Security breaches and other activities that cause network surges and outages are all on the rise in the enterprise, and today, a startup called Forward Networks, which has built a clever way to help businesses monitor their network traffic to identify when things are going wrong, has raised a round of $35 million to continue expanding its business to meet that demand.

The money, a Series C, is being led by Goldman Sachs, which in this case is both a strategic and financial investor. David Erickson, the startup’s co-founder and CEO, said the investment bank started out as a customer, and Joshua Matheus, MD for technology at Goldman Sachs, was so pleased with the results that he recommended the bank also invest in the company. Others participating in this round include Andreessen Horowitz, Threshold Ventures (previously DFJ Venture) and A. Capital, the three investors that were behind Forward Networks’ previous round of $16 million in 2017.

Erickson, along with other co-founders Nikhil Handigol, Brandon Heller and Peyman Kazemian, were all Stanford PhDs, and the company’s technology is based around work they did there around mathematical modeling. Here, that concept is applied to a company’s network to create essentially a replica of a company’s network architecture, which is in turn used to simulate individual processes and apps running on the network to figure out how they interact and what would represent “normal” versus “abnormal” behavior, which in turn is applied in real time to monitor the network and predict what might happen on it. This is not a fixing platform per se, but in developer operations, there is a fundamental need and gap in the market for products that help engineers identify what is not working in order to know what to try to fix.

If you are familiar with Honeycomb.io — a DevOps platform for running apps to determine when and where bugs or conflicts might arise (which itself recently raised funding) — this seems to be taking a similar approach, but on a network scale.

Considered together, it seems that we’re starting to see a new wave of services and platforms designed to provide more granular and intelligent pictures of how apps and networks behave in our modern technology landscapes.

Erickson tells me that today, the vast majority of Forward Networks’ customers are using the product to monitor on-premises rather than cloud architectures.

“We launched a public cloud product for AWS towards the end of last year, which today is in use by customers, but the dominant use case for us is on-prem,” Erickson said, who said that while the media (ahem) loves to talk about cloud, in many cases large enterprises have actually been slower to migrate processes in cases where legacy services still work well, and they still harbour distrust of public cloud security and reliability. “We see growth towards the cloud but it’s baby steps.”

The company has been growing steadily; today its network monitoring covers some 75,000 devices. In that context, Goldman Sachs is a significant client, with some 15,000 devices in its network alone.

Looking ahead, Erickson said that the funding would be used in part for R&D and in part to continue its business development. There are a number of other solutions and services out there that have identified the opportunity of providing better network management as a route to identifying security threats and other risks, so that also presents an opportunity for M&A for Forward, although Erickson declined to comment further on that.

“We continue to see the value that Forward Networks’ platform brings to large enterprises running complex networks,” said Bill Krause, board partner at Andreessen Horowitz. “They have solved a critical business problem, which presents a real growth opportunity.”

According to a report by Technomic, the US catering market was worth $58 billion in 2017. Business to business catering (B2B) accounted for nearly $22 billion or 38% of the industry. Social catering...

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Sramana Mitra: It’s a very good strategy. Where you can show ROI easily is where the sales cycle is going to be the fastest. Arijit Sengupta: It’s easier for the champion to go up to the management...

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Contentstack, a startup that offers a headless CMS platform for enterprises, today announced that it has raised a $31.5 million Series A round led by Insight Partners. Existing investors Illuminate Ventures and GingerBread Capital also participated in this round.

The company says that it saw its revenue grow by 4x in the first half of 2019 compared to the same time period last year. Without a baseline, that’s not exactly a meaningful number for a startup founded in 2018, of course, but sales cycles in the enterprise are notoriously long and the company does have a number of marquee customers like Shell, Walmart and Cisco.

The Contentstack founding team, Neha Sampat, Nishant Patel and Matthew Baier, recently sold Built.io to Software AG . “With Contentstack, the opportunity feels even larger, but there is also a strong sense of urgency,” said Sampat when I asked her about why she decided to raise at this point, which comes relatively late for a company with Contentstack’s ambitions. “Being able to do more right now and scale the company’s operations to match the opportunity right in front of us required more resources than the company’s organic growth would provide us.”

Sampat also noted that she believes that brands are now realizing that their customers don’t want billboards but customized experiences across channels. Yet, at the same time, they often don’t know what’s working and how to get the most value out of the content they create.

“The belief that a single platform or product can ‘do it all’ is being replaced with the realization you can do more, better by bringing together the best technologies the market has to offer,” she said. “This wasn’t an option before, because integrations were so complex and clunky. But now, with the emergence of extensible content experience platforms, companies can actually get to market faster using this approach, compared to using a single-vendor approach that wasn’t built for the modern era.”

The company tells me that it is getting traction across industries, but retail, travel/hospitality, sports/entertainment and tech are doing especially well.

Like most companies at the Series A stage, Contentstack says it will use the new funding to scale its sales and marketing team and build out its partner ecosystem and community around the product. Sampat also tells me that the company plans to expand beyond its core regions of the U.S., India and Europe by moving into the APAC region in the first half of 2020, mostly with a focus on Australia and New Zealand.

Germany just hit a new milestone in the space where venture capital and the burgeoning cannabis industry meet.

Berlin startup Demecan has completed a Series A financing round of €7 million to expand its production facility for medical cannabis and the wholesale trade in Germany. It has become the only German company allowed to produce medical cannabis in Germany.

This is a watershed moment for the country and is the first investment in this sector for the private investor network connected to btov Partners (a VC). The other half of the funding came from a single German family office, which is understood to have its roots in the consumer goods sector. Only two other companies, two of them from Canada, were awarded the contract to produce medical cannabis in Germany in May 2019.

btov Partners manages assets of €420 million and has previously invested in tech startups such as Blacklane, Data Artisans, DeepL, Facebook, Foodspring, ORCAM, Raisin, SumUp, Volocopter and XING.

The green light from Germany’s Federal Institute for Drugs and Medical Devices (BfArM) means Demecan will be able to produce at least 2,400 kilograms of dried cannabis flowers over the next four years. Demecan is also active as an importer and wholesaler of medical cannabis and can thus cover the entire value chain. Since the German government allowed cannabis to be prescribed for therapeutic purposes in 2017, demand has outstripped supply.

Jennifer Phan of btov Partners said in a statement: “Demecan operates in a very attractive market at the right time. Germany currently represents the third-largest market for medical cannabis in the world and is on a growth path. We believe that the company has a first-mover advantage in a highly regulated market environment, especially as it is the only German manufacturing and trading company in the European market.”

Dr. Constantin von der Groeben, co-founder of Demecan, added: “In recent years, we have intensively dealt with the market and reached an important milestone by winning the tender process. We are now focusing on further growth and the start of production in 2020.”

All over the globe, the population of people who are aged 65 and older is growing faster than every other age group. According to United Nations data, by 2050, one in six people in the world will be over age 65, up from one in 11 right now. Meanwhile, in Europe and North America, by 2050, one in four people could be 65 or older.

Unsurprisingly, startups increasingly recognize opportunities to cater to this aging population. Some are developing products to sell to individuals and their family members directly; others are coming up with ways to empower those who work directly with older Americans.

BrainCheck, a 20-person, Houston-based startup whose cognitive healthcare product aims to help physicians assess and track the mental health of their patients, is among the latter. Investors like what it has put together, too. Today, the startup is announcing $8 million in Series A funding co-led by S3 Ventures and Tensility Venture Partners.

We talked earlier today with BrainCheck co-founder and CEO Yael Katz to better understand what her company has created and why it might be of interest to doctors who don’t know about it. Our chat has been edited for length and clarity.

TC: You’re a neuroscientist. You started BrianCheck with David Eagleman, another neuroscientist and the CEO of NeoSensory, a company that develops devices for sensory substitution. Why? What’s the opportunity here?

YK: We looked across the landscape, and we realized that most cognitive assessment is [handled by] a subspecialty of clinical psychology called neuropsychology, where patients are given a series a tests and each is designed to probe a different type of brain function — memory, visual attention, reasoning, executive function. They measure speed and accuracy, and based on that, determine whether there’s a deficit in that domain. But the tests were classically done on paper and it was a lengthy process. We digitized them and gamified them and made them accessible to everyone who is upstream of neuropsychology, including neurologists and primary care doctors.

We created a tech solution that provides clinical decision support to physicians so they can manage patients’ cognitive health. There are 250,000 primary care physicians in the U.S. and 12,000 neurologists and [they’re confronting] what’s been called a silver tsunami. With so many becoming elderly, it’s not possible for them to address the need of the aging population without tech to help them.

TC: How does your product work, and how is it administered?

YK: An assessment is all done on an iPad and takes about 10 minutes. They’re typically administered in a doctor’s office by medical technicians, though they can be administered remotely through telemedicine, too.

TC: These are online quizzes?

YK: Not quizzes and not subjective questions like, ‘How do you think you’re doing?’ but rather objective tasks, like connect the dots, and which way is the center arrow pointing — all while measuring speed and accuracy.

TC: How much does it cost these doctors’ offices, and how are you getting word out?

YZ: We sell a monthly subscription to doctors and it’s a tiered pricing model as measured by volume. We meet doctors at conferences and we publish blog posts and white papers and through that process, we meet them and sell products to them, beginning with a free trial for 30 days, during which time we also give them a web demo.

[What we’re selling] is reimbursable by insurance because it helps them report on and optimize metrics like patient satisfaction. Medicare created a new code to compensate doctors for cognitive care planning, though it was rarely used because the requirements and knowledge involved was so complicated. When we came along, we said, let us help you do what you’re trying to do, and it’s been very rewarding.

TC: Say one of these assessments enables a non specialist to determine that someone is losing memory or can’t think as sharply. What then?

YZ: There’s a phrase: “Diagnose and adios.” Unfortunately, a lot of doctors used to see their jobs as being done once an assessment was made. It wasn’t appreciated that impairment and dementia are things you can address. But about one-third of dementia is preventable, and once you have the disease, it can be slowed.  It’s hard because it requires a lot of one-on-one work, so we created a tech solution that uses the output of tests to provide clinical support to physicians so they can manage patients’ cognitive health. We provide personalized recommendations in a way that’s scalable.

TC: Meaning you suggest an action plan for the doctors to pass along to their patients based on these assessments?

YZ: There are nine modifiable risk factors found to account for a third of [dementia cases], including certain medications that can exacerbate cognitive impairment, including poorly controlled cardiovascular health, hearing impairment and depression. People can have issues for many reasons — multiple sclerosis, epilepsy, Parkinson’s — but health conditions like major depression and physical conditions like cancer and treatments like chemotherapy can cause brain fog. We suggest a care plan that goes to the doctor who then uses that information and modifies it. A lot of it has to do with medication management.

A lot of the time, a doctor — and family members — don’t know how impaired a patient is. You can have a whole conversation with someone during a doctor’s visit who is regaling you with great conversation, then you realize they have massive cognitive deficits. These assessments kind of put everyone on the same page.

TC: You’ve raised capital. How will you use it to move your product forward?

YK: We’ll be combining our assessments with digital biomarkers like changing voice patterns and a test of eye movements. We’ve developed an eye-tracking technology and voice algorithms, but those are still in clinical development; we’re trying to get FDA approval for them now.

TC: Interesting that changing voice patterns can help you diagnose cognitive decline.

YK: We aren’t diagnosing disease. Think of us as a thermometer that [can highlight] how much impairment is there and in what areas and how it’s progressed over time.

TC: What can you tell readers who might worry about their privacy as it relates to your product?

YK: Our software is HIPAA compliant. We make sure our engineers are trained and up to date. The FDA requires that we put a lot of standards in place and we ensure that our database is built in accordance with best practices. I think we’re doing as good a job as anyone can.

Privacy is a concern in general. Unfortunately, companies big and small have to be ever vigilant about a data breach.

Group Nine — the digital media company formed by the merger of Thrillist, NowThis, The Dodo and Seeker — just announced that it has reached an agreement to acquire women’s lifestyle publisher PopSugar.

The financial terms of the deal were not disclosed, but The Wall Street Journal reports that it’s an all-stock transaction that values PopSugar at more than $300 million.

PopSugar was founded by husband-and-wife Brian and Lisa Sugar in 2006, and previously raised $41 million in funding from Sequoia Capital and IVP. Group Nine, meanwhile, just announced a fresh $50 million in funding from its backers Discovery and IVP, which it said would be used to grow its commerce business and for strategic acquisitions.

Brian and Lisa Sugar are both joining Group Nine’s executive team. Brian Sugar and Sequoia’s Michael Moritz are also joining Group Nine’s board of directors.

Earlier this year, there were reports that Group Nine was in talks to acquire a different women’s lifestyle publisher, Refinery29, which was ultimately acquired by Vice Media instead.

In a statement, Group Nine CEO Ben Lerer (pictured above) said:

When we started Group Nine almost three years ago by combining Thrillist, NowThis, The Dodo, and Seeker, we foresaw the impending consolidation of the industry and set out to create a model for the next-generation media company with significant scale, deeply loyal and engaged audiences, multiplatform expertise, and highly diversified revenue. POPSUGAR hugely expands our reach within an important demographic, bringing us a community that deeply loves the POPSUGAR brand and a company with the proven ability to diversify their revenue across premium advertising, affiliate, direct-to-consumer commerce, licensing, and experiential channels.

In the acquisition announcement, Group Nine says the combined organizations will reach an audience of more than 200 million social media followers and also points to PopSugar’s commerce offerings — including its quarterly subscription Must Have Box and its Glow marketplace for fitness content and merchandise — as a good fit for its broader ambitions in this market.

Editor’s note: James Buckhouse is design partner at Sequoia. 

James Buckhouse: We partner from idea to IPO and beyond, but it’s partnering at the idea stage that we love the most — that moment when anything is possible. And it’s happened throughout Sequoia’s history. YouTube incubated in our office. Dropbox was an unreleased demo. Stripe didn’t have a single line of code. Apple was just two dudes named Steve. And so our favorite place to be is in the earliest moments.

We’re not here tonight to share with you lessons of our great wisdom on how company building ought to go. We’re here tonight to say that we understand how hard it is. And the three partners that you’ve got here to talk with tonight — Roelof Botha, Jess Lee and Mike Vernal — are people who have actually been in the trenches building companies themselves.

Customers

James Buckhouse: Great companies like Apple, Amazon and Zoom all have this one thing in common: customer obsession. That’s an easy thing to think about when you already have a billion customers, and you already have a bunch of money. But what do you do when you’re at the pre-seed stage and you want to be customer-obsessed but you don’t even have a product yet, let alone any customers? How do you even begin?

Jess Lee: I think at the very earliest of stages, all that really matters is product market fit. A common mistake we see is that a founder is only obsessed with the product, and then goes on to think, “I have my product. Let me go find a market that works for this,” when it should actually be the other way around. You should look at the market first, and then get to know the customers in that market by doing customer research.

There’s a great book by Erika Hall where she discusses how to ask the right questions to customers in order to really understand their pain points, their motivations and their needs. That’s a hallmark of some of the best companies that we’ve seen, even at the earliest stages. They spend a lot of time talking to customers and understanding what they want. Something we at Sequoia like to recommend when we work with seed and pre-seed-stage companies is to actually take the time to write down a set of customer personas. Who are your prototypical or your archetypes of different types of customers? In the very early days, you might think, “I know the customer. I can remember this. I don’t need to write it down.” But as soon as you add one new team member, who maybe isn’t as familiar with your customer, a lot of things get lost in translation.

For my company Polyvore, which was in the women’s fashion space, I had a lot of engineers on my team who were men and didn’t understand women’s fashion very well. I would always beat my head against the wall wondering why a feature they designed didn’t quite make sense, and it’s because we did the personas exercise a little bit too late. It made me wish we’d done it earlier. Once we had three very clear personas, I started to notice everything ran more smoothly. I found, whether it was the sales team or the engineering team, people started to clearly communicate the idea of what our customer really wanted. People made better decisions at all levels. That’s why at Sequoia we always encourage even our earliest-stage companies to write their customer research down immediately, way before they think they need it.

Product

James Buckhouse: How does an early-stage startup make sure that they’re on the right track and building the right product?

Mike Vernal: The key thing to me is actually not being data-driven; it’s much more about being hypothesis-driven. The problem is people think about product as art. But I actually think of product as being equal parts art and science. And I think the science part of it, which is really important, especially at an early stage, is being clear about what your hypotheses are, what you think is going to work, why you think it’s going to work and really sort of pressure-testing that on a logical level. And, if you are able to, actually pressure-testing it with real data.

One of Jess’s techniques, which I think is great, is the notion of fake doors. If you want to know whether something’s actually going to hum in the market, whether people are going to care about it, build a landing page for it. Build a sign-up button for it. Run a bunch of ads for it. Test a bunch of different marketing copy and see if people actually want the product. I’ve seen a bunch of companies use this to great effect.

I think that in general the mistakes people make with product is, one, being too artistic and not scientific enough about things. And then two, to Jess’s point, the most important thing before you have a product is finding product market fit. Usually, finding product market fit in a category is a function of two or three important things. Identifying those important things and testing them to get clarity around that first, then designing the full product, is way better than just starting with a masterpiece, and then slowly painting over and over the masterpiece until you get to something that is great.

James Buckhouse: For enterprise companies, Roelof, can you talk a little bit about the Sales Ready Product and Templeton compression approach?

Roelof Botha: If you go to our website and search for Sequoia Sales Ready Product or Templeton, you’ll find very useful content that we put together. The insight came from one of the best leaders that we’ve worked with, in a variety of companies, who argued to not just go for an MVP, a Minimal Viable Product, if you’re building an enterprise company, but what he termed a Sales Ready Product, an SRP.

The difference is that a Minimal Viable Product just gets over the hurdle but doesn’t convince your customer to jump out of their seats to buy your product. When we invested in Cisco in the late 1980s, the first product they shipped had so many bugs it didn’t work. But the product solved such an important need for the customer that they came back to Cisco and asked if they could fix it since they needed the product to work so badly because there was a fundamental problem in trying two networks at the time. And that to me was a Sales Ready Product. You’ve got something that, even if it’s not perfect, really solves your customer’s pain point.

And so to condense the whole theory behind this: Spend a little bit more time, probably another three months, maybe another four, five months, from when you would otherwise ship an MVP to ship an SRP. The reason it matters for an enterprise company is that your sales organization will be so much more effective. Your sales team will ramp up a curve far more steeply and you’ll get sales momentum much, much faster if you sell an SRP.

Culture

James Buckhouse: I’m going to do something a little bit unexpected here and call on Alfred in the back. Could you talk a little bit about what it was like at Airbnb, where they started with culture very early on?

Alfred Lin: Brian, Joe and Nate came and visited Zappos, where we offered tours, to see what the culture was all about (Alfred was COO of Zappos). At Zappos, we started writing down our core values a little late, when we were at about 300 people. And I told Brian, Joe and Nate that that was too late.

After that trip, they went back and wrote down their core values, before hiring their first employee. They knew that they had to create a new category. Home-sharing was not something that people really thought about. And so they needed people who were willing to champion the mission. And that was one of the first core values that they wrote down.

James Buckhouse: Oftentimes, people think that culture is the thing you do later on, once your business has grown large and suddenly you have a lot of people. But that’s not true. Culture matters a lot more than people think. And it matters earlier than people think. Jess, can you talk about your framework on core values?

Jess Lee: This is something we spend a lot of time on with seed and pre-seed companies, who think, “Oh, I already know my culture. I’ll wait to write it down later.” But it’s important to get it right up front. We encourage people to not pick too many core values. Generally, you want a framework that’s a core value and the behaviors you want that exemplify that core value. And most importantly, you need a story. You need some legendary anecdote or example from inside the company that really brings the core value to life.

To use Airbnb as an example, one of its core values is to be a cereal entrepreneur. The reason it’s cereal with a “C” is because at the time, Airbnb was running out of money. They weren’t sure they had product market fit, but they went to the Democratic National Convention to try the Airbnb idea when they were down to the wire in terms of money. In order to just get the word out about the business they made boxes of cereal that said “Obama-Os” and “Captain McCain.” It’s a good example of rolling up your sleeves and doing whatever it takes to get your business launched. Somehow, they actually managed to generate revenue that they put back into the business. The really memorable part of that is the cereal anecdote. Whatever it might be at your company, make sure that the lore lives on. That’s really what brings culture to life. It’s not just the value itself.

James Buckhouse: Roelof, can you talk a little bit about the culture at PayPal in the early days?

Roelof Botha: There are a couple of elements in that. One is this idea of intercept versus slope. For those of you that are fans of math or science, it comes naturally, but sometimes you get to hire people who have a high intercept. They have a lot of experience. In our case, we needed to hire people who knew a lot about financial services, because we as the early, young team didn’t. You hire people with intercept, but then you want people with slope. People who are going to learn very quickly. And at the end of the day, part of what made PayPal successful was that we had a good slope and we learned very, very quickly.

Our culture was very hard-working. We faced a bit of a crunch in June of 2000. We’d raised a bunch of money during the dot-com era, and then we were sitting with seven months of runway and no revenue, burning $10 million a month. It was a “you’re all-in” culture. Management meetings were on Saturdays, because that’s the kind of sacrifice we were going to make as a team to get to the other side. Culture was really important to the success of the company. We had a strong bond between us as team members because we were in the trenches. We had to figure out how to make this business work when the odds were against us and the press had given up on us.

Most people on the outside are going to think that you’re going to fail. Expect that. Don’t be surprised by that. Draw strength from that, and rally your team around your cause. You should ignore that kind of feedback.

Leadership

James Buckhouse: How do you discern a strong founding team?

Roelof Botha: My favorite, especially with companies at the seed stage, is to have no slides and to have a conversation with you about your business. What I find compelling is, the more I dig, the more excited I get, because your depth of knowledge, of understanding the problem that you’re trying to solve, shows itself. There are a lot of people who start companies for the wrong reasons, and they have very superficial knowledge. So as soon as you start to pressure test it, it’s clear that there’s no depth.

The founders who are the best are the ones that are so motivated to solve the problem they’re working on, they’ve researched everything. You would have found a simpler solution to the problem if you could, and you didn’t. That inspired you to start this company. As I ask you questions, you just have this depth of knowledge. You’ve thought about it so many levels deep. Those founders are the ones that keep coming up with new ideas, and that’s why their imitators don’t do so well. We see this in our industry. You come up with a great idea, TechCrunch writes about it, everybody around the world reads about it and now you’ve got 15 competitors in other countries going after what you’re doing. But guess what? They didn’t have the idea, you did. Since you had the original idea, you’ve thought about it more deeply and you can iterate faster than they can.

James Buckhouse: Jess, how about you? What do you look for to discern a strong founding team?

Jess Lee: I do agree, and I think different investors look for very different things. There is probably a notion of founder/investor fit to some extent. For me, I especially appreciate a unique insight and depth of understanding of that customer and that market. But on top of that, the other thing I think about is grit. I think that being a founder is so hard. I felt like I was on the struggle bus the entire time. Either we weren’t doing well, which was a struggle, or we were doing really well and then we were in a state of hyper-growth, and that’s also really hard. Your job changes underneath you every six months. Because even if you’re successful, everything that used to work for you as the CEO or founder is now broken because your team is now 50 people instead of 10.

What is it driving you, to either solve this problem or just driving you in general? Because it’s just not easy, and folks who give up too easily or came into this because they thought being a founder was going to be really cool, it’s not that cool all the time, so I look for that. Sometimes it shows up in the form being really mission-driven, and you have some burning desire to solve the problem. Sometimes it’s just that you’ve been underestimated your whole life and you’re really mad about it, and you want to prove yourself. There are a lot of different ways to suss out grit, but that’s one big thing that I look for.

One thing I also like to see, that is not a must-have but I find very compelling, is if you’re a good storyteller. I think that at the end of the day you have to convince your family that you’re not crazy for quitting your job to pursue this thing. You’ve got to convince early employees to join you when you can’t pay them any money. You’ve got to convince early-stage seed investors to take a chance on you and give you money when there is nothing there yet. And you’ve got to convince customers. Being able to tell a good story, both taking something complicated and making it sound simple, as well as being able to influence and talk about why your approach is interesting and different, not just better than the competitors. I look for that as well. I think that’s important.

One area where I do disagree with Roelof is that I do prefer to see slides. I think it showcases your storytelling ability. I look at a lot of consumer companies and your attention to design and detail is also an interesting thing that you can suss out with slides.

James Buckhouse: How about you, Mike?

Mike Vernal: If you can’t describe the business in a minute or two, then you need to keep iterating. Some bad meetings end up as the following: Someone will come in with 40 slides and want to convey all of the knowledge in the 40 slides in excruciating detail.

I think a couple of things. One is, many investors look at a lot of companies all day long so they might actually know more about your space than you might think. Then two, if you need 40 minutes to explain the business, marketing and all of these other things, then for an investor meeting that might work because you have that time scheduled, but for the random engineer you meet at a party who you want to get excited about joining your company, that’s going to be really hard.

The best pitch is when I’m two minutes in and I’m like, “I get the business. This is super interesting. Let’s ask all these questions.” The tough ones are 40 minutes of being talked at, where there is no real interaction.

Capital strategies

James Buckhouse: Different types of companies need different types of capital strategies. How do you all think about how founders ought to think about their strategy for capital?

Jess Lee: It’s really important to think about three things: First, what is the actual cash you need for your business? If you’re a pure software business you don’t usually need as much as if you’re building hardware or you’re making physical goods.

Second, what is the valuation that actually makes sense? True valuation, when you become a public company, when you do M&A, is actually a function of your free cash flow, or a multiple of your revenue, so just being able to understand in the long, long-term what is a likely five, 10-year-out valuation, and then making sure you don’t overshoot that just because you can. That’s another first principle.

The third thing is ownership. Doing the math, if you don’t need to raise a lot of money, if you don’t need to raise as many rounds, at the end of the day when ideally your company is acquired for hundreds of millions of dollars, or billions of dollars, or you IPO, what is your ownership at that moment? We have founders like Dropbox, that when they went public, Drew and Arash owned nearly 40% of the company. So you have to think — would you rather have 40% of a $10 billion company, or would you rather have 2% of a $20 billion company? That ownership at the end of the day is really important. So you have to think about those three things, which is a pretty complicated equation.

It really hit home for me when my company, Polyvore, went through the M&A process and it suddenly hit me that all the acquirers were not using funny VC math. They were looking at our cash flow and the multiple of revenue. Luckily, we hadn’t raised that much money, as I’d wanted to keep as much ownership as possible. I was optimizing for ownership for the team. Because of that, we actually had a really nice outcome, where everybody made money because we hadn’t over-raised since we didn’t need to. We were a pure software-based, capital-efficient kind of company, but I think not enough founders think about that from first principles, starting from the early days. They just look at who’s raising what, and how much they could possibly get. They want to maximize that, when in reality, it’s not actually the right way to think about it.

Roelof Botha: When you raise money, you’re recruiting a partner. I see too many companies, especially seed-stage companies, make the mistake of accepting funding from whoever shows up, when that’s probably the most expensive equity you’ll ever sell in your business. You could potentially be selling it to people that are not going to be there six months or six years from now, helping you close a candidate, helping you wrestle with an important strategic decision or helping you refine your business model. Those people aren’t going to be there, so it’s a recruiting decision. Take it seriously. It’s also important to check their references. Your investor is going to do references on you. Why aren’t you doing references on them?

London and Tel Aviv based VC firm 83North has closed out its fifth fund at $300 million, as we reported earlier. It last raised a $250 million fund in 2017 and expects to continue the same investment mix, while tracking developments in emerging areas like healthcare AI and autonomous vehicles.

In a conversation with general partner Laurel Bowden, the veteran investor shared a few further thoughts with Extra Crunch — talking about the tech scene in Europe vs Israel, what the firm looks for in a team and tips on scaling globally.

The interview has been lightly edited for clarity. 

TechCrunch: Is Europe starting to catch up to Israel when it comes to deep tech startups?

Laurel Bowden: We clearly think we have in our portfolio some deep tech. And in other VC portfolios too — there’s clearly some deep tech [coming out of Europe]. And then on the reverse side you’ve seen more consumer-related stuff coming out of Israel. But still if you take a blanket look, we see more data infrastructure, security, storage coming out of Israel than we see in Europe — that’s for sure.

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 9am Pacific, you can subscribe here.

1. And the winner of Startup Battlefield at Disrupt SF 2019 is… Render

In the beginning, there were 20 startups. After three days of fierce competition, we now have a Battlefield champion.

That winner is Render, which has created a managed cloud platform to serve as an alternative to traditional cloud providers such as AWS, Azure and GCP. And the runner-up is OmniVis, which aims to make cholera detection as quick, simple and cheap as a pregnancy test.

2. Next Insurance raises $250M from Munich Re, becomes a unicorn

Next Insurance sells insurance products to small businesses. And Germany-based Munich Re, one of the world’s largest reinsurers, was the sole investor in its new round.

3. Roku to launch low-cost versions of its soundbar and subwoofer under Walmart’s onn brand

In September, Roku debuted the Smart Soundbar and Wireless Subwoofer, both at $180 each. The Walmart onn-branded Smart Soundbar and Wireless Subwoofer, meanwhile, will only cost $129 each.

4. No one could prevent another ‘WannaCry-style’ attack, says DHS official

Jeanette Manfra, the assistant director for cybersecurity for Homeland Security’s Cybersecurity and Infrastructure Security Agency, said at Disrupt SF that the 2017 WannaCry cyberattack was uniquely challenging because it spread so quickly: “I don’t know that we could ever prevent something like that.”

5. NASA shares 3D Moon data for CG artists and creators

The data set includes not just imagery but depth data, making it simple to build an incredibly detailed 3D map of the Moon.

6. As Sinai Ventures returns first fund, partner Jordan Fudge talks new LA focus

Fudge and co-founder Eric Reiner are centralizing the Sinai Ventures team in Los Angeles for its next fund — a bet on the rising momentum of the local startup ecosystem and their vision to be the city’s leading Series A and B firm. (Extra Crunch membership required.)

7. This week’s TechCrunch podcasts

We’ve got a new episode of Equity recorded at Disrupt, with Alex and Kate discussing why San Francisco remains a startup hub. (And keep an eye out later today for a bonus episode of Original Content.)

Missing out on a month’s rent because you can’t find a tenant is a huge loss. Searching for someone to fill a home takes work, while property managers are incentivized to price your place too high, leading to costly vacancies.

But new startup Doorstead wants to take on the risk and the work for you. It acts as a property manager for single-family homes, but guarantees you rent at a specific rate starting in a certain number of days, even if it can’t fill the house or apartment. It also handles all the algorithmic pricing, advertising, tenant interviews, repairs, maintenance, leases and online payments in exchange for 8% of rent. Owners just sit back and receive the money, making it much easier to profit off of distant real estate. The startup claims to earn users 3% to 9% more than other property management models.

Doorstead’s approach to the hot sector of “iRenting” has attracted a $3.3 million seed round co-led by M13 and Silicon Valley Data Capital, and joined by Venture Reality Fund and SOMA Capital. They’re betting on co-founders Jennifer Bronzo, whose parents ran a construction and property management firm, and Ryan Waliany, who worked in product at Uber after his recipe platform Kitchenbowl was acqui-hired.

“I grew up going to job sites and learning about construction,” Bronzo says. “In the recent decade, my family purchased a lot of properties in the Bay and they needed help filling capacity. I saw so many opportunities in property management because of how antiquated the industry is.” Doorstead is now operating in five cities around the San Francisco Bay Area.

As consumers grow accustomed to zero-friction services, that approach is branching into bigger and bigger sectors like the trillions paid for long-term rentals. Waliany, Doorstead’s CEO, tells me, “We’re in the process of Uber’izing each step of the property management life cycle.” The startup is hoping to become the OpenDoor of rentals.

How Doorstead works

First, property owners contact Doorstead and provide some basic information on the home they want to rent out. They receive a preliminary offer before the startup does an inspection and takes professional marketing photos while digging through reams of data on local pricing, availability and demand to pick a rate its algorithm believes it can fill the home for quickly. Owners then receive a final offer agreement saying they’ll be paid $X per month starting in Y number of days (typically 21 to 45 days), with Doorstead absorbing all the risk if it can’t find a tenant.

From there, the startup does approved maintenance and cleaning as necessary, and then methodically lists the home on all the top rental platforms. It handles open house walk-throughs and runs background checks on potential tenants to find who will most reliably pay rent. Doorstead prepares a lease and gets it signed by a tenant, but even if it doesn’t, owners still get their guaranteed payments. Rent is collected online, and if a move-out or eviction is necessary, Doorstead takes care of the transition to finding a new tenant.

There’s plenty of margin for Doorstead to earn if it can consistently fill homes faster. Most property managers charge at least 50% of the first month’s rent, but instead, Doorstead keeps all the rent of any extra days if it fills the spot before the guaranteed due date. From there, it charges 8% of monthly rent with no tenant placement fee, which is close to or under the common 10% fee on single-family home property management. And if it manages to secure a higher rate from tenants than its guarantee, it gives 70% to the owner.

“Property management incumbents have a 43-day vacancy average which leads to $86 billion in economic waste in the U.S. alone,” Waliany tells TechCrunch. “This means that landlords could earn the same money and lower rents by 12% for tenants with an efficient market.”

The rise of iRenting

With Doorstead, even if the owner lives far away, the turn-key service lets them efficiently rent their home. That’s not only important to them, but to overcrowded cities like San Francisco that often see apartments left vacant by overseas owners because they’re too much effort to rent out. To date, Doorstead’s algorithm has allowed it to recoup 100% of its guarantees and it’s shooting to stay above 90%, while maintaining its NPS of 80.

But if the startup is working that well, it’s only a matter of time until incumbents try to barge in.

“It would be a no brainer for Airbnb to enter this market and Zillow to open this,” Waliany admits, given their existing pricing algorithms and popularity as rental destinations. But Bronzo says “the biggest barrier is the operations piece that an Airbnb and Zillow haven’t stepped into.” It would be a big departure from their lean software-based marketplaces. Other property management startups like Mynd, OneRent and BelongHome only offer guaranteed rent once tenants are found, absolving themselves of most of the risk. They’d have to take on a more precarious business model.

What about Zeus, Sonder and Lyric, which offer property management of homes they then use for corporate housing or as boutique hotels? “An owner of ours considered Zeus versus Doorstead and went with Doorstead because: 1) our offer was ~12% higher, and 2) they didn’t want the wear-and-tear that comes with having people move in and out of the property every few days or few months,” Waliany explains. “Sonder and Lyric have 300 move-in and move-outs over a six-year period. Doorstead has ~4 move ins/outs and that results in significantly less wear-and-tear and a much easier operations to manage. Not only that, the long-term rental market is 42x larger and has 12x more addressable revenue.” Doorstead will have to build a brand and product moat to defend against inevitable direct competition.

As iRenting is still a fresh concept, Waliany warns that “with any new business model, there will inevitably be ‘unknown unknowns’ that we cannot predict, black swan events and things that we might only be able to learn through calculated bets.” Luckily, because it doesn’t hold the leases for very long, and home rentals typically increase in an economic downturn, Doorstead’s liability is manageable in the event of a recession or other crisis.

“There are three large trillion-dollar industries — food, transportation and housing. At Doorstead, we have an opportunity to completely redefine the housing value chain by creating a new class of property management that eliminates unnecessary vacancies. In the end, this redefinition of the value chain allows ourselves to become the Blackstone of the future,” Waliany concludes. “It seems like we’re giving everyone free money.” That will prove either the startup’s downfall or a powerful growth tactic.

This interview delves into the Security Technology Operations space. Sramana Mitra: Let’s start by introducing our audience to yourself as well as to LogRhythm. Chris Petersen: I’m the Chief...

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This year’s CNBC Disruptor 50 was topped by an AI unicorn in the field of AgTech called Indigo Ag. With the use of artificial intelligence, it enables better forecasting and transparency and aims to...

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Arijit Sengupta: They won’t tell you how much they’ve made, but you can tell that they have made more than you are going to charge them. That changes the conversation. I like to see this pattern. If...

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This feature from TechCrunch covers the result of the Startup Battlefield competition held in San Francisco last week. For this week’s posts, click on the paragraph links. Tech Posts Cloud...

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In a wide-ranging conversation at TechCrunch Disrupt San Francisco last week, Postmates co-founder and chief executive officer Bastian Lehmann made light of the company’s lack of IPO documents.

The San Francisco-based on-demand delivery business was expected to publicly file its IPO prospectus in September in preparation for a fall exit, sources familiar with the matter told TechCrunch this summer. September, however, has come and gone and we’re still waiting on Postmates to release the critical document.

“The reality is that we will IPO when we believe we find the right time for the business and the right time for the markets,” Lehmann told TechCrunch. “And if you look at the markets right now, I believe they are a little choppy. They are a little choppy when it comes to growth companies specifically … We are hopeful that we find a good window to get out there.”

Lehmann made reference to Uber and other companies to recently float, citing market conditions as an IPO deterrent. Uber, Lyft, Slack and other fast-growing unicorns have struggled since entering the public markets earlier this year despite sky-high private market valuations. WeWork, a money-losing endeavor, recently decided to delay its IPO after demand from Wall Street devalued the business by the billions. Whether Postmates will complete its debut by the end of the year is unclear.

Postmates confidentially filed with the U.S. Securities and Exchange Commission for an IPO in February. Shortly after, Postmates held M&A talks with DoorDash, another food delivery unicorn, according to people familiar with the matter, but failed to come to mutually favorable terms. DoorDash has previously declined to comment on these reports. On stage last week, Lehmann declined to confirm the reports.

“I don’t think it does any good to speculate on M&A,” he said. “I think you have four well-funded players here in the U.S. in this space. I think everyone is well aware of the strengths and the weaknesses of each other and you know at some point down the line, if we take Europe for example, you will see consolidation in the market. People have conversations all the time but I wouldn’t read too much into it.”

Postmates operates its on-demand delivery platform, powered by a network of local gig economy workers, in more than 3,500 cities across all 50 states. The company does not yet operate in any international markets aside from Mexico City, however, Lehmann’s comments suggest the business could be plotting a foray into Europe, where Deliveroo, Just Eat and others dominate the market.

Postmates has raised about $900 million to date, including a $225 million round announced last month that valued the company at $2.4 billion. DoorDash, on the other hand, reached a $12.6 billion valuation in May with a $600 million Series G and has raised more than double that of Postmates. When asked why DoorDash, a similar and competing business, needed that much more capital, Lehmann joked “Maybe [DoorDash CEO Tony Xu] needs a jet, I don’t know.”

Postmates, founded in 2011 by Lehmann, is backed by Spark Capital, Founders Fund, Uncork Capital, Slow Ventures, Tiger Global, Blackrock and others. In our interview with Lehmann, the long-time CEO discussed the ‘choppy’ public markets, competitors, the company’s autonomous robotics delivery efforts and more.

Sramana Mitra: What was your lock-in period? Did you go to Salesforce? Arijit Sengupta: I had a three-year resting and two-year non-compete clause. I did my two years. Salesforce is a wonderful...

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Did you miss the deadline to apply for Startup Battlefield at Disrupt Berlin 2019? Well don’t despair, founders. There’s more than one way to place your early-stage startup in front of thousands of influential technologists, investors and global media. Apply to be considered for our TC Top Picks program and the opportunity to exhibit in Startup Alley for free.

Deadline alert: You must apply to be a TC Top Pick by 18 October at 12 p.m. (PT). It’s simple to do and it’s free. Don’t let this opportunity slip through your time-strapped fingers.

TC Top Picks is a pre-conference competition. To be considered, your early-stage startup must fall within one of the following categories: AI/Machine Learning, Biotech/Healthtech, Blockchain, Fintech, Mobility, Privacy/Security, Retail/E-commerce, Robotics/IoT/Hardware, CRM/Enterprise and Education.

Our TechCrunch editors — always on the hunt for the best early-stage startups — will vet each application and select up to five startups in each category. If you’re named a TC Top Pick, you’ll receive a free Startup Alley Exhibitor Package and a VIP experience at Disrupt Berlin.

What sort of startup catches TechCrunch’s discerning editorial eyes? Great question. Take a look at the list of TC Top Picks from Disrupt Berlin 2018.

The exclusive TC Top Pick cadre will exhibit in a prime location within Startup Alley and — thanks to plenty of pre-conference marketing — be on the receiving end of intense investor and media interest. One of the best perks is the live Showcase Stage interview. TechCrunch editors interview each Top Pick to showcase their company and product. We record the interview and promote the video across our social media platforms.

If you’re still kicking yourself for missing the Startup Battlefield deadline, here’s more good news. There’s always the possibility that you’ll compete as a Wild Card. Say what, now?

Out of all the startups exhibiting in Startup Alley, TechCrunch editors will choose one — the Wild Card — to compete in the Startup Battlefield. At Disrupt Berlin 2018, TC editors chose Legacy, and the feisty startup went on to win the Startup Battlefield and the $50,000 prize.

Disrupt Berlin 2019 takes place on 11-12 December, and TC Top Picks is your chance to place your extraordinary startup in front of the people who can move your business forward. If you want to exhibit in Startup Alley for free, do not miss this deadline. Apply to be a TC Top Pick before 18 October at 12 p.m. (PT). We’ll see you in Berlin!

Is your company interested in sponsoring or exhibiting at Disrupt Berlin 2019? Contact our sponsorship sales team by filling out this form.