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Future tech exits have a lot to live up to

Inflation may or may not prove transitory when it comes to consumer prices, but startup valuations are definitely rising — and noticeably so — in recent quarters.

That’s the obvious takeaway from a recent PitchBook report digging into valuation data from a host of startup funding events in the United States. While the data covers the U.S. startup market, the general trends included are likely global, given that the same venture rush that has pushed record capital into startups in the U.S. is also occurring in markets like India, Latin America, Europe and Africa.

The rapidly appreciating startup price chart is interesting, and we’ll unpack it. But the data also implies a high bar for future IPOs to not only preserve startup equity valuations at their point of exit, but exceed their private-market prices. A changing regulatory environment regarding antitrust could limit large future deals, leaving a host of startups with rich price tags and only one real path to liquidity.

Investors appear to be implicitly betting that the future IPO market will accelerate for a multiyear period at attractive prices.

That situation should be familiar: It’s the unicorn traffic jam that we’ve covered for years, in which the global startup markets create far more startups worth $1 billion and up than the public markets have historically accepted across the transom.

Let’s talk about some big numbers.

Startup valuations: Up, and going upper

To summarize what PitchBook published: Round sizes are going up as valuations go up, and with the latter rising faster than the former, we’re not seeing investors get more ownership despite them having to spend more for deal access.

In the early-stage market, deal sizes are rising as follows:

Image Credits: PitchBook

Prices are going up as well, as the following chart shows:

Image Credits: PitchBook

Which leads to the following decline in equity take rates:

Image Credits: PitchBook

Those charts belie somewhat how quickly venture capital is changing. For example, in 2020, the median early-stage value created between rounds was $16 million (or a 54% relative velocity, if you prefer). In 2021 thus far, it’s $39.4 million (120% relative velocity). And that 2020 figure was a prior record. It just got smashed.

The PitchBook dataset has other superlatives worth noting. Enterprise-focused seed pre-money valuations hit an average of $11 million in the first half of 2021, an all-time high. Early-stage valuations for enterprise-focused startups also hit fresh records — $92.7 million on average, $43 million median — this year after rising consistently since 2011.

And late-stage valuations for enterprise tech startups have gone vertical (chart on the right):

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Pry Financials raises $4.2M to make startup accounting more approachable

Pry Financials wants to make startup finances approachable for its entire team, not just the people in charge of its accounting spreadsheets. The Y Combinator alum announced today it has raised $4.2 million from Global Founders Capital, Pioneer Fund, NOMO VC, Liquid2 and Hyphen Capital. 

Launched in March, Pry now has more than 200 customers and claims it has grown 35% month-over-month since YC’s Demo Day. It was founded by Alex Sailer, Tiffany Wong, Hayden Jensen and Andy Su. 

Before starting Pry, Su was co-founder of InDinero, another YC alum that started as a “Mint for small businesses” before pivoting to a full-service accounting company. InDinero launched while he was still a student at UC Berkeley, and Su eventually became responsible for its financial planning.

A group photo of Pry Financials' team

Pry Financials’ team. Image Credits: Pry Financials

He told TechCrunch that most startups can’t afford accounting software like Workday Adaptive Planning. Instead, they sometimes work with outsourced CFO services, but mostly rely on spreadsheets for everything: three-way forecasts, predicting runway, hiring and contractor budgets and investor updates. 

“I was the chief technical officer and over the years, I also took on the finance function, so it was kind of a dual CTO/CFO role. This was 2010 through 2020 and as technology grew, the engineering and product teams got all sorts of new tools every six months or so, whereas the finance team was just stuck in Excel,” he said. 

Started as a side project while Su was still at InDinero, Pry starts at just $50 a month and replaces those spreadsheets with easy-to-understand dashboards for accounting, financial planning and scenario modeling. The dashboards connect to QuickBooks, Xero or bank accounts, so numbers are continuously updated.

Pry’s clients typically start using it after they raise seed funding, because “for most first-time founders, that’s the most amount of money you have ever received, so you need to spend more time managing it and reviewing it every month. And you’re spending a lot of time on payroll each month,” Su said. Second-time founders, meanwhile, sign up for Pry because they are sick of Excel spreadsheets. 

“Reviewing a spreadsheet is mind-numbingly hard,” said Su. “If you see a number that’s off, you get this weird formula if you didn’t do it yourself. Then you basically have to write a long email to the financial analyst who wrote it and hope that they get back to you before closing time.” For founders who need to update lenders or investors every month, this means a lot of work. 

Pry makes the process more efficient by turning three-way reports — combinations of balance sheets, profit and loss statements and cashflow — into Financial Report dashboards, and then adding features like hiring plans, financial modeling and scenario planning. 

The scenario planning feature serves as a sandbox, giving startup teams and their investors a way to predict how different situations will impact finances: for example, how much runway they have if they raise a certain amount of funding or adjust product pricing.

Fundraising dashboards created with Pry Financials

Fundraising dashboards created with Pry Financials. Image credits: Pry Financials

“We’re improving upon and trying to make decisions about the company in a collaborative way. The analogy we have is Git branching, where you have your main plan, and want to try something like a new revenue model or acquiring a business, but don’t want to mess with your current strategy,” said Su. “What you can do is create a completely new branch with, say, a new pricing strategy. You can make all the changes you want and then switch back to your old branch without worrying about overriding or conflicting with it.” 

Those speculative branches are also continuously updated with the company’s most recent bank account and payroll information, so founders don’t need to recreate them from scratch if they want to revisit a potential scenario later. 

Pry plans to build more complex predictive tools and also integrate industry standards, like statistic and benchmarks, into templates to help founders understand what targets they should set. 

Because Pry is easier to manage than a set of Excel spreadsheets, Su said it’s helped startups spot important things. For example, one founder was able to find a way to save $15,000 by catching a tax issue. Pry also helps everyone at a startup understand its finances’ even if they haven’t worked with accounting spreadsheets before. The platform will add roles and permissions soon, so founders can give or restrict access to different people, like leaders of specific departments. 

Su said Pry does not compete with the accounting services many startups rely on until they can hire a head of finance, but makes it easier for startups to collaborate with them since they can share their dashboards. 

“Usually early on, you can outsource to a CFO firm. That’s the norm in the business and it works pretty well for most companies. You get a part-time CFO to work really hard for a month and get your fundraising structure done,” said Su, adding “we fit into that ecosystem well.” 

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How one founder aims to bring researchers and food producers together around cultured meat

When Clarisse Beurrier was getting her education in chemical engineering and biotechnology, she already knew she wanted to make a difference; hence her participation in Effective Altruism Cambridge, an organization dedicated to helping smart and capable people target their philanthropic urges at the problems that will have the biggest actual impact on the world. She’s now a co-founder at Animal Alternative Technologies, a startup aiming to expedite the commercialization of cultured — aka “lab-grown” — meat.

Clarisse joined us for this week’s episode of Found, our interview podcast where we speak to a different founder every week. We talk about what Clarisse learned about the cultured meat and animal protein alternative industry from her work experience at a couple of startups, including HigherSteaks, and how that dovetailed with the work she was doing at school to help her identify a crucial gap between science and industry. We get into everything from convincing big, entrenched industry heavyweights to embrace change to the challenges of being a first-time founder right out of school.

We loved our time chatting with Clarisse, and we hope you love yours listening to the episode. And of course, we’d love if you can subscribe to Found in Apple Podcasts, on Spotify, on Google Podcasts or in your podcast app of choice. Please leave us a review and let us know what you think, or send us direct feedback either on Twitter or via email at found@techcrunch.com, or leave us a voicemail at (510) 936-1618. And please join us again next week for our next featured founder.

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Zūm CEO Ritu Narayan explains why equity and accessibility works for mobility services

Getting children to school safely and reliably is a challenge as old as public education itself. But rarely have any entrepreneurs tackled the problem of updating and optimizing one of the nation’s largest legacy transit systems, now nearly a century old. It’s still common to find people at U.S. student transportation hubs speaking into walkie-talkies and wrangling clipboards as they sort passengers into gas-guzzling yellow buses.

Ritu Narayan was working as a product executive at eBay when her two children began attending school. Finding safe and reliable options for getting them to campus was sometimes so difficult that anytime those options would fall out, she would be on the verge of leaving her job.

“We had the minimum viable product, which we expanded upon, built the entire platform, and we kept on going to better places with our solutions.”

Bearing in mind that her mother in India had set aside a career to raise Narayan and her three siblings, she founded Zūm in 2016 with brothers Abhishek and Vivek Garg to optimize routes, create transparency and make school commutes greener; since then, Zūm has operated in several California districts (including San Francisco), as well as in Seattle, Chicago and Dallas. In Oakland, Zūm has optimized routes to reduce the previous bus requirement by 29 percent, with the balance being serviced by midsized vehicles.

Zūm also plans to have a fleet of 10,000 electric school buses by 2025 and is partnering with AutoGrid to transform that fleet into a virtual power plant with the potential capacity to route 1 GW of energy back to the grid.

To get a deeper look into the startup’s plans and hear what Narayan has learned from its journey so far, we discussed the pandemic’s impacts on Zūm’s development, where she thinks the company will be a year from now, and how she convinced investors to back a business model that embraces accessibility and equity.

(Editor’s note: This interview has been edited for clarity and length.)

How did COVID-19 affect your business? What percentage of your business is back now?

It’s funny, because we used to say that student transportation is a recession-proof business, and no matter what, kids are still going to go to school, but the pandemic was the first time in probably the last 100 years when kids across the globe did not go to school. It was an interesting time for us, because overnight, all the rides were closed and we had to focus on what was needed immediately to support our districts and students.

We realized that the school is such an important physical infrastructure that’s not just for education, but students get meals there as well as physical and emotional help. So we helped the school districts with reverse logistics, taking the meals or laptops from the school districts and delivering them to homes, because our software could handle that kind of thing. That was just an interim to make sure the communities settled. Starting last year, rides started coming back around 30%, and this year starting in April, it has been 100% back in the business.

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With more cash and a launch, Vannevar Labs is reconnecting Silicon Valley to its defense industry roots

Silicon Valley was once one of the most productive regions in the country for the defense industry, churning out chips and technologies that helped the United States overtake the Soviet Union during the Cold War. Since then, the region has been known far less for silicon and defense than for the consumer internet products of Google, Facebook and Netflix.

A small number of startups, though, are attempting to revitalize that important government-industry nexus as the rise of China pushes more defense planners in Washington to double down on America’s technical edge. Vannevar Labs is one of this new crop, and it has hit some new milestones in its quest to displace traditional defense contractors with Silicon Valley entrepreneurial acumen.

I last chatted with the company just as it was debuting in late 2019, having raised a $4.5 million seed. The company has been quiet and heads down the past two years as it developed a product and traction within the defense establishment. Now it’s ready to reveal a bit more of what all that work has culminated in.

First, the company officially launched its Vannevar Decrypt product in January of this year. It’s focused on foreign language natural language processing, organizing overseas data and resources that are collected by the intelligence community and then immediately translating and interpreting those documents for foreign policy decisionmakers. CEO and co-founder Brett Granberg said that the product “went from one deployment to a dozen adoptions.”

Second, the company raised a $12 million Series A investment in May from Costanoa Ventures and Point72, with General Catalyst participating. Costanoa and GC co-led the startup’s seed round.

Finally, the company has been on a hiring spree. The team has grown into a crew of 20 employees, and the firm last week brought on Scott Sanders to lead business development. Sanders was one of the earliest employees at Anduril, and had spent several years at the company. Vannevar also added to its board John Doyle, a long-time Palantir employee who was head of its national security business, according to Granberg. Today, the team is equally split between national security folks and technologists, and he says that the team is set to double this year.

Vannevar Labs

Co-founders Nini Moorhead and Brett Granberg of Vannevar Labs. Photo via Vannevar Labs.

With a few years of hindsight, Granberg says that he has refined what he considers the best model for defense tech startups to break into the hardscrabble market at the Pentagon and across Northern Virginia.

First, there needs to be incredible focus on getting access to actual end users and learning their work. The functions that defense and intelligence personnel perform are completely different from operations in the commercial economy, and trying to translate what works at a large corporation into defense is a fool’s errand. “You need to have both the DNA of understanding new technology and the DNA of deeply understanding a lot of different use cases within DoD,” Granberg said, referencing the Department of Defense.

That has directly informed how Decrypt has developed over time. “We started focusing on the counter-terrorism space, and as the government moved away from counter-terrorism, we started moving to the foreign actors that were important,” he said. “Once we have our first couple of deployments, we are able to iterate very, very quickly.”

He also strongly eschews a popular view in defense procurement circles that there are “dual-use” technologies that can be used equally well in commercial and defense applications. “Some of the most important mission problems where the government spends the most money and has the most interest,” he explained, are also contexts where commercial off-the-shelf products (dubbed COTS in the industry parlance) are least useful. He says startups targeting defense simply cannot split their bandwidth by also trying to learn commercial use cases.

In fact, he went so far to predict that “you are going to see a lot of companies that have raised a lot of money that will fizzle out in the coming years” because they just can’t nail the dual-use model well.

Second, he argues that defense tech startups need to move beyond the model that each company should work on one platform, and instead move to an organizational model where a company offers multiple products to reach scale. Each product has the potential to reach “a couple of hundred million in revenue,” according to Granberg, but it is hard to expand a company’s size if it doesn’t parallelize product development.

To that end, Granberg said that he pushes Vannevar Labs to always be exploring new product lines for growth. “Decrypt is our first product [but]10% of our energy is in new product efforts,” he said. “I can imagine when we are three to four years down the line… it might be nine-10 products.” He said that the one platform approach might have worked for Palantir, which ironically, is the major winner in the defense tech space the last few years. But newer companies like Anduril and Shield AI have been designed around product line expansion.

Finally, noting those other companies, Granberg believes there is something of a collective benefit as each startup makes headway in the defense sector. “There is this theory in our space that we don’t view ourselves as competitors — if one of us does well, we all do well,” he said. Given the varied mission requirements of different agencies and the absolute massive scale of budgets in this field, startups actually have a lot of independent terrain to explore, even if they come up against the big legacy defense contractors on a regular basis.

As for Vannevar Labs, its next goal is to turn its Decrypt product into a program of record, which would guarantee it a certain level of sales and revenue for potentially years into the future. That’s a huge bar to leap, but would be a turning point in the company’s long-term trajectory.

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Announcing the agenda for TechCrunch Sessions: SaaS

TechCrunch Sessions is back!

On October 27, we’re taking on the ferociously competitive field of software as a service (SaaS), and we’re thrilled to announce our packed agenda, overflowing with some of the biggest names and most exciting startups in the industry. And you’re in luck, because $75 early-bird tickets are still on sale — make sure you book yours so you can enjoy all the agenda has to offer and save $100 bucks before prices go up!

Throughout the day, you can expect to hear from industry experts, and take part in discussions about the potential of new advances in data, open source, how to deal with the onslaught of security threats, investing in early-stage startups and plenty more.

We’ll be joined by some of the biggest names and the smartest and most prescient people in the industry, including Javier Soltero at Google, Kathy Baxter at Salesforce, Jared Spataro at Microsoft, Jay Kreps at Confluent, Sarah Guo at Greylock and Daniel Dines at UiPath.

You’ll be able to find and engage with people from all around the world through world-class networking on our virtual platform — all for $75 and under for a limited time, with even deeper discounts for nonprofits and government agencies, students and up-and-coming founders!

Our agenda showcases some of the powerhouses in the space, but also plenty of smaller teams that are building and debunking fundamental technologies in the industry. We still have a few tricks up our sleeves and will be adding some new names to the agenda over the next month, so keep your eyes open.

In the meantime, check out these agenda highlights:

Survival of the Fittest: Investing in Today’s SaaS Market
with Casey Aylward (Costanoa Ventures), Kobie Fuller (Upfront) and Sarah Guo (Greylock)

  • The venture capital world is faster and more competitive than ever. For investors hoping to get into the hottest SaaS deal, things are even crazier. With more nontraditional money pouring into the sector, remote dealmaking now the norm and an increasingly global market for software startups, venture capitalists are being forced to shake up their own operations — and expectations. TechCrunch sits down with three leading investors to discuss how they are fighting for allocation in hot deals, what they’ve changed in their own processes, and what today’s best founders are demanding.

Data, Data Everywhere
with Ali Ghodsi (Databricks)

  • As companies struggle to manage and share increasingly large amounts of data, it’s no wonder that Databricks, whose primary product is a data lake, was valued at a whopping $28 billion for its most recent funding round. We’re going to talk to CEO Ali Ghodsi about why his startup is so hot, and what comes next.

SaaS Security, Today and Tomorrow
with Edna Conway (Microsoft), Olivia Rose (Amplitude)

  • Enterprises face a constant stream of threats, from nation states to cybercriminals and corporate insiders. After a year where billions worked from home and the cloud reigned supreme, startups and corporations alike can’t afford to stay off the security pulse. Find out what SaaS startups need to know about security now, and in the future.

Automation’s Moment Is Now
with Daniel Dines (UiPath), Laela Sturdy (CapitalG) and Dave Wright (ServiceNow)

  • One thing we learned during the pandemic is the importance of automation, and that’s only likely to be more pronounced as we move forward. We’ll be talking to UiPath CEO Daniel Dines, Laela Sturdy, an investor at CapitalG and Dave Wright from ServiceNow about why this is automation’s moment.

Was the Pandemic Cloud Productivity’s Spark
with Javier Soltero (Google)

  • One big aspect of SaaS is productivity apps like Gmail, Google Calendar and Google Drive. We’ll talk with executive Javier Soltero about the role Google Workspace plays in the Google cloud strategy.

The Future Is Wide Open
with Abby Kearns (Puppet), Aghi Marietti (Kong) and Jason Warner (Redpoint)

  • Many startups today have an open-source component, and it’s no wonder. It builds an audience and helps drive sales. We’ll talk with Abby Kearns from Puppet, Augusto “Aghi” Marietti from Kong and Jason Warner, an investor at Redpoint, about why open source is such a popular way to build a business.

How Microsoft Shifted from On-Prem to the Cloud
with Jared Spataro (Microsoft)

  • Jared Spataro has been with Microsoft for over 15 years and he was a part of the shift from strictly on-prem software to that which is dominated by the cloud. Today he runs one of the most successful SaaS products out there, and we’ll talk to him about how Microsoft made that shift and what it’s meant to the company.

How Startups are Turning Data into Software Gold
with Jenn Knight (Agentsync), Barr Moses (Monte Carlo) and Dan Wright (DataRobot)

  • The era of big data is behind us. Today’s leading SaaS startups are working with data, instead of merely fighting to help customers collect information. We’ve collected three leaders from three data-focused startups that are forging new markets to get their insight on how today’s SaaS companies are leveraging data to build new companies, attack new problems and, of course, scale like mad.

What Happens After Your Startup Is Acquired
with Jyoti Bansal (Harness), Nick Mehta (GainSight) and Jewel Burkes Solomon (Partpic)

  • We’ll speak to three founders about the emotional upheaval of being acquired and what happens after the check clears and the sale closes. Our panel includes Jyoti Bansal who founded AppDynamics, Jewel Burkes Solomon, who founded Partpic and Nick Mehta from GainSight.

Fireside Chat
with Jay Kreps (Confluent)

  • Confluent, the streaming platform built on top of Apache Kafka, was born out of a project at LinkedIn, and rode that from startup to IPO. We’ll speak to co-founder and CEO Jay Kreps to learn about what that journey was like.

We’ll have more sessions and names shortly, so stay tuned. But get excited in the meantime, we certainly are.

Pro tip: Keep your finger on the pulse of TC Sessions: SaaS. Get updates when we announce new speakers, add events and offer ticket discounts.

Why should you carve a day out of your hectic schedule to attend TC Sessions: SaaS? This may be the first year we’ve focused on SaaS, but this ain’t our first rodeo. Here’s what other attendees have to say about their TC Sessions experience.

“TC Sessions: Mobility offers several big benefits. First, networking opportunities that result in concrete partnerships. Second, the chance to learn the latest trends and how mobility will evolve. Third, the opportunity for unknown startups to connect with other mobility companies and build brand awareness.” — Karin Maake, senior director of communications at FlashParking.

“People want to be around what’s interesting and learn what trends and issues they need to pay attention to. Even large companies like GM and Ford were there, because they’re starting to see the trend move toward mobility. They want to learn from the experts, and TC Sessions: Mobility has all the experts.” — Melika Jahangiri, vice president at Wunder Mobility.

TC Sessions: SaaS 2021 takes place on October 27. Grab your team, join your community and create opportunity. Don’t wait — jump on the early bird ticket sale right now.

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Givz raises $3M in seed funding to make donations a marketing tool for businesses

Givz, which has developed an API-powered platform that gives brands a way to convert discounts into donations, has raised $3 million in seed funding.

Eniac and Accomplice co-led the financing for the New York-based startup. Additional investors include Supernode Ventures, Claude Wasserstein of Fine Day, Phoenix Club and Dylan Whitman.

Givz was founded in 2017 to make charitable giving more accessible and convenient for the masses. In March 2020, right before the COVID-19 pandemic hit, the company pivoted from B2C to B2B and used the technology rails it had built to create the e-commerce marketing platform that Givz is today.

The company aims to drive “full-price purchasing behavior” by giving consumers the ability to convert the money they would be saving if getting a discount, and donating it to their favorite charities. 

Prior to the funding, Givz had been working with more than 80 enterprise, mid-market and SMB retail and e-commerce clients such as H&M, Tom Brady’s TB12, Seedlip and Terez, and accumulated more than 40,000 individual users. Since the shift last year, the company has helped drive more than $1 million to 1,100 charities, according to CEO and founder Andrew Forman.

It just launched on Shopify, which Forman says will give the startup access to the 1.7 million retailers that use Shopify as their e-commerce platform.

Givz operates under the premise that “donation-driven marketing” consistently outperforms discounts and costs less, “making it an attractive addition” to corporate marketing.

“We are creating a new marketing category and generating the largest sustainable charitable giving platform in the process,” he told TechCrunch. 

An example of a company using Givz can be found in Tervis, which offered customers “For every $50 you spend, you’ll receive $15 to give to the charity of your choice.” 

“They used Givz technology to allow consumers to choose the charity of their choice and make a turnkey disbursement to hundreds of charities,” Forman explained. “They saw a 20% lift in website conversion and a 17% increase in average order value as a result of this offer.”

Image Credits: Givz

Currently, Givz has eight employees with plans to more than double that number over the next year.

The company plans to use the new capital toward that hiring, and to do some marketing of its own.

“We also want to explore the full potential around the consumer behavior data we collect,” Forman said.

In the short term, Givz is focused on “Shopify growth” with direct to consumer brands.

“But we have successful use cases and huge potential with enterprise retailers and financial institutions,” Forman told TechCrunch. “In the future, we have our sights set on restaurants, the gaming industry and global expansion. I believe that using personalized donations to incentivize consumer behavior has endless application across industries, verticals and continents.”

Eniac partner Vic Singh said that there’s been a trend of brands experimenting with different ways to target the socially conscious consumer. 

“We believe Givz’s donation-driven marketing platform offers brands the best way to attract the socially conscious consumer while elevating their brand, moving more inventory and driving increased order value rather than simplistic traditional discounting,” he added.

Accomplice’s TJ Mahony said that both he and Singh believed SMS would emerge as a new marketing category, which led to early investments in Attentive and Postscript, respectively.

“We both saw a similar opportunity with Givz,” he wrote via e-mail. “Discounting is a well worn marketing muscle, but it’s detrimental to the brand, margins and customer expectations. We believe continuous impact marketing becomes the alternative to discounting and marketers will begin to build teams and budget around thoughtful and persistent giving strategies.”

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Lux Capital’s Deena Shakir is helping judge Startup Battlefield at this year’s Disrupt

Deena Shakir is a partner at Lux Capital, where she looks to invest in technologies that are streamlining analog industries while also improving lives and livelihoods. Among the companies she has backed, for example, are Shiru, which is leveraging computational design to create enhanced proteins to help feed the world; and AllStripes, which aggregates and analyzes medical records, then sells the de-identified data to pharma companies to help them develop medicines.

It’s not a surprise that Shakir is focused on empowering people. Shakir’s father is a psychiatrist and as she once told us, “for a hot minute, I thought I was going to be a doctor myself.” Instead, after attending Harvard, then Georgetown’s School of Foreign Service, she wound up working for the State Department during the Obama administration, then headed to Google. She would stay for the next seven years, spending the last of them with GV, Google’s venture unit. There, her work revolved in part around some of the alternative protein companies in GV’s portfolio. Then, in 2019, she was poached by Lux.

Indeed, while Shakir might have once imagined working with people on an individual basis, she has become an increasingly sought-after investor in startup teams, which is why we couldn’t be more excited that she’s able to join us this year for TechCrunch Disrupt. Specifically, we’re thrilled that Shakir will be judging our Startup Battlefield competition, the centerpiece of Disrupt every year and oftentimes a life-changing event for the winning team — and often runners-up, too. Consider that past winners include Vurb, Dropbox, Mint and Yammer, while runner-up Cloudflare currently boasts a market cap of $38 billion.

It’s because we take the competition — and our record to date — so seriously that we’re exceedingly thankful to savvy investors like Shakir, who ask the right questions, and make the tough decisions when it comes time to decide which teams to move along.

Want to watch and judge from home? With our entirely virtual event this year, you’re more than welcome to join us from the comfort of your home or office (and let us know what you think of the startups within the many networking forums you’ll find).

To watch this year’s 20+ startups compete for $100,000 — and to interact with more than 100 hours of content and thousands of enthusiastic startup fans — make sure to book your pass to TC Disrupt, happening September 21-23 — all for less than $100.

Secure your seat today.

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Samsung’s Galaxy Z Flip 3 is the foldable to beat

I took a long walk on Saturday. It’s become a routine during the pandemic, a chance to unwind after too many hours indoors, while seeing parts of the city that would otherwise be lost to subway rides in normal years. Saturday was more purpose-driven, heading to a newly opened Trader Joe’s before Henri unleashed itself on the Eastern Seaboard.

Taking respite from the early rain, I found a food court in Long Island City, ordered a shawarma and pulled the Galaxy Z Flip from my pocket. I unfolded the phone, popped the new Galaxy Buds in my ears and watched a baseball game on the MLB.TV app. The Flip really made sense in that moment, open in landscape mode at a 135-degree angle to keep the 6.7-inch screen upright. When the game ended (spoiler, it didn’t end well), I snapped the phone shut, stuck it in my pocket and went on my way.

It doesn’t always come with a piece of new technology, but sometimes you get lucky and have an experience where it just clicks. There were plenty of jokes about the long-ago death of the clamshell when the first Flip arrived. Those won’t be going away anytime soon, of course, but the phone also offered the first sense for many that maybe Samsung was heading in the right direction with its foldable ambitions.

Image Credits: Brian Heater

Setting aside the early flaws with the first Galaxy Fold (we’ve covered them ad nauseum elsewhere), the device is also unwieldy. While it’s true the foldable screen affords you the ability to carry around a screen that might otherwise be impossible, it’s a large device when folded, and the opportunities to unfold don’t readily present themselves. The Flip splits the difference nicely between screen size and portability. In terms of display size, it’s effectively a Galaxy Note that snaps in two and fits nicely in your pocket.

Most of the talk of Samsung mainstreaming foldables has centered on the Galaxy Z Fold — mostly from the company itself. Samsung has made a big to-do about positioning the Fold as its latest flagship — augmenting or, perhaps replacing, the Note in its lineup. The Fold 3 certainly blurs the lines with the addition of S Pen functionality, but the Flip is the much clearer bridge between Samsung’s existing flagships and the foldable future it envisions.

Mainstreaming foldables was always going to be a tricky proposition. Right out of the gate, they were hit with negative coverage over production issues and prices; $2,000 is a lot to pay for a product you essentially have to handle with kid gloves. You shouldn’t have to worry about accidentally damaging your daily driver through normal use. The Flip benefits from the mistakes of earlier fold generations, getting a more robust design and water resistance as a result.

Perhaps even more importantly, however, is pricing. The Galaxy Z Flip is Samsung’s first foldable under $1,000. Now, granted, it’s literally one penny under that threshold — a price point that puts it in line with expensive premium phones from the likes of Samsung and Apple. But in the world of foldables, that’s a really big win. The first couple of generations could — to some degree — survive on novelty alone.

Image Credits: Brian Heater

As more of these devices make their way into the world, utility supersedes novelty. But growing popularity also means scale — and, as a result, price drops. For the first time, buying a Samsung foldable is not the financial equivalent of buying two phones. That’s a much more significant threshold than the Galaxy Fold dropping $200 over its previous generation.

The company noted this week, that “in just 10 days since announcement pre-orders for the Galaxy Z Fold3 and Galaxy Z Flip3 have already surpassed total global Samsung foldables sales in all of 2021, also making it the strongest pre-order for Samsung foldables ever.” There are a lot of factors here, including a lower price, more robust design, the absence of a new Note and an aggressive push to get consumers to preorder. But it’s safe to say the line is, at the very least, trending the right way.

Expectedly, the company’s numbers don’t break down sales in terms of Fold versus Flip. Admittedly, the Fold is more fully featured, and 7.6 inches of screen is better than 6.7 inches of screen, when it comes, to, say, watching a full movie. But for most people in most instances, the Galaxy Flip is a better choice. I can say with no hesitation: The Samsung Galaxy Z Flip is the most mainstream foldable on the market.

If you’re not sold on the importance of foldables, such a statement understandably doesn’t mean much. But for a vast majority of people looking to make the leap to what is increasingly looking like a key part of the mobile future, the Flip is an obvious choice. And while it’s easy to make fun of the clamshell design as a relic of a bygone era, there’s a reason phones went that way in the first place. One assumes a big part of the reason they largely went away is that — until now — smartphones weren’t foldable.

Image Credits: Brian Heater

Samsung gets the design language right here. The Flip 3 is easily the company’s best-looking foldable to date. The dual-color shell is striking. The company sent along a cream color, which I’m not particularly fond of, but the green, lavender and even plain black or white are quite striking. It pairs well with the strip of black that houses the exterior display, which has been bumped from 1.1 to 1.9 inches. It doesn’t sound like a lot, sure, but that’s a healthy increase on a screen this size.

Of course, you’re losing the full exterior screen functionality you get on the Fold. The Flip’s display is effectively a quick-glance secondary screen for notifications. Pull it out, and it shows you the time, date and how much battery you’ve got left. Swipe right and you’ll see your notifications.

Swipe left and you get an alarm or timer, with the option of adding more widgets to the screen, including weather, media playback (effectively audio play/pause) and Samsung Health Metrics. It’s a small list, but one that will no doubt increase if more people pick up the Flip. Swipe down for some quick settings and Swipe up for Samsung Pause.

In a time when many of us are trying to make a concerted effort to minimize our phone use, I appreciate the dichotomy between the two screens. It’s a much clearer line in the sand than the one separating the Fold’s 6.2- and 7.6-inch screens. Phone closed = checking my notifications. Phone open = engagement. When the time comes to open the phone, the Flip is a much easier proposition than the phones. I haven’t quite mastered the art of the one-handed open just yet, but it’s much easier to execute on the fly than the Fold, which is effectively like opening a book. The biggest downside to the form factor in terms of speed is there’s no quick way to fire off a photo.

Image Credits: Brian Heater

Taking photos is far more deliberate, requiring one to open the phone to see the internal view finder. You can, however, snap off some selfies by double-pressing the power button, with the small front-facing screen doubling as a small viewfinder. Swiping to the left toggles between still, while swiping up and down changes the level of zoom. It’s a bit awkward and clunky, but the pair of 12-megapixel cameras (wide and ultra-wide) will get you a much better selfie than most pinhole cameras (including the Flip’s 10 megapixel lens).

Like the Fold, the rear cameras (which are also the front-facing cameras, depending on how you look at it) are largely unchanged since the Flip 2. A dual-camera system can feel almost antiquated in 2021, but for most intents and purposes, they do the trick, coupled with Samsung’s many years of camera software experience. The 22:9 aspect ratio means more than a quarter of the screen is occupied by the controls out of necessity.

The aspect ratio in general merits comment. It’s, like, really, really tall when open. It’s a nice amount of real estate to have when, say, scrolling through Gmail or Twitter. But when watching video, you’ll often encounter pillarboxing — letterboxing on the sides of the screen. The video world simply isn’t ready for 22:9, and quite frankly, it probably won’t ever be.

And then, of course, there’s the seam. It’s right there in the center of the lovely 2640 x 1080, 425 ppi screen. And barring some unforeseen breakthrough in foldable tech, I frankly don’t see it disappearing any time soon. I understand why that might be a deal breaker, though I’ve largely gotten used to it after spending time with these devices.

Like the Fold, the Flip runs on the Snapdragon 888 processor. Predictably, the lower cost comes with less in the way of RAM and storage, at 8 and 128GB on the Flip, to the Fold’s 12 and 256GB. Another $150 will upgrade the storage 256GB here. While Samsung mostly hasn’t skimped much on the internals, the 3,300 mAh battery does fall short.

Battery life is an issue with the Fold and an even bigger problem on the Flip — in fact, it’s the biggest complaint here. Moderate to heavy use is going to require getting near a charging cable before the day is over. Maybe not a huge deal in these pandemic days, but something to consider as we re-enter the world. Certainly long, unplugged plane rides are out of the question.

Image Credits: Brian Heater

Again, I can totally sympathize with that being a deal breaker. You pay $1,000 for a phone, you want a battery that’s going to get you through a day of use, worry-free. And certainly it’s something for Samsung to focus on in gen four.

As it stands, the Galaxy Z Flip 3 has the benefit of previous generations, with a stronger aluminum frame, improved screen protector and IPX8 water resistance (no dust resistance rating, for reasons outlined in the Fold review). It’s not a perfect phone, but it’s a strong sign of how far Samsung’s foldables have come in three generations, coupled with a sub-$1,000 price point.

The device is likely to be second fiddle as the company continues to push the Fold as its flagship foldable. But for most people looking to enter the world of foldable phones, the Flip is the easy choice.

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How Cisco keeps its startup acquisition engine humming

Enterprise startups have several viable exit strategies: Some will go public, but most successful outcomes will be via acquisition, often by one of the highly acquisitive large competitors like Salesforce, Microsoft, Amazon, Oracle, SAP, Adobe or Cisco.

From rivals to “spin-ins,” Cisco has a particularly rich history of buying its way to global success. It has remained quite active, acquiring more than 30 startups over the last four years for a total of 229 over the life of the company. The most recent was Epsagon earlier this month, with five more in its most recent quarter (Q4 FY2021): Slido, Sedona Systems, Kenna Security, Involvio and Socio. It even announced three of them in the same week.

It begins by identifying targets; Cisco does that by being intimately involved with a list of up to 1,000 startups that could be a fit for acquisition.

What’s the secret sauce? How it is going faster than ever? For startups that encounter a company like Cisco, what do you need to know if you have talks that go places with it? We spoke to the company CFO, senior vice president of corporate development, and the general manager and executive vice president of security and collaboration to help us understand how all of the pieces fit together, why they acquire so many companies and what startups can learn from their process.

Cisco, as you would expect, has developed a rigorous methodology over the years to identify startups that could fit its vision. That involves product, of course, but also team and price, all coming together to make a successful deal. From targeting to negotiating to closing to incorporating the company into the corporate fold, a startup can expect a well-tested process.

Even with all this experience, chances are it won’t work perfectly every time. But since Cisco started doing M&A nine years into its history with the purchase of LAN switcher Crescendo Communications in 1993 — leading to its massive switching business today — the approach clearly works well enough that they keep doing it.

It starts with cash

If you want to be an acquisitive company, chances are you have a fair amount of cash on hand. That is certainly the case with Cisco, which currently has more than $24.5 billion in cash and equivalents, albeit down from $46 billion in 2017.

CFO Scott Herren says that the company’s cash position gives it the flexibility to make strategic acquisitions when it sees opportunities.

“We generate free cash flow net of our capex in round numbers in the $14 billion a year range, so it’s a fair amount of free cash flow. The dividend consumes about $6 billion a year,” Herren said. “We do share buybacks to offset our equity grant programs, but that still leaves us with a fair amount of cash that we generate year on year.”

He sees acquisitions as a way to drive top-line company growth while helping to push the company’s overall strategic goals. “As I think about where our acquisition strategy fits into the overall company strategy, it’s really finding the innovation we need and finding the companies that fit nicely and that marry to our strategy,” he said.

“And then let’s talk about the deal … and does it make sense or is there a … seller price point that we can meet and is it clearly something that I think will continue to be a core part of our strategy as a company in terms of finding innovation and driving top-line growth there,” he said.

The company says examples of acquisitions that both drove innovation and top-line growth include Duo Security in 2018, ThousandEyes in 2020 and Acacia Communications this year. Each offers some component that helps drive Cisco’s strategy — security, observability and next-generation internet infrastructure — while contributing to growth. Indeed, one of the big reasons for all these acquisitions could be about maintaining growth.

Playing the match game

Cisco is at its core still a networking equipment company, but it has been looking to expand its markets and diversify outside its core networking roots for years by moving into areas like communications and security. Consider that along the way it has spent billions on companies like WebEx, which it bought in 2007 for $3.2 billion, or AppDynamics, which it bought in 2017 for $3.7 billion just before it was going to IPO. It has also made more modest purchases (by comparison at least), such as MindMeld for $125 million and countless deals that were too small to require them to report the purchase price.

Derek Idemoto, SVP for corporate development and Cisco investments, has been with the company for 100 of those acquisitions and has been involved in helping scout companies of interest. His team begins the process of identifying possible targets and where they fall within a number of categories, such as whether it allows them to enter new markets (as WebEx did), extend their markets (as with Duo Security), or acqui-hire top technical talent and get some cool tech, as they did when they purchased BabbleLabs last year.

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