritt is right, then the CEO of Appian might be right as well about how many business apps the average company is going to have in a few years’ time.

And finally for Market Notes, my work BFF and IRL friend Ron Miller wrote about Box’s earnings this week, and how the changing world is bolstering the company. It’s worth a read. (Most public software companies are doing well, mind.)

Various and Sundry

We’re already over length, so I’ll have to keep our bits-and-bobs section brief. Thus, only the brightest of baubles for you, my friend:

• Y Combinator startups are focusing on revenue in this more uncertain world. Per The Information, the startup org has encouraged startups in its world to “focus on generating revenue” and how to juice enough cash from their operations to endure sans checks from private investors. 
• Given the pace of private investments into certain startup niches today, it’s almost odd advice. But what is true for late-stage SaaS companies (very hot!) might not hold true for smaller YC companies that are focused on consumers.
• Natasha wrote about a particularly hot startup from this YC batch, so I reached out to a hot company from a prior batch, namely Tandem. But they didn’t want to talk on the record, so no news there. Alas.
• The Fastly deal is super cool and you should read more about it. As was this $300 million investment.

And with that, we are out of room. Hugs, fist bumps and good vibes, 

Alex

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Startups Weekly: With Asana, JFrog, Palantir, Snowflake, Sumo and Unity, we’re in peak season for tech IPOs

Editor’s note: Get this free weekly recap of TechCrunch news that any startup can use by email every Saturday morning (7 a.m. PT). Subscribe here.

Pandemic numbers are looking better, it’s still a couple months before U.S. elections and a growing line of tech companies have already ventured out into public markets successfully this summer. Hard to imagine conditions beating the present any time soon, whether you’re traditionally banked, going with a direct listing or getting inside a SPAC vehicle.

We covered the frenzy this week with an eye toward what other startups can learn about the way these companies have arrived at this point. Here are the headlines for each, from Asana to Unity.

But first, consider this special episode of our Equity podcast from Wednesday, where the team reviews the news. And for a faster(ish) read, Extra Crunch subscribers should also check out Alex Wilhelm’s “super-long roundup” of the companies.

The IPOs:

As losses expand, Asana is confident it has the ticket for a successful public listing

Palantir and the great revenue mystery
The bullish case for Palantir’s direct listing (EC)
Leaked S-1 says Palantir would fight an order demanding its encryption keys
Palantir’s S-1 alludes to controversial work with ICE as a risk factor for its business

Unpacking the Sumo Logic S-1 filing (EC)

A quick peek at Snowflake’s IPO filing
Industry experts say it’s full speed ahead as Snowflake files S-1

Unity’s IPO numbers look pretty … unreal?
Sequoia strikes gold with Unity’s IPO filing

Regarding that last one, EC members should be sure to check out our popular deep dive from last year detailing how Unity came to be a leading gaming engine.

Finally, here’s one last EC headline to get you ready for what is sure to be another week of official S-1s, leaked filing information, rumors of imminent IPO dates, controversies over methods of going public, etc.:

SaaS stocks survive earnings, keeping the market warm for software startups, exits

Image Credits: Getty Images

You don’t know SPACs

Special purpose acquisition companies are an older model of financial vehicle used to take companies public that has become a hot trend in recent years as more tech startups try to figure out liquidity events. Here’s Connie Loizos, who put together a long list of questions and answers about SPACs, concluding that the trend is here for the long-term:

[One] investment banker says he’s seeing less interest from VCs in sponsoring SPACs and more interest from them in selling their portfolio companies to a SPAC. As he notes, “Most venture firms are typically a little earlier stage investors and are private market investors, but there’s an uptick of interest across the board, from PE firms, hedge funds, long-only mutual funds.”

That might change if [A* SPAC founder] Kevin Hartz has anything to do with it. “We’re actually out in the Valley, speaking with all the funds and just looking to educate the venture funds,” he says. “We’ve had a lot of requests in. We think we’re going to convert [famed VC] Bill Gurley  from being a direct listings champion to the SPAC champion very soon.”

In the meantime, asked if his SPAC has a specific target in mind already, Hartz says it does not. He also takes issue with the word “target.”

Says Hartz, “We prefer ‘partner company.’” A target, he adds, “sounds like we’re trying to assassinate somebody.”

Image Credits: Dougal Waters / Getty Images

Inside the nearly 200 companies of Y Combinator’s Summer 2020 demo day

After YC’s first remote-only demo day this spring, the seed-stage venture firm switched from recorded pitches to live ones. The TechCrunch team was on hand to cover the 192 presentations over Monday and Tuesday this week. We’ve written up these two handy guides to help you find your newest competitors, employers or maybe investment:

The 98 companies from Y Combinator’s Summer 2020 Demo Day 1
The 94 companies from Y Combinator’s Summer 2020 Demo Day 2

The staff also picked out their dozen or so favorites from each day, for Extra Crunch subscribers:

Our 11 favorite companies from Y Combinator’s S20 Demo Day: Part 1
Our 12 favorite startups from Y Combinator’s S20 Demo Day: Part 2

(Check out this special demo day edition of Equity for a free audio rundown.)

One company wasn’t in the mix — a startup called Trove, that provides internal compensation SaaS tools, and has just raised a huge new round from Andreessen Horowitz. Natasha Mascarenhas has more.

What investors are saying about startup cities in 2020: Chicago edition

Cities around the world have developed strong tech scenes, but these startup hubs are at the center of potential disruption from pandemic problems plus the possibilities of remote work. We’re surveying investors around the world about what’s next for their home bases. This week, Matt Burns checks in with top Chicago investors about the tech future of the biggest Midwestern city. Here’s Constance Freedman of proptech-oriented fund Moderne Ventures, who is investing in the middle of all these changes:

World-class startups still need world-class feeders, so I don’t expect expansion to reach all that far, but perhaps density or proximity to work becomes less important for those who work there. This may give more cities a change to rise, including Chicago.

So what does this mean for Chicago startup ecosystem? I think Chicago is poised to come out well. The city is affordable to begin with … like 50% more affordable than the West or East Coast hubs. If I live in Chicago I can afford space, I can enjoy my city and I have good transportation if I want to bail out of the city and move to the suburbs. Chicago has a strong ecosystem of universities and capital that can sustain it and may become more appealing to those (tech people and investors) who moved out to go to the coasts in the first place and now realize they don’t need to be there. As people migrate to live where they really want to live, with the lifestyle they want to have, near family they want to be with, they begin to look for more local opportunities and that may bring some great talent back to Chicago and other markets outside of the coasts.

Chicago has long been known for banking, real estate, health care and insurance. I think these sectors and others are poised to do well. The largest opportunity for us (and any major city) is how to close the education gap, which leads to closing the income gap and from there — the sky is the limit!

Meanwhile, Mike Butcher is working on surveys across Europe, and would like to hear from you if you are an investor in Paris or Warsaw.

Around TechCrunch (Disrupt Time)

Conan is coming to Disrupt 2020

Meet the Disrupt 2020 ‘TC10’

Presenting TechCrunch Disrupt’s Asia sessions

Learn how to scale social impact startups at Disrupt with Phaedra Ellis-Lamkins and Jessica O. Matthews

Benchmark’s Peter Fenton is joining us at Disrupt

Learn why embedded finance is the future of fintech at Disrupt

Laura Deming, Frederik Groce, Amish Jani, Jessica Verrilli and Vanessa Larco are coming to Disrupt

Carbon Health’s Eren Bali and Color’s Othman Laraki will join us at Disrupt 2020

Black founders can get tactical advice at Disrupt

Five real reasons to attend Disrupt 2020 online

Hear from experienced edtech investors on the market’s overnight boom at Disrupt 2020

Startup Alley exhibitors: Register for VC-led Fundraising & Hiring Best Practices webinar

Here’s how you can get a second shot at Startup Battlefield

Two weeks left on early-bird pricing for TC Sessions: Mobility 2020

Grab your student discount pass for TC Sessions: Mobility 2020

Register for our last pitch-off next week on September 2

Extra Crunch discount now available for military, nonprofits and government employees

Across the week

TechCrunch

The pandemic has probably killed VR arcades for good

Femtech poised for growth beyond fertility

Five proven ways to attract and hire more diverse talent

Will automation eliminate data science positions?

Eduardo Saverin on the ‘world of innovation past Silicon Valley’

The H-1B visa ban is creating nearshore business partnership opportunities

Meet the startups from Brinc’s first online Demo Day

Extra Crunch

What can growth marketers learn from lean product development?

Alexa von Tobel: Eliminating risk is the key to building a startup during an economic downturn

As DevOps takes off, site reliability engineers are flying high

How to establish a startup and draw up your first contract

COVID-19 is driving demand for low-code apps

Synthetic biology startups are giving investors an appetite

Funding for mental health-focused startups rises in 2020

Box CEO Aaron Levie says thrifty founders have more control

#EquityPod

From Alex Wilhelm:

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

This is the fourth episode of the week, pushing our production calendar to the test. Happily, we’ve managed to hold it together amidst the news deluge that the last few days have brought. It was a good week for our scheduling change, with the main episode of the show coming to you on Thursday afternoon versus Friday morning.

Change is good.

But unchanging this time around was our hosting lineup, with Natasha Mascarenhas and Danny Crichton and myself yammering with Chris Gates on the mix. Here’s what we got into:

• The CEO of TikTok is out, bids are swirling and who will wind up owning a piece of all of TikTok’s global operations is not clear. Walmart is in the mix, apparently, which feels very 2020.
• The New York Stock Exchange has gotten approval from the SEC for a new type of direct listing, one in which the company going public can sell a bloc of shares during the normal price discovery process. This means that all the banker-faff of setting a price and roadshowing to various investor groups could be going the way of the buffalo.
• About time, maybe? That was our take after reading this Bill Gurley note and the latest SEC news.
• But while the direct listing world is getting more interesting, the SPAC world is taking flight. Desktop Metal is going public via a SPAC which is all sorts of fascinating. A younger, Boston-based unicorn going public in this manner is eye catching!
• And then two funding rounds, the first from Finix, which can’t stop adding to its Series B. And Mural, which raised the largest Series B we can recall.

And with that, we’re all going to bed. We’re tired. No more news, thanks!

Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

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