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4-year founder vesting is dead

Jake Jolis
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Jake Jolis is a partner at Matrix Partners and invests in seed and Series A technology companies including marketplaces and software.
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We recently invested in a team of co-founders who had voluntarily made their own vesting longer than four years. Four-year vesting is the industry standard. Why would someone voluntarily make it longer for themselves?

Their answer: “These days, with companies taking seven to 10 years to reach exit, it would make sense for founders to be on a similar schedule.”

This matters because the four-year co-founder vesting schedule frequently harms startup founders’ interests. Sometimes it damages their startup irreparably.

A growing number of founders are starting to realize this. I talked to quite a few about this over the last two years. Mostly, the “longer-than-four-years-vesting” founders share a similar story as well as logic. Almost always they are repeat, experienced founders. Often scarred by a co-founder separation in their prior startup, they are determined to set things up smarter in their next company.

Importantly, this group of founders assumes they are going to be the ones actually building the company. They created the company. They are the company. Nobody is forcing them out. I suspect founders who already believe this about their own startup will find this post most helpful.

Given the massive implications of co-founder vesting schedules, all startup founders should consider co-founder vesting lengths more carefully and then choose what makes sense for them. You make this decision around the time of incorporation but feel the effects over the lifetime of your company.

4-year vesting schedules are anachronistic

As far back as the 1980s, the standard startup vesting schedule was four or five years, with five being more prevalent on the East Coast. Nobody seems to remember a time it was anything different. The closest I’ve gotten to a logical answer on why it’s four years today stretches back to a pre-401(k) era, from before Reagan’s tax reforms in the ’80s. Prior to then, tax rules incentivized big company pension plans to have vesting periods of at least five years.

Startups didn’t offer traditional pension plans. Instead, startups offered employees stock, vesting over four years instead of five as a competitive move. That is all moot today. It has no relevance for startup founders in 2020.

More relevantly, time from founding to exit has gone from four years in 1999 to eight years in 2020. Yet founder vesting remains stuck at four. This is dangerous.

median time to exit

Exit data from U.S. startups with minimum $1 million in venture funding. Image Credits: PitchBook

Hedging against the crash of ineptitude

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Yotascale raises a $13M Series B to help companies track and manage their cloud spends

These days when you found a startup, you don’t go out and buy a rack of servers. And you don’t build an in-house data center team. Instead, you farm out your infrastructure needs to the major cloud platforms, namely Amazon AWS, Microsoft Azure and Google Cloud.

That’s all well and good, but over time, any startup’s cloud setup will become more complex, varied and perhaps multi-provider. Throw in microservices and one can wind up with a big muddle, and an even bigger bill. That’s the problem that Yotascale wants to attack.

And there’s money backing the startup’s progress, including $13 million in new capital. The round, a Series B, was led by Aydin Senkut at Felicis, with participation from other capital pools, including Engineering Capital, Pelion Ventures and Crosslink Capital. Yotascale has now raised $25 million in total.

The funding event caught my eye, as I’ve heard startup CEOs discuss their public cloud spends in somewhat bitter terms; it’s hard for most startups to change infrastructure direction after they get off the ground, which means that as they grow, so too does their outflow of dollars to the major tech companies — the same megacaps that might turn around and compete with the very same startups that are pumping up their revenues and margins.

So spending less on AWS or Azure would be nice for startups. Yotascale wants to be the helper for lots of companies to better understand and attribute that spend to the correct part of their platform or service, perhaps lowering aggregate spend at the same time.

Let’s talk about how Yotascale got to where it is today.

The startup’s CEO, Asim Razzaq, talked TechCrunch through his company’s history, which didn’t get started until after he had wrapped up tenure at both another startup and PayPal.

When he set out to found Yotascale, Razzaq didn’t fire up a deck, raise capital and then get right to building. Instead, he first went out to do customer discovery work. That effort led him to the perspective that current solutions aimed at understanding cloud spend were insufficient and led to data being used against infrastructure teams in arguments for lower spend when it wasn’t a good idea (cutting backup expenses, for example).

During that time he also determined who Yotascale’s target customer is, namely the head of platform engineering at a company.

The startup self-funded for a while, with Razzaq telling TechCrunch that he wanted to be completely sure that he had conviction concerning the project before moving ahead.

After starting to work on Yotascale in mid 2015, the company raised some capital in 2016. It set out to solve the spend attribution problem that companies with public cloud contracts deal with — including having to contend with modern architecture and its related issues — while earning the trust of engineers, according to Razzaq.

From its period of customer discovery to working on product market fit after raising funds from Engineering Capital, Yotascale raised a Series A in mid-2018. Why? Because, Razzaq, told TechCrunch, as ones gains conviction, one must scale their team. And thus more capital was required.

During our chat with the CEO, it was notable how sequential his company-building process has proven. From talking to potential customers, to working to understand who his buyer is, to waiting on scaling the startup’s go-to-market efforts until he was confident in product-market fit, Yotascale seems to follow the inverse of the “raise lots and spend fast and try to win right away” model that became quite popular during the unicorn era.

How did Yotascale know when it found product market fit? According to its CEO, when companies started pulling the startup into their operations, and not the other way around.

Yotascale reported 4x year-over-year annual recurring revenue (ARR) growth at some point this year, though Razzaq was diffident about sharing specifics concerning the metric.

Sticking to the theme of reasonableness and caution, when asked about why his Series B is modest in size, Razzaq said that he was not interested in raising big rounds, and that $13 million is an amount of money that can move his company forward. What’s coming from the company? Yotascale wants to add support for Azure and Google Cloud in addition to its AWS work of today, to pick an example.

(You can find other hints that Yotascale is perhaps more mature than its peers at its current age. For example, in 2018 the company hired a new chief revenue officer, even putting out a release on the matter.)

That’s enough on this particular round. What will prove interesting is how far Yotascale can push its ARR up by the end of Q3 2021. And if it raises again before then.

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Free-to-play gaming giant Roblox confidentially files to go public

The gaming company Roblox announced today that it had confidentially filed paperwork with the SEC to make its public debut.

In February, the company, which operates a free-to-play gaming empire with tens of million of users, was valued at $4 billion after a Series G funding round led by Andreessen Horowitz . The company has raised more than $335 million in venture capital funding, according to Crunchbase.

The company has not detailed the number of shares it plans to offer and furthermore notes in standard legalese that their timely debut is “subject to market and other conditions.” After a slow 2019 for tech IPOs the rebound of public markets in mid-pandemic 2020 has provided an awfully wide window for tech startups reaching for their debuts.

In the games space, we recently saw the debut of Unity Technologies, which makes a popular game engine that developers use to build and monetize gaming titles.

Roblox offers an interesting sell to both consumers and developers, shipping a free-to-play vision of the future which pushes developers away from graphics-intense game design toward building content that can be played on a wide variety of devices. The games company has been more successful than most in translating a first-party experience’s success into a robust developer network. Roblox’s platform has been particularly successful with young audiences.

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Seraphim Capital’s space tech accelerator releases details of its newest Space Camp cohort

The U.K.’s Seraphim Capital, the country’s only space tech accelerator, has released details of its newest cohort as part of its Space Camp programme, timed with the end of World Space Week last week.

4pi Lab
Raised so far: Undisclosed amount / Non-Equity Assistance from Creative Destruction Lab
Description: “4pi Lab is developing a Low-Earth Orbit (LEO) satellite constellation providing real-time, wildfire detection, monitoring and reporting. Their unique sensor gives them the ability to detect wildfires at a 10m resolution globally helping to eradicate major catastrophic wildfire events.”

Clutch Space Systems
Raised so far: £300,000 from FSE Group Enterprise M3 Expansion Loan
Description: “Clutch Space Systems provides software-defined radio (SDR) ground stations for satellite communications. SDR ground station technology improves downlink communications, provides significant cost savings and is far more dynamic, acting as an enabler for the exponentially growing Satcoms market.”

Helix Technologies
Raised so far: N/A
Description: “Helix Technologies – enables precision GPS antennas, providing 10cm level accuracy. Through breakthroughs in manufacturing and RF technology, Helix has developed a new GNSS antenna with a ceramic core capable of precision dynamic position accuracy whilst being space efficient for demanding tel and navigation applications. The design also enables the antenna to be highly immune to reflection off infrastructure and jamming.”

Kinnami
Raised so far: Undisclosed amount / seed from ICE71 Accelerate, 25 June 2020
Description: “Kinnami uniquely secures and optimises data sharing, ongoing data migration and management across distributed systems. Kinnami has created a unique storage and security system, ‘AmiShare’, which fragments and encrypts data. By storing these encrypted fragments across a distributed network of devices, it can secure data collected on the edge and have application within Satcoms, Defence and Enterprise.”

Starfish Space
Raised so far: Undisclosed amount / seed, 1 December 2019
Description: “Starfish Space aims to create an on-demand, in-space transportation and maintenance service for orbiting satellites. Their proximity Operations software uses a combination of breakthrough orbital mechanics, Machine Vision AI, and a low-thrust electric propulsion system to enable them to use smaller and cheaper space tugs that can operate across orbits. This addresses Counter-space and Mission opportunities.”

Sust Global
Raised so far: N/A
Description: “Sust Global provides real-time geospatial monitoring at an asset-level for analyzing Climate Risk. Their platform uses data from multiple satellites and ground sources to create full-stack ‘Asset-Level Geospatial Analytics’. Sust combines this data with the latest Climate Models and Standardised Risk Assessments to analyze risk and gain quantitative actionable insights for the Financial Services sector.”

Vector Photonics
Raised so far: 2018 secured undisclosed funding from ICURe; 2019 £70,000 of funding from Engineering and Physical Sciences Research Council and £30,000 from a Glasgow company to support that award
Description: “Vector Photonics’ disruptive and revolutionary photonic crystal lasers push the boundaries of what is possible with conventional semiconductor lasers providing comparable costs and flexibility with edge-emitting laser performance. Its unique beam steering capability is industry-changing in Datacoms and aligned markets like LIDAR.”

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What to expect from Apple’s ‘Hi Speed’ iPhone event

For starters, iPhones, of course. That one was easy. The company skipped out on new mobile devices during its recent Apple Watch event, owing to COVID-19-related delays. And, of course, the fact that the events are all pre-taped and virtual now means companies can more easily split them up in ways that were harder to justify when people were expected to fly in from all over the world.

That doesn’t mean we won’t be getting more than just a phone (or, more like multiple phones). While Apple’s been more inclined to host more, smaller events, there’s a decent chance this is going to be the last major event the company hosts before the holidays. That means it’s going to want to get a lot of bang for its buck this time out.

The iPhone 12 is expected to be the centerpiece, of course. The headline feature will almost certainly be 5G. Apple’s been a little behind the curve on that front versus its Android competitors (Samsung, for instance, has several devices with next-gen wireless), though another knock-on effect from the pandemic has been a slower than expected adoption of the tech. So in some ways, Apple’s really right on time here. In the U.S., the company is said to offer both the mmWave and sub-6Ghz 5G technologies. Availability may vary depending on the needs of a given market.

Rumors point to a bunch of different models. After all, gone are the days a company like Apple could just offer up a big premium device and be done with it. Sales for high-end devices were already drying up well before the virus came along to bring smartphone sales to a screeching halt there for a bit. People were already tired of paying in excess of $1,000 for new phones when the ones they already had still did the job perfectly fine.

There are supposedly four sizes arriving. There will be higher-end devices at 6.1 and 6.7 inches, and more budget-minded devices at 6.1 and 5.4 inches. It’s a pretty broad price range, from $699 for the “mini” to $1,099 and up for the Pro Max (sandwiched between are the $799 iPhone 12 and $999 Pro). Along with its recently expanded Watch line, Apple’s all about choice this time out.

Reportedly, however, the company will be bringing OLED tech to all of the models, marking a pretty big change from the days of LCD-sporting budget models. The new models are expected to get a welcome redesign, reportedly returning to something more in line with the iPhone 5. The rounded edges are expected to be dropped in favor of a flatter design, akin to what you get on the iPad Pro.

Other interesting potential additions include the return of the company’s dearly departed MagSafe life for a pair of wireless charging pads that will hopefully finally lay to rest any memory of the failed AirPower experiment. Available for one or two devices, the new pads will reportedly leverage magnets built into the phones to snap them in place.

Music has always been a cornerstone for the company, and it’s long overdue for some updates to audio products. This time out, we may finally get the long-awaited AirPods Studio, an over-ear addition to its line of headphones. The models are set to come in two variations, the largest variation being build materials. A smaller version of its smart speaker could be on the way, as well. The HomePod has long been cost-prohibitive for many, so a mini version could finally make it a bit more accessible.

Another long-rumored addition — AirTags — could finally arrive, as well. Apple’s product-tracking Tile competitor has been in the cards for some time now, but has repeatedly been delayed. That may still be the case — and same goes for a refresh to Apple TV. With the company’s subscription service about to celebrate its year anniversary, it could really use some updated hardware. New Macs with Apple-built chips could be on the table, as well, though the company is reportedly planning one more 2020 event for that big launch.

The event kicks off tomorrow at 10AM PT/1PM ET. We’ll be watching along with you, bringing you the news as it breaks.

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2020 IPO report card: Are tech’s newest public companies meeting expectations?

As the American election looms and the IPO cycle slows some, it’s a good time to review how well the public offerings we have seen thus far have performed.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


Welcome to a Monday morning data rundown discussing how well the latest-stage startups that went public this year have performed after their first day. We’ll be awarding letter grades for post-IPO performance as well, because we can.

So, how did Snowflake do compared to Vroom, both stacked next to JFrog and One Medical? Let’s find out.

Ranking 2020’s IPOs

The fine folks at my former publication Crunchbase News have a running list of 2020 IPOs, which will help us not miss any names. Of course, we’re not going to include every possible deal; there have been some marginal debuts that we can leave behind.

But, the majors matter. So let’s get into them now:

  • Snowflake: It priced above its raised range. Then it went up sharply. From an IPO price of $120 per share, Snowflake is worth $250 per share today. That’s so expensive, compared to the data-focused Snowflake’s revenue, that I can hardly figure out what the hell its price means. The company’s valuation got so rich that we wrote that all tech companies should go public to take advantage of the rich market. This year’s standout IPO. A+.
  • Unity: Unity’s IPO was a source of wonder for those curious about the economics of the gaming world. For us finance dorks, it was also a right corker. We were impressed. So were investors. After setting a $34 and $42 per share IPO range, Unity raised it to $44 and $48 per share. Then it went public at $52 per share. Today it’s worth $94.50 per share, or around $25 billion. It was priced at $6 billion, give or take, in its final private round. A huge win of an IPO. A.

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Snapdocs raises $60M to manage the mortgage process in the cloud

The U.S. economy may be in a precarious state right now, with a presidential election looming on the horizon and the country still in the grips of the coronavirus pandemic. But partly thanks to lower interest rates, the housing market continues to rise, and today a startup that has built technology to help it run more efficiently is announcing a major growth round of funding. 

Snapdocs, which is used by some 130,000 real estate professionals to digitally manage the mortgage process and other paperwork and stages related to buying a home, has raised $60 million in new equity funding on the heels of a few bullish months of business.

In August 2020 — a peak in home sales in the U.S., reaching their highest level in 14 years — the startup saw 170,000 home sales, totaling some $50 million in transactions, closed on its platform. This accounted for almost 15% of all deals done that month in the U.S. Snapdocs is now on track to close 1.5 million deals this year, double its 2019 volume.

On top of this, the startup’s platform is being used by more than 70% of settlement agents nationally, with customers including Bell Bank, LeaderOne Financial Corporation, Googain and Georgia United Credit Union among its customers.

The Series C is being led by YC Continuity (Snapdocs was part of Y Combinator’s Winter 2014 cohort), with existing investors Sequoia Capital, F-Prime Capital and Founders Fund, and new backers Lachy Groom (formerly of Stripe and now a prolific investor) and DocuSign, a strategic backer, also participating.

“Like us they are on a mission to defragment an ecosystem,” King said, referring to it as a “perfect complement” to Snapdocs’ own efforts.

Snapdocs is not talking about its valuation. Aaron King, the founder and CEO, said in an interview that he believes disclosing it is nothing more than “grandstanding” — which is interesting considering that the industry he focuses on, real estate, is all about public disclosures of valuation — but he noted that most of the $103 million that the startup has raised to date is still in the bank, which says something about the company’s overall financial health.

And for some further context, according to PitchBook data estimates, Snapdocs was valued at $200 million in its last round, in October 2019.

Snapdocs’ central premise is that buying a house requires not just a lot of paperwork but also a lot of different parties to be on the same page, so to speak, to set the wheels in motion and get a deal done. There is not just the mortgage (with its multiple parties) to settle; you also have real estate brokers and agents, the home sellers, inspectors and appraisers, the insurance company, the title company and more — some 15 parties in all.

The complexity of all of them working together in a quick and efficient way often means the process of buying and selling a house can be long and costly. And that’s before the pandemic — with the problems associated with social distancing and remote working — hit us.

Snapdocs’ solution has been to build one platform in the cloud that helps to manage the documents needed by all of these different parties, providing access to data and the ability to flag or approve things remotely, to speed the process along. It also has built a number of features, using AI technology and analytics, to also help identify what might be potential issues early on and get them fixed.

King is not your typical tech startup entrepreneur. He began working in mortgages as a notary when he was still in high school — he’s effectively been in the industry for 23 years, he said — and his earliest startup efforts were focused on one aspect of the complexities that he knew first-hand: he saw an opportunity to lean on technology to get notarized signatures sorted out in a legal, orderly and quicker way.

He then got deeper into identifying the possibilities of how tech could be used to improve the larger process, and that is how Snapdocs came into existence.

Given how big the real estate market is — it’s the largest asset class in the world, by many estimates — and how many other industries tech has “disrupted” over the years, it’s interesting that there have been so few attempting to solve it. One of the reasons, it seems, is that there hasn’t been enough of a crossover between tech experts and mortgage experts, and Snapdocs is a testament to the virtues of building a startup specifically around a hard problem that you happen to know really well.

“Most people have identified this as a tech problem, and a lot of the tech — such as e-signatures — has existed for 20 years, but the fragmentation of real estate is the issue,” he said. “We’re talking about a mass constellation of companies and workflow. But we’re obsessed about the workflow of all of these constituents.”

That’s a position that has helped Snapdocs build its standing with the industry, as well as with investors.

“I’ve known the Snapdocs team for many years and have always been amazed by their focus and execution toward bringing each stakeholder in the mortgage process online,” said Anu Hariharan, partner at YC Continuity, in a statement. “In 2013, Snapdocs began as a notary marketplace before expanding horizontally to service title companies and, more recently, lenders. By connecting the numerous parties involved in a mortgage on a single platform, Snapdocs is quickly becoming the “operating system” for mortgage closings. Mortgages, much like commerce, will shift online, bringing improved efficiency and a far better customer experience to the outdated home-closing process.” Hariharan has real estate experience herself and is joining the board with this round.

There have been a number of companies taking new, tech-based approaches to the market to find new and faster ways of doing things, and to open up new kinds of value in the market.

Opendoor, for example, has rethought the whole process of selling and buying houses, taking on a role as a middleman in the process both to take on a lot of the harder work of fixing up a home, and handling all of the difficult stages in the sales process: it’s a role that has recently seen the company catapult to a valuation of $4.8 billion by way of a SPAC-based public listing. An interesting idea, King said, but still only accounting for a small sliver of house sales.

Others, like Orchard, Reonomy and Zumper, have all also raised large rounds on the back of a lot of promise of the market continuing to grow and the opportunity to take part in that process through new approaches. It’s a sign that “safe as houses” still has a place in the market, even with all the other unknowns in play.

“Over the next five years the real estate industry will be completely digitized, so a lot of companies are trying to figure out what their place are, and how to provide value,” King said.

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Quince launches out of beta with new ‘manufacturer-to-customer’ model

The retail landscape is shifting rapidly. While D2C brands have changed the way we shop, Quince is looking to change retail even more dramatically.

The brand, which raised $8.5 million in seed funding last year (and only revealed as much today), is looking to rethink the supply chain with its own line of 700 items, including men’s and women’s apparel, accessories, jewelry and home goods.

After beta testing for a year as “Last Brand,” Quince is launching with a new model called “M2C,” or manufacturer to consumer.

The idea is that Quince goes directly to factories with designs for essentials — not overly patterned or branded items — with an order that can dynamically adjust each week based on demand. As orders start coming in, Quince can work alongside manufacturers to ensure they aren’t over or under producing on a specific SKU. The factory then ships directly to the customer, rather than shipping to a distribution center or store and then again to the final destination.

You might think that factories wouldn’t be as amenable to this model, as they have little to lose when a brand overestimates demand for a SKU and doesn’t sell it through to the customer. But co-founder and CEO Sid Gupta says that this new model is being presented at a pivotal time in retail. Bigger brands, the ones that place orders for 100,000 units, are struggling during the pandemic and shrinking their SKU portfolio.

This leaves the factories with two options: turning to D2C brands or selling through a marketplace like Amazon.

“D2C demand is really fragmented, and most D2C companies are really sub-scale,” said Gupta. “It’s hard to get the efficiency gains out of it. The issue with selling on a marketplace, like Amazon, is you’ve got to compete with hundreds, if not thousands, of other sellers for the same exact good. If you’re a factory that actually makes high-quality goods, and you pay your workers fairly, and you don’t damage the environment, your cost might be 3% or 5%, higher.”

He added that it’s difficult for a factory to have those factors shine through to the customer on Amazon, and more difficult still to learn how to play the advertising game.

This environment has made manufacturers slightly more open to a new way of doing things.

By working directly with factories, Quince says it’s able to bring the cost of luxury items down significantly, selling a cashmere sweater for approximately $50 instead of $150+, as you’ll often find with other brands. Quince works with more than 30 factories across the world.

Gupta says the company has also thought very deeply about sustainability, setting standards around the materials used (are they organic or recycled?), the manufacturing process (is it ecologically sound?), worker pay and more. The company is also looking into giveback programs to share in the profits with the factories and the workers.

The funding from last fall has allowed Quince to beta test last year and grow the team to 16, including co-founders Becky Mortimer and Sourabh Mahajan. Thirty-five percent of employees are female, and 65% are minorities.

The company’s investors include Founders Fund, 8VC and Basis Set Ventures.

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Equity Monday: Twilio buys Segment, and Airkit raises $28M for its low-code platform

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.

So, what was on our minds this morning?

  • Headlines: The Twilio-Segment deal is real, happening and priced about where we expected. Big names in the ex-China internet want to make encryption worse. And, how the United States government would break up Google is becoming clearer by the week.
  • On the Twilio-Segment deal, as TechCrunch and Forbes anticipated, the transaction came in around $3.2 billion, forming something of an API monster from their combined form. As we noted on the show, a lot of investors made a mint from the transaction.
  • Airkit has raised $28 million while in stealth since 2017. What does it do? Per Forbes, it’s a “low-code platform” that wants to “improve customer engagement.” That’s notably similar to what Segment does.
  • Flash Express raised $200 million, as the on-demand and delivery spaces stay hot.
  • And Razorpay raised $100 million at a valuation of $1 billion, meaning that we have just witnessed the birth of yet another fintech unicorn.
  • And, finally, warm public markets mean that the startup and VC game will stay afoot, even if we see a pre-election dip in IPOs.

We hope that you are well and warm and full of good spirits. Back soon!

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 PodcastsOvercastSpotify and all the casts.

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Twilio is buying customer data startup Segment for between $3B and $4B

Sources have told TechCrunch that Twilio intends to acquire customer data startup Segment for between $3 and $4 billion. Forbes broke the story on Friday night, reporting a price tag of $3.2 billion.

We have heard from a couple of industry sources that the deal is in the works and could be announced as early as Monday.

Twilio and Segment are both API companies. That means they create an easy way for developers to tap into a specific type of functionality without writing a lot of code. As I wrote in a 2017 article on Segment, it provides a set of APIs to pull together customer data from a variety of sources:

Segment has made a name for itself by providing a set of APIs that enable it to gather data about a customer from a variety of sources like your CRM tool, customer service application and website and pull that all together into a single view of the customer, something that is the goal of every company in the customer information business.

While Twilio’s main focus since it launched in 2008 has been on making it easy to embed communications functionality into any app, it signaled a switch in direction when it released the Flex customer service API in March 2018. Later that same year, it bought SendGrid, an email marketing API company for $2 billion.

Twilio’s market cap as of Friday was an impressive $45 billion. You could see how it can afford to flex its financial muscles to combine Twilio’s core API mission, especially Flex, with the ability to pull customer data with Segment and create customized email or ads with SendGrid.

This could enable Twilio to expand beyond pure core communications capabilities and it could come at the cost of around $5 billion for the two companies, a good deal for what could turn out to be a substantial business as more and more companies look for ways to understand and communicate with their customers in more relevant ways across multiple channels.

As Semil Shah from early stage VC firm Haystack wrote in the company blog yesterday, Segment saw a different way to gather customer data, and Twilio was wise to swoop in and buy it.

Segment’s belief was that a traditional CRM wasn’t robust enough for the enterprise to properly manage its pipe. Segment entered to provide customer data infrastructure to offer a more unified experience. Now under the Twilio umbrella, Segment can continue to build key integrations (like they have for Twilio data), which is being used globally inside Fortune 500 companies already.

Segment was founded in 2011 and raised over $283 million, according to Crunchbase data. Its most recent raise was $175 million in April on a $1.5 billion valuation.

Twilio stock closed at $306.24 per share on Friday up $2.39%.

Segment declined to comment on this story. We also sent a request for comment to Twilio, but hadn’t heard back by the time we published.  If that changes, we will update the story.

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