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Daily Crunch: TikTok’s CEO resigns

Published August 27, 2020

Turmoil continues at TikTok, Salesforce lays off 1,000 people and Warby Parker is now valued at $3 billion. This is your Daily Crunch for August 27, 2020.

The big story: TikTok’s CEO resigns

Kevin Mayer, the former Disney executive who joined TikTok as CEO just over 100 days ago, announced yesterday that he’s resigning. While Mayer was likely brought on to reassure U.S. legislators about the app’s Chinese owners, it seems he wasn’t expecting this level of conflict, with President Donald Trump signing an executive order that would ban TikTok in the U.S. unless it’s sold to another company.

“We appreciate that the political dynamics of the last few months have significantly changed what the scope of Kevin’s role would be going forward, and fully respect his decision,” a TikTok spokesperson said in a statement. “We thank him for his time at the company and wish him well.”

As for which company might acquire TikTok, Walmart has confirmed that it’s interested in teaming up with Microsoft to acquire the popular video app.

The tech giants

Salesforce confirms it’s laying off around 1,000 people in spite of monster quarter — Salesforce says it’s “reallocating resources to position the company for continued growth.”

Google Assistant app now uses your searches to make personalized recommendations — Those recommendations could include podcasts, restaurants, recipes and more.

Facebook isn’t happy about Apple’s upcoming ad tracking restrictions — The company says Audience Network revenue could decline by more than 50%.

Startups, funding and venture capital

Warby Parker, valued at $3 billion, raises $245 million in funding — The eyewear startup has launched a telehealth service for New York customers, allowing them to extend an existing glasses or contacts prescription.

Instacart faces lawsuit from DC attorney general over ‘deceptive’ service fees — The suit alleges that Instacart misled customers into thinking the 10% service fee was a tip for the delivery person.

Narrative raises $8.5 million as it launches a new data marketplace — The goal is to make buying data as easy as buying something on Amazon.

Advice and analysis from Extra Crunch

Alexa von Tobel: Eliminating risk is the key to building a startup during an economic downturn — Von Tobel says that one of the most important exercises in forming LearnVest was writing out a business plan.

To reach scale, Juni Learning is building a full-stack edtech experience — The startup’s path to $10 million in annual recurring revenue is inspired by Peloton, not Kumon.

What can growth marketers learn from lean product development? — Andrea Fryrear argues that marketers should begin creating minimum viable campaigns.

(Reminder: Extra Crunch is our subscription membership program, which aims to democratize information about startups. You can sign up here.)

Everything else

A faster, easier, cheaper way of going public — The latest episode of Equity discusses direct listings and SPACs.

Here’s how you can get a second shot at Startup Battlefield — Your second chance comes in the form of two Wild Card entries for the upcoming Battlefield at Disrupt.

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.

KitchenMate makes it easy to cook fresh meals at work

Published August 27, 2020

KitchenMate is a Toronto-based startup promising businesses a fresh approach to feeding their employees.

The startup has raised $3.5 million in seed funding led by Eniac Ventures and Golden Ventures, with participation from FJ Labs and Techstars. It’s also expanding into the United States.

Founder and CEO Yang Yu said KitchenMate was founded with the goal of providing “healthy meals at an affordable cost.” The solution he and his team developed combines refrigerated, tamper-proof “smart meal-pods” containing fresh, prepared meals that are then heated in a “smart cooker.”

You might think a pandemic is the wrong time for this idea, since so many companies are still working from home. And Yu acknowledged that some of KitchenMate’s most likely customers (such as tech companies) don’t need the product right now.

At the same time, he said there are many “old-school companies” in industries like manufacturing, distribution and essential services that can’t operate that way — and in those sectors, business is “booming.”

“[Before the pandemic,] it was a nice-to-have for a lot of companies that care about employees and want to offer them a healthy meal,” he said. “It’s become a must-have for a lot of companies now that everything is closed.”

In other words, Yu said that with many restaurants and other businesses shuttered by the pandemic, KitchenMate has emerged for some employers as “the only option.” He also said it’s being used by hospitals as an efficient way to prepare healthy meals for patients.

Without a KitchenMate Smart Cooker at home, I can’t vouch for the quality of the food, but Yu showed me how he prepared a meal in the KitchenMate office: He opened the refrigerator, removed a Smart Meal-Pod and scanned it with his phone, then loaded the Meal-Pod into the cooker. A few minutes later, a tasty-looking lunch of rice, curry, vegetables and tofu was ready for him.

KitchenMate offers the equipment for sale or rent to employers. The meals are then purchased by employees via smartphone app at an average cost of $9, usually with employees paying $7 and employers subsidizing the rest.

KitchenMate delivers new Meal-Pods once or twice a week, and teams can influence what gets delivered by voting on the dishes that they want. The startup also offers an option where staff members can prepare the meals for employees, rather than having everyone raid the refrigerator and making meals for themselves.

Yu suggested that as offices reopen, people will want to avoid crowded cafeterias, and they’ll choose KitchenMate’s bulk deliveries over having lots of individual deliveries going in and out of buildings and elevators.

Yu acknowledged that there is a risk of a “backlog” in the kitchen if everyone wants their lunch at the same time, but he said KitchenMate tries to alleviate this issue by allowing people to pre-order their meals in the app.

“We create more flexibility around people eating for a lot of companies who either can’t afford catering or, post-COVID, it’s just not possible anymore to have shared meals,” he said.

Facebook extends coronavirus work from home policy until July 2021

Box benefits from digital transformation as it raises its growth forecast

Published August 27, 2020

Box has always been a bit of an enigma for Wall Street, and perhaps for enterprise software in general. Unlike vendors who shifted to the cloud tools like HR, CRM or ERP, Box has been building a way to manage content in the cloud. It’s been a little harder to understand than these other enterprise software stalwarts, but slowly but surely Box has shifted into a more efficient, and dare we say, profitable public company.

Yesterday the company filed its Q2 2021 earnings report and it was solid. In fact, the company reported revenue of $192.3 million. That’s an increase of 11% year over year and it beat analyst’s expectations of $189.6 million, according to the company. Meanwhile the guidance looked good too, moving from a range of $760 to $768 million for the year to a range of $767 to $770 million.

All of this points to a company that is finding its footing. Let’s not forget, Starboard Value bought a 7.5% stake in the company a year ago, yet the activist investor has mostly stayed quiet and Box seems to be rewarding its patience as the pandemic acts as a forcing function to move customers to the cloud faster — and that seems to be working in Box’s favor.

Let’s get profitable

Box CEO Aaron Levie has not been shy about talking about how the pandemic has pushed companies to move to the cloud much more quickly than they probably would have. He said as a digital company, he was able to move his employees to work from home and remain efficient because of tools like Slack, Zoom, Okta and, yes, Box were in place to help them do that.

All of that helped keep the business going, and even thriving, through the extremely difficult times the pandemic has wrought. “We’re fortunate about how we’ve been able to execute in this environment. It helps that we’re 100% SaaS, and we’ve got a great digital engine to perform the business,” he said.

He added, “And at the same time, as we’ve talked about, we’ve been driving greater profitability. So the efficiency of the businesses has also improved dramatically, and the result was that overall we had a very strong quarter with better growth than expected and better profitability than expected. As a result, we were able to raise our targets on both revenue growth and profitability for the rest of the year,” Levie told TechCrunch.

Let’s get digital

Box is seeing existing customers and new customers alike moving more rapidly to the cloud, and that’s working in its favor. Levie believes that companies are in the process of reassessing their short and longer term digital strategy right now, and looking at what workloads they’ll be moving to the cloud, whether that’s cloud infrastructure, security in the cloud or content.

“Really customers are going to be trying to find a way to be able to shift their most important data and their most important content to the cloud, and that’s what we’re seeing play out within our customer base,” Levie said.

He added, “It’s not really a question anymore if you’re going to go to the cloud, it’s which cloud are you going to go to. And we’ve obviously been very focused on trying to build that leading platform for companies that want to be able to move their data to a cloud environment and be able to manage it securely, drive workflows on it, integrate it across our applications and that’s what we’re seeing,” he said.

That translated into a 60% increase quarter over quarter on the number of large deals over $100,000, and the company crossed 100,000 customers globally on the platform in the most recent quarter, so the approach seems to be working.

Let’s keep building

As with Salesforce a generation earlier, Box decided to build its product set on a platform of services. It enabled customers to tap into these base services like encryption, workflow and metadata and build their own customizations or even fully functional applications by taking advantage of the tools that Box has already built.

Much like Salesforce president and COO Bret Taylor told TechCrunch recently, that platform approach has been an integral part of its success, and Levie sees it similarly for Box. calling it fundamental to his company’s success, as well.

“We would not be here without that platform strategy,” he said. “Because we think about Box as a platform architecture, and we’ve built more and more capabilities into that platform, that’s what is giving us this strategic advantage right now,” he said.

And that hasn’t just worked to help customers using Box, it also helps Box itself to develop new capabilities more rapidly, something that has been absolutely essential during this pandemic when the company has had to react quickly to rapidly changing customer requirements.

Levie is 15 years into his tenure as CEO of Box, but he still sees a company and a market that is just getting started. “The opportunity is only bigger, and it’s more addressable by our product and platform today than it has been at any point in our history. So I think we’re still in the very early stages of digital transformation, and we’re in the earliest stages for how document and content management works in this modern era.”

Aaron Levie: ‘We have way too many manual processes in businesses’

A faster, easier, cheaper way of going public

Published August 27, 2020

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!

Equity drops every Monday at 7:00 a.m. PT and Friday at 6:00 a.m. PT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

To reach scale, Juni Learning is building a full-stack edtech experience

Published August 27, 2020

Juni Learning connects kids with math and science tutors, but co-founder Vivian Shen would prefer not to be lumped in with other edtech startups, despite the sector’s pandemic-born boom.

“We’re not just in the middle to take a few percentage points off of each side and pretend like we’re delivering value,” said Shen. “That’s not scalable.”

Semantics aside, Shen’s words underscore a truth about live tutoring businesses: Anyone can start one. All it takes is smart friends, eager students and a platform to bring them together.

The low barrier of entry has given rise to a slew of new startups. Some view edtech as a marketplace play, others go the gig economy route, and some are trying to make tutoring as simple as calling an Uber — on-demand and only when you need it.

Juni Learning, co-founded by Shen and Ruby Lee, is entering a fragmented and fatigued market full of better-funded and well-known startups. The startup views itself as a consumer play instead of an edtech startup and raised a $10.5 million Series A back in February to prove it can take a slice of the market.

With only 4,000 active subscribers, Juni Learning is bringing in $10 million in annual run revenue (ARR), compared to $2 million of ARR in March, according to my calculations.

So how is it faring?

A word of warning

In 2005, Andrew Geant was thinking about two-sided gig economy marketplaces. He applied the model to tutoring, thinking he could grow a business from connecting students and tutors online to meet offline. So, Geant and Mike Weishuhn, both recent Princeton graduates, founded Wyzant.

Berbix raises $9M for its identity verification platform

Published August 27, 2020

Berbix, an ID verification startup that was founded by former members of the Airbnb Trust and Safety team, today announced that it has raised a $9 million Series A round led by Mayfield. Existing investors, including Initialized Capital, Y Combinator and Fika Ventures, also participated in this round.

Founded in 2018, Berbix helps companies verify the identity of its users, with an emphasis on the cannabis industry, but it’s clearly not limited to this use case. Integrating the service to help online services scan and validate IDs only takes a few lines of code. In that respect, it’s not that different from payment services like Stripe, for example. Pricing starts at $99 per month with 100 included ID checks. Developers can choose a standard ID check (for $0.99 per check after the basic allotment runs out), as well as additional selfie and optional liveness checks, which ask users to show an emotion or move their head to ensure somebody isn’t simply trying to trick the system with a photo.

While ID verification may not be the first thing you think about in the context of the COVID-19 pandemic, the company is actually seeing increasing demand for its solution now that in-person ID verification has become much harder. Berbix CEO and co-founder Steve Kirkham notes that the company now processes the same number of verifications in a day that it used to do monthly only a year ago.

“The inability to conduct traditional identity checks in person has forced organizations to move online for innumerable use cases,” he says in today’s announcement. “One example is the Family Independence Initiative, a nonprofit that trusts and invests in families’ own efforts to escape poverty. Our software has enabled them to eliminate fraudulent applications and focus on the families who have been economically affected by COVID.”

Berbix co-founder Eric Levine tells me the company plans to use the new funding to expand its team, especially the product and sales department. He also noted that the team is investing heavily in localization, as well as the technical foundation of the service. In addition, it’s obviously also investing in new technologies to detect new types of fraud. Scammers never sleep, after all.

Fondeadora is a Mexican challenger bank that just raised $14 million

Published August 27, 2020

Meet Fondeadora, a fintech startup based in Mexico City that wants to build a full-stack neobank. The company just raised a $14 million Series A round led by Gradient Ventures, Google’s AI-focused venture fund. Founded in 2018, the company already manages 150,000 accounts and is adding $20 million in deposits every month.

Mexico represents a massive opportunity for a challenger bank as many people still rely on cash for most of their transactions. Given that all countries are progressively switching to card and digital payments, it seems like the right time to launch Fondeadora .

Y Combinator, Scott Belsky, Sound Ventures, Fintech Collective and Ignia are also participating in the funding round.

“We launched the first crowdfunding platform in Mexico about 10 years ago,” co-founder and co-CEO Norman Müller told me. “About 50% of card transactions failed in the system.”

That platform was also called Fondeadora. After a deal with Kickstarter, Müller and Fondeadora co-founder René Serrano went back to the drawing board and thought about the problems they had while operating the crowdfunding platform. It became Fondeadora as we know it today, a challenger bank that wants to improve the banking experience in Mexico.

The team traveled across Mexico to find a bank charter that they could use. “We acquired the charter, it was owned by a group of tomato farmers in Mexico. Twenty years ago, the government gave about 10 charters to create financial inclusion,” Müller told me.

The company launched its banking service after that. You can open an account without visiting a branch. You then receive a Mastercard debit card. You can choose to receive notifications after each purchase, lock and unlock your card, send instant transfers to other users and more. There are no monthly subscription fee and no foreign transaction fee.

Up next, Fondeadora wants to democratize savings accounts. “Cash has a great UX and UI. You can touch it, you can store it in your drawer. But as a medium to generate income, it’s terrible,” Müller told me.

In the coming months, you’ll earn interest on your deposits in your Fondeadora account. “We’re investing in government bonds, it’s a very secure type of instruments. In Mexico, you can get 5% or 6% interest rate,” Müller said. The startup could allocate a small portion of deposits to medium-risk investments as well.

Image credits: Fondeadora

Chinese EV startup Xpeng Motors raises $1.5 billion in US public market debut

Published August 27, 2020

Chinese electric vehicle startup Xpeng Inc. raised $1.5 billion through an initial public offering in the U.S. as investor interest in EVs and clean energy outstripped concerns over escalating tensions between the U.S. and China.

The automaker, which is headquartered in Guangzhou, China and has offices in Silicon Valley and San Diego, said in a filing that it sold 99.7 million shares for $15 each, raising about $1.5 billion. The automaker had originally planned to sell 85 million shares with a price guidance of between $11 and $13.

Shares of Xpeng began trading Thursday on the New York Stock Exchange under the ticker symbol XPEV.

Xpeng had raised a total of $1.7 billion from investors, including Chinese e-commerce giant Alibaba and Xiaomi Corp, prior to its Wall Street debut. In July, the company said it had raised around $500 million in a Series C+ round to further develop electric vehicle models aimed at China’s tech-savvy middle-class consumers.

Moving to the public market gives Xpeng access to a far bigger pool of capital, which it will need to compete against an increasingly crowded EV marketplace in China. Xpeng faces competition from Li Auto, Nio, WM Motor and notably, Tesla, which began producing Model 3 sedans at its new Shanghai factory in December 2019.

SHANGHAI, CHINA – 2019/08/25: Customers experiencing a new car at the Chinese automobile manufacturer Xpeng or Xiaopeng Motors store in Shanghai. (Photo by Alex Tai/SOPA Images/LightRocket via Getty Images)

Xpeng has two electric vehicles on the market, the G3 SUV and the P7 sedan. Production of the G3 began in November 2018. As of July 31, Xpeng said it had delivered 18,741 G3 SUVs to customers.

Deliveries of the P7 began in May 2020. The company has delivered 1,966 P7 sedans — a direct competitor to the Tesla Model 3 — as of July 31. Xpeng is also planning a third electric vehicle, which will be another sedan, that will come to market in 2021.

Walmart expresses interest in TikTok, teaming up with Microsoft

Published August 27, 2020

There’s been a flurry of TikTok news today, and the flood doesn’t seem to be letting up.

First was the announcement that Kevin Mayer, who joined the company just a bit more than three months ago, has stepped down overnight.

TikTok CEO Kevin Mayer resigns after 100 days

Now, we are receiving a bunch of deal-related news as well. Walmart has confirmed to multiple news outlets that it has expressed interest in teaming up with Microsoft in a bid for the fast-growing social app. Meanwhile, entertainment news site The Wrap reported that Oracle has placed a bid for the company, targeting a price around $20 billion.

This is a fast-developing story, and we will have more updates to come as we receive them.

TikTok has been heavily in the news since the Trump administration threatened to ban TikTok from the U.S. market unless it sold its U.S. operations to an American company. On August 6, President Trump signed an executive order that gave TikTok’s Beijing-based parent company ByteDance 45 days to make a deal to divest the U.S. operations of its popular video-sharing app. The deadline was later extended until mid-November.

The order arrived at a time of heightened tensions between the U.S. and China, which are battling across a number of fronts outside of tech. Relations have deteriorated over issues like China’s move to assert more authority over Hong Kong with its new national security law, the detention of one million or more ethnic Uighur Muslims in China’s Xinjiang region, trade tariffs, Beijing’s military buildup in the disputed South China Sea and the COVID-19 pandemic.

Tech companies were pulled into this conflict between the two superpowers. Ahead of the proposed TikTok ban, the U.S. government also had tightened its restrictions on China’s Huawei Technologies in recent weeks.

After Trump’s signing of the executive order, TikTok immediately fought back, most recently in the form of a lawsuit against the U.S. government that challenged the legality of the TikTok ban. In the interim, several U.S. tech companies’ names emerged as having had discussions with TikTok about a deal, including Microsoft, Twitter, Google, Oracle and even Walmart. Oracle on Thursday morning was said to be nearing a deal with the White House that would comprise $10 billion of cash, $10 billion in Oracle stock and 50% of annual TikTok profit to flow back to ByteDance.

The actual risk presented by the TikTok app has remained in dispute. Trump’s executive order declared the social app, and other apps owned by Chinese companies that have entered the U.S., a threat to “the national security, foreign policy, and economy of the United States.” The concern is that the app could collect data on U.S. citizens, including location, browsing and search histories. Critics believe TikTok could serve as a conduit for the Chinese Communist Party’s propaganda and censorship arm, as well.

The TikTok app itself has become hugely popular in the U.S in recent years. Facebook CEO Mark Zuckerberg even declared TikTok’s existence one of the reasons why Facebook shouldn’t be considered a monopoly, in his testimony before the U.S. House Judiciary Committee in July.

According to data from app store intelligence firm Sensor Tower, TikTok has been download nearly 194 million times in the U.S., which is 8.2% of TikTok’s total downloads, including its Chinese version, Douyin. The U.S. also accounted for nearly $111 million, or 13%, of TikTok’s total ~$840 million in revenue.

Mobile data and analytics firm App Annie said TikTok had 52 million weekly active users in the U.S. during the week of August 9-15, 2020, and this number continues to climb. Its weekly active user count in July (July 15-25) was up 75% from just the beginning of 2020, in fact. It also became the top grossing app on the iOS App Store globally in the second quarter, due to increased consumer usage of mobile apps during the pandemic. It consistently ranks in the top five for downloads across both the U.S. iOS App Store and Google Play.

Time spent in the app has grown as well, from 5 hours, 4 minutes per month as of August 2018 to 16 hours, 20 minutes per month as of December 2019.

Despite all that success though, TikTok’s next steps remain hazy. It needs to fight its lawsuit, net approval from U.S. regulatory agencies and also continue to build trust with users in the throes of an acrimonious election season. We’ll have more developments as this story unfolds.

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

Published August 27, 2020

It’s time again to start warming up your pitching arm. Our next Pitchers & Pitches session takes place next week on September 2. Register today!

Pitchers & Pitches sessions combine critique and competition with a focus on helping early-stage startup founders create an iron-clad, 60-second pitch. Here’s how it works. Everyone is welcome to attend, but only founders exhibiting in Digital Startup Alley at Disrupt 2020 will be invited to pitch.

We’ll feature five startups from Digital Startup Alley to present their best, rapid-fire pitch to a panel of experts. Previous P&P judges have featured leading VCs, including Monique Idlett-Mosley, Jeff Morris Jr., Sydney Thomas and Curtis Rodgers. Who better than top VCs to provide constructive feedback on your pitch? They’ll help you cut to the chase and present the essential information in the best possible light.

The viewing audience will choose which of the five startups presented the best pitch, and that lucky team will win a consulting session with cela, a company that connects early-stage startups to accelerators and incubators that can help scale their businesses.

Listen to what the winner of our first Pitchers & Pitches session, Hannah Webb, CEO of Findster Technologies, says about her experience:

Disrupt and Digital Start Up Alley haven’t even officially started yet, and we’ve already seen great benefits. Cela introduced us to multiple accelerators in the NYC area and one is a perfect fit for our company’s situation.

Even if you don’t get to pitch, you still get to benefit. Take that top VC advice and apply it to your own business to make your pitch a more effective tool. You need a pitch that impresses, that opens doors and starts conversations. This is a rare opportunity to get advice from the very people you want to attract.

Here are even more reasons to attend Pitchers & Pitches:

Get familiar with the new virtual Disrupt platform before it goes live in September
Watch and interact with the pitch-off event on the virtual main stage
Meet and video network with other attendees
Connect with the five pitchers in their virtual booth in the startup expo

The next Pitchers & Pitches takes place on September 2 at 1 p.m. PT / 4 p.m. ET — Register to see all of the action today. And while you’re at it, get your Disrupt Digital Startup Alley Package so you can start to reap all of the benefits of Disrupt 2020 right away! Get warmed up and ready to throw the first pitch!

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