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Extra Crunch roundup: Edtech VC survey, 5 founder mistakes, fintech liquidity, more

Published January 29, 2021

Edtech is so widespread, we already need more consumer-friendly nomenclature to describe the products, services and tools it encompasses.

I know someone who reads stories to their grandchildren on two continents via Zoom each weekend. Is that “edtech?”

Similarly, many Netflix subscribers sought out online chess instructors after watching “The Queen’s Gambit,” but I doubt if they all ran searches for “remote learning” first.

Edtech needs to reach beyond underfunded public school systems to become more sustainable, which is why more investors and founders are focusing on lifelong learning.

Besides serving traditional students with field trips and art classes, a maturing sector is now branching out to offer software tutors, cooking classes and singing lessons.

For our latest investor survey, Natasha Mascarenhas polled 13 edtech VCs to learn more about how “employer-led up-skilling and a renewed interest in self-improvement” is expanding the sector’s TAM.

Here’s who she spoke to:

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

Full Extra Crunch articles are only available to members
Use discount code ECFriday to save 20% off a one- or two-year subscription

In other news: Extra Crunch Live, a series of interviews with leading investors and entrepreneurs, returns next month with a full slate of guests. This year, we’re adding a new feature: Our guests will analyze pitch decks submitted by members of the audience to identify their strengths and weaknesses.

If you’d like an expert eye on your deck, please sign up for Extra Crunch and join the conversation.

Thanks very much for reading! I hope you have a fantastic weekend — we’ve all earned it.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

13 investors say lifelong learning is taking edtech mainstream

Image Credits: Bryce Durbin

13 investors say lifelong learning is taking edtech mainstream

Rising African venture investment powers fintech, clean tech bets in 2020

Image Credits: Nigel Sussman (opens in a new window)

After falling into yesterday’s wild news cycle, Alex Wilhelm returned to The Exchange this morning with a close look at venture capital activity across Africa in 2020.

“Comparing aggregate 2020 figures to 2019 results, it appears that last year was a somewhat robust year for African startups, albeit one with fewer large rounds,” he found.

For more context, he interviewed Dario Giuliani, the director of research firm Briter Bridges, which focuses on emerging markets in Africa, Asia and Latin America.

Rising African venture investment powers fintech, clean tech bets in 2020

Talent and capital are shifting cybersecurity investors’ focus away from Silicon Valley

A road sign that says "Leaving California."

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

New cybersecurity ecosystems are popping up in different parts of the world.

Some of of that growth has been fueled by an exodus from the Bay Area, but many early-stage security startups already have deep roots in East Coast cities like Boston and New York.

In the United Kingdom and Europe, government innovation programs have helped entrepreneurs close higher numbers of Series A and B rounds.

Investor interest and expertise is migrating out of Silicon Valley: This post will help you understand where it’s going.

Talent and capital are shifting cybersecurity investors’ focus away from Silicon Valley

Will Apple’s spectacular iPhone 12 sales figures boost the smartphone industry in 2021?

On Wednesday, 20 January, 2021, in Dublin, Ireland. (Photo by Artur Widak/NurPhoto via Getty Images)

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

Today’s smartphones are unfathomably feature-rich and durable, so it’s logical that sales have slowed.

A phone purchased 18 months ago is probably “good enough” for many consumers, especially in times of economic uncertainty.

Then again, of the record $111.4 billion in revenue Apple earned last quarter, $65.68 billion came from phone sales, largely driven by the release of the iPhone 12.

Even though “Apple’s success this quarter was kind of a perfect storm,” writes Hardware Editor Brian Heater, “it’s safe to project a rebound for the industry at large in 2021.”

Will Apple’s spectacular iPhone 12 sales figures boost the smartphone industry in 2021?

The 5 biggest mistakes I made as a first-time startup founder

Boy Standing with Dropped Ice Cream Cone

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

Finmark co-founder and CEO Rami Essaid wrote a post for Extra Crunch that candidly describes the traps he laid for himself that made him a less-effective entrepreneur.

As someone who’s worked closely with founders at several startups, each of the points he raised resonated deeply with me.

In my experience, many founders have a hard time delegating, which can quickly create cultural and operational problems. Rami’s experience bears this out:

“I became a human GPS: People could follow my directions, but they struggled to find the way themselves. Independent thinking suffered.”

The 5 biggest mistakes I made as a first-time startup founder

Dear Sophie: How can I sponsor my mom and stepdad for green cards?

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

Image Credits: Bryce Durbin/TechCrunch

Dear Sophie:

I just got my U.S. citizenship! My husband and I want to bring my mom and her husband to the U.S. to help us take care of our preschooler and toddler.

My biological dad passed away several years ago when I was an adult and my mom has since remarried.

Can they get green cards?

— Appreciative in Aptos

Dear Sophie: How can I sponsor my mom and stepdad for green cards?

Check out the amazing speakers joining us on Extra Crunch Live in February

Extra Crunch Live February Schedule: February 3 Gaurav Gupta Lightspeed Venture Partners Raj Dutt Grafana Labs February 10 Aydin Senkut Felicis Kevin Busque Guideline February 17 Steve Loughlin Accel Jason Boehmig Ironclad February 24 Matt Harris Bain Capital Isaac Oates Justworks

Next month, Extra Crunch Live returns with a lineup of guests who are extremely well-qualified to discuss early-stage startups.

Each Wednesday at noon PPST/3 p.m. EST, join a conversation with founders and the investors who backed their companies:

February 3:

Gaurav Gupta (Lightspeed Venture Partners) + Raj Dutt (Grafana Labs)

February 10:

Aydin Senkut (Felicis Ventures) + Kevin Busque (Guideline)

February 17:

Steve Loughlin (Accel) + Jason Boehmig (Ironclad)

February 24:

Matt Harris (Bain Capital) + Isaac Oates (Justworks)

Also, we’re adding a new feature to Extra Crunch Live — our guests will offer advice and feedback on pitch decks submitted by Extra Crunch members in the audience!

Check out the amazing speakers joining us on Extra Crunch Live in February

10 VCs say interactivity, regulation and independent creators will reshape digital media in 2021

Photo of a young woman watching TV in the bedroom of her apartment; eating sushi and enjoying her night at home alone.

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

Since the pandemic disrupted the social rhythms of work and school, many of us have compensated by changing our relationship to digital media.

For instance, I purchased a new sofa and thicker living room curtains several months ago when I realized we have no idea when movie theaters will reopen.

Last year, podcast sponsors spent almost $800 million to reach listeners, but ad revenue is estimated to surpass $1 billion this year. Clearly, I’m not the only person who used a discount code to buy a new product in 2020.

At this point, I can scarcely keep track of the multiple streaming platforms I’m subscribed to, but a new voice-activated remote control that comes with my basic cable plan makes it easier to browse my options.

Media reporter Anthony Ha spoke to10 VCs who invest in media startups to learn more about where they see digital media heading in the months ahead. For starters, how much longer can we expect traditional advertising models to persist?

And in a world with hundreds of channels, how are creators supposed to compete for our attention? What sort of discovery tools can we expect to help us navigate between a police procedural set in a Scandinavian village and a 90s sitcom reboot?

Here’s who Anthony interviewed:

  • Daniel Gulati, founding partner, Forecast Fund
  • Alex Gurevich, managing director, Javelin Venture Partners
  • Matthew Hartman, partner, Betaworks Ventures
  • Jerry Lu, senior associate, Maveron
  • Jana Messerschmidt, partner, Lightspeed Venture Partners
  • Michael Palank, general partner, MaC Venture Capital (with additional commentary from MaC’s Marlon Nichols)
  • Pär-Jörgen Pärson, general partner, Northzone
  • M.G. Siegler, general partner, GV
  • Laurel Touby, managing director, Supernode Ventures
  • Hans Tung, managing partner, GGV Capital

Normally, we list each investor’s responses separately, but for this survey, we grouped their responses by question. Some readers say they use our surveys to study up on an individual VC before pitching them, so let us know which format you prefer.

10 VCs say interactivity, regulation and independent creators will reshape digital media in 2021

Does a $27 billion or $29 billion valuation make sense for Databricks?

Image Credits: Nigel Sussman (opens in a new window)

Data analytics platform Databricks is reportedly raising new capital that could value the company between $27 billion and $29 billion.

By the end of Q3 2020, Databricks had surpassed a $350 million run rate — a $150 million YoY increase, reports Alex Wilhelm.

At the time, he described the company as “an obvious IPO candidate” with “broad private-market options.”

Which begs the question: “Can we come up with a set of numbers that help make sense of Databricks at $27 billion?”

Does a $27 or $29 billion valuation make sense for Databricks?

End-to-end operators are the next generation of consumer business

Tourist route to the top of the mountain. Rope bridge in the clouds. Crimea. Ai-Petri

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

Rapid shifts in the way we buy goods and services disrupted old-school marketplaces like local newspapers and the Yellow Pages.

Today, I can use my phone to summon a plumber, a week’s worth of groceries or a ride to a doctor’s office.

End-to-end operators like Netflix, Peloton and Lemonade take a lot of time and energy to reach scale, but “the additional capital required is often outweighed by the value captured from owning the entire experience.”

End-to-end operators are the next generation of consumer business

Unpacking Chamath Palihapitiya’s SPAC deals for Latch and Sunlight Financial

Image Credits: Nigel Sussman (opens in a new window)

On January 25, Social Capital CEO Chamath Palihapitiya tweeted that he was making two blank-check deals.

Enterprise SaaS company Latch makes keyless entry systems; Sunlight Financial helps consumers finance residential solar power installations.

“There are nearly 300 SPACs in the market today looking for deals,” noted Alex Wilhelm, who unpacked both transactions.

“There’s no escaping SPACs for a bit, so if you are tired of watching blind pools rip private companies into the public markets, you are not going to have a very good next few months.”

Unpacking Chamath Palihapitiya’s SPAC deals for Latch and Sunlight Financial

Fintechs could see $100 billion of liquidity in 2021

Long exposure spillway shines water and light. Copy space.

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

On Monday, we published the Matrix Fintech Index, a three-part study that weighs liquidity, public markets and e-commerce trends to create a snapshot of an industry in perpetual flux.

For four years running, the S&P 500 and incumbent financial services companies have been outperformed by companies like Afterpay, Square and Bill.com.

In light of steady VC investment, increasing consumer adoption and a crowded IPO pipeline, “fintech represents one of the most exciting major innovation cycles of this decade.”

Fintechs could see $100 billion of liquidity in 2021

Drupal’s journey from dorm-room project to billion-dollar exit

Dries Buytaert, co-founder and CTO at Acquia

Image Credits: Acquia

On January 15, 2001, then-college student Dries Buytaert released Drupal 1.0.0, an open-source content-management platform. At the time, about 7% of the world’s population was online.

After raising more than $180 million, Buytaert exited to Vista Equity Partners for $1 billion in 2019.

Enterprise reporter Ron Miller interviewed Buytaert to learn more about his 18-year journey.

“His story is compelling, but it also offers lessons for startup founders who also want to build something big,” says Ron.

Drupal’s journey from dorm-room project to billion-dollar exit

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How Roblox’s creator accelerator helps the gaming giant build new platform opportunities

Published January 29, 2021

As Roblox eyes what could be a historic debut on public markets in the coming months, investors who have valued the company at $29.5 billion are certainly eyeing the gaming company’s dedicated and youthful user base — but it’s the 7 million active creators and developers on the Roblox platform that they are likely most impressed by. 

Since 2015, Roblox has been running an accelerator program focused on enabling the next generation of game developers to be successful on its platform. Over the years, the program has expanded from one annual class to now three, each with around 40 developers participating. That means more than 100 developers per year are working directly with Roblox to gain mentorship, education and funding opportunities to get their games off the ground.  

As the company’s efforts on this front have grown more formalized, Roblox in 2018 hired former Accelerator alumni Christian Hunter, a Roblox gamer since age 10 and game developer since 13, to run the program full time. Having been through the experience himself, Hunter brought to the program an understanding of how the Accelerator could improve, based on a developer’s own perspective. 

However, the COVID-19 pandemic threw into disarray the company’s plans to run the program. Instead of being able to invite developers to spend three months participating in classes hosted at Roblox’s San Mateo office, the company had to revamp the program for remote participation. 

Roblox raises at $29.5 billion valuation, readies for direct listing

As it turned out, developers who were used to playing and building games taking place in virtual worlds quickly adjusted to the new online experience. 

“Before COVID, everyone was together. It was easier to talk to people. [Developers] could just walk up to someone that was on our product or engineering team if they were running into issues,” explains Roblox Senior Product Manager Rebecca Crose. “But obviously, with COVID-19, we had to switch and think differently.”  

The remote program, though differently structured, offered several benefits. Developers could join the program’s Discord server to talk to both current participants and previous classes, and reach out and ask questions. They could also participate in the Roblox company Slack to ask the team questions, and there were more playtests being scheduled to gain reactions and feedback from Roblox employees.

Meanwhile, to get to know one another when they couldn’t meet in person, developers would have game nights where they’d play each other’s games or others that were popular on Roblox, and bond within the virtual environment instead of in face-to-face meetings and classes. 

The actual Accelerator content, however, remained fairly consistent during the remote experience. Participants had weekly standups, talks on topics like game design and production, and weekly feedback sessions where they asked Roblox engineers questions. 

But by its nature, a remote Accelerator broadened who could attend. Instead of limiting the program to only those who could travel to San Mateo and stay for three months, the program was opened up to a more global and diverse audience. This drove increased demand, too. 

The 2020 program saw Roblox receiving the largest number of applications ever — five times the usual number.

As a result, the class included participants from five countries: The Philippines, South Korea, Sweden, Canada and the U.S. 

The promise and challenge of Roblox’s future in China

The developers at IndieBox Studios saw the program as a chance to double down on their game development side hustles. The young friends spread across the U.K. and Kentucky spent their time during the accelerator scaling up their photorealistic title called Tank Warfare.

“We’ve actually never once met in real life, like, we’ve been friends for going on, what, nine years now,” Michael Southern tells TechCrunch. “We met on Roblox.”

IndieBox is representative of many of Roblox’s early developer teams — younger gamers that have spent more than a decade learning the ins and outs of the evolving Roblox gaming platform.

“We all joined Roblox way back in 2008,” IndieBox’s Frank Garrison says. “But we only started developing on the platform in 2019. And for us, the decision to choose Roblox was more down to like, well it’s what we know, why not give it a bash?” 

The demographics of the accelerator have been shifting in other ways as the developer base grows more diverse.

“I would say, in the beginning, it was mostly young males. But as we’ve watched the program evolve, we’ve been getting so many new interesting teams,” notes Program Manager Christian Hunter. 

The 2020 program had more women participants than ever, for example, with 12 in a class of 50. And one team was all women. 

The age of participants, who are typically in the 18 to 22-year-old range, also evolved. 

“We’ve seen a lot more older folks,” Hunter says. “With [the COVID-19 pandemic], we actually saw our first 50-year-old in the program. We’ve never had anyone older than, I’d say, 24. And in 2020, we had 12 individuals over the age of 30,” he notes. 

Two of the teams were also a combination of a kid and a parent. 

Shannon Clemens learned about the Roblox platform from her son Nathan, learning to code and bringing her husband Jeff in to form a studio called Simple Games. Nathan’s two sisters help the studio part time, as well as his friend Adrian Holgate.

“Seeing [my son’s] experience on Roblox getting involved with the platform, I thought it would be neat to learn how to make our own games,” Shannon Clemens told TechCrunch.

Their title Gods of Glory has received more than 13.5 million visits from Roblox players since launching in September.

“Our whole family is kind of creatively bent towards having fun with games and coming up with things like that,” Jeff Clemens tells us. “Why would we not try this? So, that’s when we applied to the program and said, ‘well, we’ll try and see if we get accepted,’ and we did and it’s been awesome.”

In addition to the changes facilitated by a remote environment, Roblox notes there were other perks enabled by remote learning. For one thing, the developers didn’t have to wake up so early to benefit from the experience.  

“With it being remote, the developers were working their hours,” says Crose. “As a developer, we tend to work later and stay up at night. Having them come in at 9 AM sharp was very difficult. It was hard for them because they’re just like…a zombie. So we definitely saw that by letting them work their own hours, [there is] less burnout and they increase their productivity,” she says. 

The Roblox Gambit

Though the COVID-19 crisis may eventually end as the world gets vaccinated, the learnings from the Accelerator and the remote advantages it offers will continue. Developers from the program hope that the growth seen on gaming platforms like Roblox continues as well.

“The pandemic has been great for most game studios,” developer Gustav Linde tells TechCrunch. “Obviously, it’s a very weird time, but the timing was good for us.”

The Gang Stockholm, a Swedish game development studio co-founded by Linde, has been building experiences — largely branded ones for clients, exclusively on the Roblox platform. The team of 12 has used the accelerator to slow down development deadlines and dig into some unique areas of the platform as well as focus wholly on their upcoming title, Bloxymon, which they plan to release this year.  

“If you look at Steam and the App Store and Google Play, those markets are extremely crowded, and Roblox is a very exciting platform for developers right now,” said Linde. “Roblox is also getting a lot of attention and a lot of big brands are interested in entering the platform.”

Roblox says that going forward, future Accelerator programs will feature a remote element inspired by the COVID experience. The company plans to continue to make its program globally available, with the limitation for now, of English-speaking participants. But it’s looking to expand to reach non-English speakers with future programs.

The fall 2020 Accelerator class graduated in December 2020, and the next spring class will start in February 2021. Roblox says they are already in the process of recruiting for their summer 2021 class, which will again have some 40 participants. Roblox will again aim to continue diversifying the group of creators.

How Roblox avoided the gaming graveyard and grew into a $2.5B company

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

Published January 29, 2021
Kyle Poyar
Contributor

Kyle Poyar is VP of Growth at OpenView.

Software buying has evolved. The days of executives choosing software for their employees based on IT compatibility or KPIs are gone. Employees now tell their boss what to buy. This is why we’re seeing more and more SaaS companies — Datadog, Twilio, AWS, Snowflake and Stripe, to name a few — find success with a usage-based pricing model.

The usage-based model allows a customer to start at a low cost, while still preserving the ability to monetize a customer over time.

The usage-based model allows a customer to start at a low cost, minimizing friction to getting started while still preserving the ability to monetize a customer over time because the price is directly tied with the value a customer receives. Not limiting the number of users who can access the software, customers are able to find new use cases — which leads to more long-term success and higher lifetime value.

While we aren’t going 100% usage-based overnight, looking at some of the megatrends in software —  automation, AI and APIs — the value of a product normally doesn’t scale with more logins. Usage-based pricing will be the key to successful monetization in the future. Here are four top tips to help companies scale to $100+ million ARR with this model.

1. Land-and-expand is real

Usage-based pricing is in all layers of the tech stack. Though it was pioneered in the infrastructure layer (think: AWS and Azure), it’s becoming increasingly popular for API-based products and application software — across infrastructure, middleware and applications.

API-based products and appliacation software – across infrastructure, middleware and applications.

Image Credits: Kyle Povar / OpenView

Some fear that investors will hate usage-based pricing because customers aren’t locked into a subscription. But, investors actually see it as a sign that customers are seeing value from a product and there’s no shelf-ware.

In fact, investors are increasingly rewarding usage-based companies in the market. Usage-based companies are trading at a 50% revenue multiple premium over their peers.

Investors especially love how the usage-based pricing model pairs with the land-and-expand business model. And of the IPOs over the last three years, seven of the nine that had the best net dollar retention all have a usage-based model. Snowflake in particular is off the charts with a 158% net dollar retention.

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Okta SaaS report finds Office 365 wins the cloud — sort of

Published January 29, 2021

Each year Okta processes millions of SaaS logons via its authentication system. It kindly aggregates that data to find the most popular apps and publishes an annual report. This year it found that the most popular tool by far was Microsoft Office 365.

It’s worth noting that while app usage popularity varied by region, Office 365 was number one with a bullet across the board, whether globally or when the report broke it down by geographic area. That wasn’t true of any other product in this report, so Office 365 has extensive usage across the world (at least among companies that use Okta).

But as with everything cloud, it’s not a simple matter to say that because lots of people signed onto Office 365, Microsoft is the clear winner in a broader sense. In reality, the cloud is a complex marketplace, and just because people use one tool doesn’t preclude them from using tools that compete directly with it.

As a case in point, consider that the report found that 36% of Microsoft 365 customers were also using Google Workspace (formerly known as G Suite), which offers a similar set of office productivity tools. Further, Okta found that 42% of Office 365 customers were using Zoom and 32% were using Slack.

How should SaaS companies deliver and price professional services?

This is pretty remarkable when you consider that Office 365 bundles Teams with similar functionality for free. What’s more, so does Google with Google Hangouts, so people use the tool they want when they want, and sometimes it seems they use competing versions of the same tool. The report also found that of those Office 365 users, 44% are using Salesforce, 41% AWS, 15% Smartsheet and 14% Tableau (which is owned by Salesforce). Microsoft has products in all those categories.

Microsoft is clearly a big company with a lot of products, but the report blows a hole in the idea that because people like Office 365, they are going to be big fans of other Microsoft products, or that they can count on any kind of brand loyalty across the range of products or even exclusivity within the same product category.

All of this, and much of the other data in this report makes tremendously interesting reading as far as it goes. It’s not a definitive window on the state of SaaS. It’s a definitive reading on the state of Okta customers’ use of SaaS, on the Okta Integration Network (OIN), a point the company readily acknowledges in the report’s methodology section.

“As you read this report, keep in mind that this data is representative of Okta’s customers, the applications and integrations we connect to through the OIN, and the ways in which users access these tools through our service,” the report stated.

But it is a way to look at the state of SaaS taking advantage of the 9400 Okta customers using the network and the 6,500 integrations to the world’s most popular SaaS tools. That gives the company a unique view into the world of SaaS. What you can conclude is that the cloud is complicated, and it’s not a zero-sum game by any means. In fact, being a winner in one area is not a guarantee of winning across the board.

Should your SaaS startup embrace a bottom-up GTM strategy?

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Why calendar invites are worth $3B

Published January 28, 2021

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

Natasha and Danny and Alex and Grace hopped online for our weekly show, sans Gamestop news (which you can find here) to talk about all the other busy news happening in startup world right now.

Here’s a taste of what we got into:

  •  Qualtrics IPO pricing, and the future of major acquisition pricing schemes. This company’s path to the public markets has been a long-time coming, so we had plenty to say.
  •  How Atlanta’s Calendly turned a scheduling nightmare into a $3 billion company. This story was not only neat, but also operated as a sort of palate cleanser for the team.
  •  Rhino‘s interesting insurtech play, and how it is pre-IPO pretty damn early. Revenue questions, the power of insurtech, and public markets impacting startups? This story had it all!
  •  Alex talks about how Fast is raising fast money ($102 million to be exact). Even more, the Fast story fits into a broader narrative of online checkout startups raising a zillion dollars in recent weeks.
  •  A boom in food delivery and restaurant startups, and why Danny is bearish on a plastic-free play. Natasha is in favor. Alex gets a company’s model mixed up with Spoon Rocket.
  •  Natasha explains how Clubhouse isn’t the first company to raise millions off of millions of users with no known near-term monetization plan. Her piece on ClassDojo illustrates how a quiet edtech giant finally turned its 51 million users into a profitable base. There’s also a new edtech investor survey for you to check out (Discount code: EQUITY).
  • TCV’s record fund, and a female-focused angel fund coming out of Africa.

As always, it was a ton to get through because there is just so much going on. More Monday morning, until then stay cool!

Equity drops every Monday at 7:00 a.m. PST 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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Daily Crunch: Robinhood restricts GameStop trading

Published January 28, 2021

The GameStop stock saga continues, Apple releases more details about its privacy changes and Qualtrics goes public. This is your Daily Crunch for January 28, 2021.

The big story: Robinhood restricts GameStop trading

Robinhood has responded to an upsurge in retail investors buying shares in companies like GameStop, AMC and Blockbuster by restricting trading on “certain securities” to “position closing only,” meaning that users can no longer buy more of the companies’ stocks. (It says it will allow “limited buys” tomorrow.)

This comes after the current buying spree — targeting stocks shorted by institutional investors and spurred by the WallStreetBets forum on Reddit — took Robinhood and Reddit to the top of the app charts.

Now, Robinhood is being hit with numerous 1-star reviews, and the move also attracted criticism from politicians on both sides of the aisle, with Rep. Alexandria Ocasio-Cortez describing it as “unacceptable” and Senator Ted Cruz tweeting, “Fully agree.”

The tech giants

Apple’s App Tracking Transparency feature will be enabled by default and arrive in ‘early spring’ on iOS — The plan is to launch these changes in early spring, with a version of the feature coming in the next iOS 14 beta release.

Qualtrics prices IPO at $30 per share, above its upgraded target range — The company sold 50.4 million shares in the process.

Twitter is already working on integrating newsletters on its site, following its Revue acquisition — It appears “Newsletters” will soon be the newest addition to Twitter’s sidebar navigation.

Startups, funding and venture capital

Workday acquires employee feedback platform Peakon for $700M — Peakon says companies have used its platform’s weekly surveys to ask more than 153 million questions since inception six years ago.

Fintech darling Nubank raises blockbuster $400M Series G at $25B valuation — The fintech company now has 34 million customers.

Flowhaven raises $16M to evolve brand licensing management beyond emails and spreadsheets — The media licensing business is a massive market, but much of the work involved is still handled manually through emails and spreadsheets.

Advice and analysis from Extra Crunch

Thirteen investors say lifelong learning is taking edtech mainstream — As learners become more multi-layered and nuanced, so have the edtech companies that back them.

Talent and capital are shifting cybersecurity investors’ focus away from Silicon Valley — Solving the cybersecurity problem will take more time and resources than we are currently allocating.

Mind the gap: E-commerce marketers should revise their TAM and SAM estimates — 2021 is going to be another glorious year for e-commerce.

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

Everything else

Smartphone sales slowed decline in Q4, with a big assist from Apple — The past year was, of course, a major blow to an industry already suffering a slide.

GM pledges to be carbon neutral by 2040 with zero tailpipe emission vehicles by 2035 — It’s a big step for a company whose products are responsible for a large percentage of global greenhouse gas emissions.

UCLA is building a digital archive of mass incarceration with a new $3.6M grant — The “Archiving the Age of Mass incarceration” effort is being led by Kelly Lytle Hernandez, director of the university’s Bunche Center for African American Studies.

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.

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SPACs are the construct VCs need to fund clean tech

Published January 28, 2021
Brian Walsh
Contributor

Brian Walsh is the head of WIND Ventures, the venture capital arm of COPEC, a leading energy company in Central and South America and the U.S. WIND Ventures provides mobility, energy and retail startups and scaleups with access to Latin America.
More posts by this contributor

In light of climate change and escalating global energy demand, more emphasis is being placed on emerging clean technologies — ranging from renewables and energy storage to nuclear power. Although these technologies have tremendous potential, they require lots of innovation, and innovation needs abundant capital.

The issue: early-stage financing for clean tech hasn’t been plentiful, and it’s stifling the growth of new energy companies. Why is this? In general, clean tech companies lack the startup advantages of agility and flexibility.

“Moving fast” works for products such as consumer mobile apps and SaaS solutions. The clean tech sector, on the other hand, tends to involve highly regulated, capital-intensive, mission-critical infrastructure.

That has hurt both returns and well-intentioned impact. According to Cambridge Associates, venture-backed companies have returned, on average, -15% internal rate of return (IRR) since 2000. Contrast that to venture-backed companies in healthcare, which returned 24% in IRR over the same time period.

Why clean tech lacks funding

While noble in its aims to make the world a better, cleaner, safer, healthier place through technology, clean tech venture capital has suffered simply because clean tech does not fit the traditional venture capital model. Central to the venture capital model is the ability to de-risk new ideas and significantly capitalize the most promising ones, allowing for liquidity via M&A or initial public offering (IPO).

Early-stage financing for clean tech hasn’t been plentiful, and it’s stifling the growth of new energy companies.

This construct allows for the return of venture capital dollars, plus appreciation that enables VC firms to raise new funds. These capitalization events also allow the venture-backed company to accelerate growth and maximize market impact.

How this construct works is evident when comparing healthcare and clean tech. In healthcare, new innovations are de-risked by VCs. More mature innovations are acquired or reach IPO every year. As a result, the average annual ratio of dollars raised via an exit to VC-invested dollars since 2012 is 1.8. This ratio is only 0.2 for clean tech, an 800-plus percent difference in the wrong direction. This has resulted in poor returns and limited capitalization of clean tech companies.

Enter (or reenter) the SPAC

Given the state of the world’s environment and lack of abundant energy in emerging economies, we need to collectively fix this issue. Special purpose acquisition companies (SPACs) are significantly improving clean tech’s venture capital construct. According to Investopedia:

SPACs are companies with no commercial operations that are formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company.

Also known as “blank-check companies,” SPACs have been around for decades. In recent years, they’ve become more popular, attracting big-name underwriters and investors and raising a record amount of IPO money in 2019.

In 2020, more than 110 SPACs completed transactions in the U.S., capitalizing these companies with more than $29 billion.

In 2020, SPACs capitalized clean tech companies with almost $4 billion of capital, including Fisker, Lordstown Motors, QuantumScape, Hyliion, XL Fleet and others. This helped push the ratio of funds raised at exit to venture capital invested in 2020 from the previous 0.2 average to a much healthier 0.6, a 200% improvement.

In 2021, we will likely see even further improvement. Why? Because there are 43 active SPACs looking toward or finalizing merger targets with a clean tech focus, potentially providing $12 billion in growth capital. Even if there are no more new SPACs in 2021 and a historically low average of M&As and IPOs, 2021 promises continued improvement for clean tech investment.

Don’t let Nikola tarnish the pack

One of the most high-profile clean tech SPACs was Nikola Corporation. The battery-electric and hydrogen-powered truck maker has attracted much fanfare since going public last June through a reverse merger with special purpose acquisition company VectoIQ. The company’s market capitalization soared and things seemed to be going well, but things became controversial later in the year when the company was accused of making false statements about its technology and other things.

Although examples such as Nikola have the potential to tarnish the emergence of SPACs as a way to spur clean tech investing, they shouldn’t. There are plenty of examples of emerging companies that scream quality and integrity. For example, Stem*, a leader in the energy storage optimization space, is now going public, pending SEC approval, via the Star Peak SPAC.

Public markets are receiving the SPAC with enthusiasm. Assuming the merger happens, Stem will be capitalized with greater than $450 million of cash to accelerate growth and drive impact. It’s an illustration of SPACs as a positive venture capital construct that is needed to make clean tech work and become a thriving sector.

As a long-time clean tech venture capitalist myself, it is interesting that public investment via the SPAC may be the correcting element for the clean tech VC construct. For years, I assumed that corporates would step up their M&A activity at premium valuations to solve this issue, but I’ve spent a long time waiting.

Judging by activity, corporates seem content to continue playing the still very important investor/nurturer role, versus the “owning” role. Regardless, capitalizing promising clean tech companies can only mean one thing: clean-tech-related impact is coming like never before as these companies require and use capital to scale.

New and more diverse approaches to finding and funding new, great clean tech companies are sorely needed. SPACs are going to be the tool needed to bring clean tech up to par with sectors such as healthcare. It’s a development that will benefit all of us.

*Stem is a Wind Ventures portfolio company.

What’s behind this year’s boom in climate tech SPACs?

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Smartphone sales slowed decline in Q4, with a big assist from Apple

Published January 28, 2021

New numbers from Canalys show a slowing in the major smartphone decline we saw for 2020. The past year was, of course, a major blow to an industry already suffering a slide. Hope that the arrival of 5G would right the ship were dashed by Covid-19.

Things are looking up, fueled in large part by a killer quarter for Apple. The company posted its earnings last night, putting much of its success at the feet of the iPhone 12. In spite (or perhaps because) of pandemic-fueled delays, the handset arrived in a perfect storm – the beginnings of a “supercycle” that see customers upgrading devices in a kind of critical mass.

Investors don’t seem that impressed by Apple’s $111 billion quarter

Numbers are still down for the fourth quarter of 2020 – but they’re down by only 2% per the firm. That’s due in no small part to what amounted to the iPhone’s best quarter, as the company introduced four 5G-sporting handsets. Canalys shows a 4% increase for Apple, as the device arrived to a wider 5G rollout just in time for the holiday season.

The company snagged the global number one spot, with Samsung taking number two in spite of a 12% decline. Chinese manufacturers Xiaomi, Oppo and Vivo rounded out the top five, all seeing double digit increases, y-o-y.

Image Credits:

The category is expected to see a rebound this year, after suffering declines due first to supply chain concerns and then larger economic issues, stemming from the pandemic.

“The introduction of COVID-19 vaccines is also boosting business confidence for 2021, allowing them to plan and invest,” analyst Ben Stanton says of the figures. “Going forwards, there will be obvious economic ripple effects as government stimulus fades, and there are ongoing concerns around new virus strains. Overall though, sentiment in the industry is positive, and 2021 will see the smartphone market rebound after a 7% decline in 2020.”

Another report from Canalys notes more positive news for the PC market, showing a 35% y-o-y increase, courtesy of tablet and Chromebook sales.

Not even 5G could rescue smartphone sales in 2020

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Robinhood and Reddit top the App Store, as trading apps surge following GameStop mania

Published January 28, 2021

The GameStop mania didn’t just drive up the stock price of a declining video game retailer, it’s also sent trading apps and others to the top of the App Store, due to record-breaking downloads. Today, the popular trading app Robinhood has become the No. 1 app overall on the App Store for the first time, followed by No. 2 Reddit, home to the r/wallstreetbets forum which drove the push to buy GameStop.

Neither app had reached as high a chart position before, according to data from Apptopia.

The app store intelligence firm also found that Robinhood had its best day ever in terms of single-day downloads on Wednesday, Jan. 27, 2021 when 120,000 new users downloaded the stocks app for the first time across both iOS and Android. Robinhood also broke records for its highest number of daily active users on mobile at 2.6 million.

Meanwhile, online forum site Reddit broke its download record for its mobile app, with 199,000 single-day downloads on iOS and Android, Apptopia estimates, while also climbing to No. 2 on the Overall Top Charts on the U.S. App Store.

But the frenzy around GameStop and the revenge of the retail trader is boosting other, more traditional trading apps, as well. Apps like TD Ameritrade, Webull, Fidelity, and E*TRADE have benefited from the situation, with record-breaking daily users and higher chart rankings.

All four apps on Wednesday achieved their highest-ever chart position to date on the U.S. App Store, with Webull at No. 45 Overall, followed by TD Ameritrade at No. 53, E*TRADE at No. 113, and Fidelity at No. 178. (App Annie sees Webull closing Wednesday even higher — at No. 30 on iPhone. Before, it hadn’t even ranked in the top 100 free iPhone apps.)

Webull also recorded its highest number of daily active users yesterday, with 952,000, while TD Ameritrade saw a record 444,000 daily active users and Fidelity had a record of 429,000 Apptopia found.

Combined, the four apps saw 863,000 total downloads on Wednesday (Webull: 39K; TD Ameritrade: 24K; E*TRADE: 11K; and Fidelity: 12.3K).

It’s unclear how long the trading app mayhem will continue, as Robinhood has already halted the trading of “meme stocks” like GameStop, AMC Entertainment, BlackBerry, and Bed, Bath & Beyond, Koss Corporation, Express, Nokia and Naked Brand.

That hasn’t sat well with Robinhood users, who are now in the processing of assailing the app with 1-star reviews as a result, and encouraging others to the do the same.

Surprisingly, the Square-owned Cash App hadn’t yet gained from the GameStop insanity this week, Apptopia found. But it does appear to now be struggling as the Robinhood crowd began the search for another stock trading tool. This morning, Cash App’s Twitter account bio reads it’s looking into an issue with Cash App that’s “delaying some orders.”

App Annie reports some slight movement today on Cash App,as it just jumped from No. 14 overall to No. 12.

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