Dean Takahashi of GamesBeat moderates a reunion panel of former Xbox leaders Robbie Bach, Shane Kim, and Ed Fries.Read More

At the all-digital E3 today, Square Enix showed a deeper dive into Life is Strange: True Colors, the latest in the Life is Stranger series.Read More

The rumors are true. Final Fantasy: Origin is real. Square Enix revealed the spin-off during its E3 presentation today.Read More

Twelve years ago, Joby Aviation consisted of a team of seven engineers working out of founder JoeBen Bevirt’s ranch in the Santa Cruz mountains. Today, the startup has swelled to 800 people and a $6.6 billion valuation, ranking itself as the highest-valued electric vertical take-off and landing (eVTOL) company in the industry.

It’s not the only air taxi company to reach unicorn status. The field is now dotted with new or soon-to-be publicly traded companies courtesy of mergers and special purpose acquisition companies. Partnerships with major automakers and airlines are on the rise, and CEOs have promised commercialization as early as 2024.

As in any disruptive industry, the forecast may be cloudier than the rosy picture painted by passionate founders and investors. A quick peek at comments and posts on LinkedIn reveals squabbles among industry insiders and analysts about when this emerging technology will truly take off and which companies will come out ahead.

Other disagreements have higher stakes. Wisk Aero filed a lawsuit against Archer Aviation alleging trade secret misappropriation. Meanwhile, valuations for companies that have no revenue yet to speak of — and may not for the foreseeable future — are skyrocketing.

Electric air mobility is gaining elevation. But there’s going to be some turbulence ahead.

Big goals and bigger expenses

Taking an eVTOL from design through to manufacturing and certification will likely cost about $1 billion, Mark Moore, then-head of Uber Elevate, estimated in April 2020 during a conference held by the Air Force’s Agility Prime program.

That means in some sense, the companies that will come out on top will likely be the ones that have managed to raise enough money to pay for all the expenses associated with engineering, certification, manufacturing and infrastructure.

“The startups that have successfully raised or that will be able to raise significant amounts of capital to get them through the certification process … that’s the number one thing that’s going to separate the strong from the weak,” Asad Hussain, a senior analyst in mobility technology at PitchBook, told TechCrunch. “There’s over 100 startups in the space. Not all of them are going to be able to do that.”

Just consider some of the expenses accrued by the biggest eVTOLs last year: Joby Aviation spent a whopping $108 million on research and development, a $30 million increase from 2019. Archer spent $21 million in R&D in 2020, according to regulatory filings. Meanwhile, Joby’s net loss last year was $114.2 million and Archer’s was $24.8 million, though, of course, neither company has brought a product to market yet. Operating expenses will likely only continue to grow into the future as companies enter into manufacturing and deployment phases.

What that means for the future of the industry is likely two things: more SPAC deals and more acquisitions.

Mobility companies, including those working on electrified transport, are often pre-revenue and have capitally intensive business models — a combination that can make it difficult to find buyers in a traditional IPO. SPACs have become increasingly popular as a shorter, less expensive path to becoming a public company. SPACs have also historically received less scrutiny than IPOs. Should the U.S. Securities Exchange Commission start to take a closer look at SPAC mergers in the future, it may impair the ability of other air taxi companies to go public this way, Hussain said.

That means market consolidation is nearly guaranteed, as smaller companies may find it more advantageous to sell than continue to raise more capital. It’s already begun: At the end of April, eVTOL developer Astro Aerospace announced the acquisition of Horizon Aircraft.

Horizon cited “greater access to capital” as one of the many benefits of the transaction, and other companies will likely find the buy or sell route to be the most beneficial on the road to commercialization. And just last week, British eVTOL Vertical Aerospace, which has an order for 150 aircraft from Virgin Atlantic, said it would go public via a merger with Broadstone Acquisition Corp. at an equity value of around $2.2 billion.

This morning, Anna Heim and Alex Wilhelm dug into the EU insurtech market, interviewing European VCs and collating the biggest recent rounds to take the temperature of the waters across the pond:

Alex Timm, CEO, RootDan Preston, CEO, MetroMileLuca Bocchio, partner, AccelFlorian Graillot, investor, Astorya.vcStephen Brittain, director and founder, Insurtech Gateway

Several European-based insurtech startups entered unicorn territory this year, such as Bought By Many, which offers pet insurance; London-based Zego; and Alan, a French startup that raised a $220 million round.

According to Brittain, EU startups in this sector are “still at the very early stages of innovation,” having only shown “a fraction of what’s possible” in a market that is “as large as banking.” Interestingly, he predicted that AI will play a larger role in the future as companies deploy it for fraud detection, improved customer experiences and processing claims more quickly.

“We are fully expecting the next generation of AI-driven business to unlock real-time risk analysis, pricing and claims resolution in the next few years,” he said.

Thanks very much for reading Extra Crunch; I hope you have a safe, relaxing weekend.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

What do these 4 IPOs tell us about the state of the market?

Earlier this week, The Exchange assessed the looming Monday.com IPO before reading the tea leaves about that flotation and three others to sum up the overall state of the market.

So what do the Marqeta, Monday.com, Zeta Global and 1stDibs debuts tell us? We may have been too conservative.

Toast’s Aman Narang and BVP’s Kent Bennett on how customer obsession is everything

On a recent episode of Extra Crunch Live, we spoke to Toast founder Aman Narang and Kent Bennett of Bessemer Venture Partners about how they came together for a deal, what makes the difference for both founders and investors when fundraising, and the biggest lessons they’ve learned so far.

The episode also featured the Extra Crunch Live Pitch-Off, where audience members pitched their products to Bennett and Narang and received live feedback.

Extra Crunch Live is open to everyone each Wednesday at 3 p.m. EDT/noon PDT, but only Extra Crunch members are able to stream these sessions afterward and watch previous shows on-demand in our episode library.

AI startup investment is on pace for a record year

Alex Wilhelm and Anna Heim solicited feedback from investors to get a temperature on the market for AI startup investments.

“The startup investing market is crowded, expensive and rapid-fire today as venture capitalists work to preempt one another, hoping to deploy funds into hot companies before their competitors,” they write. “The AI startup market may be even hotter than the average technology niche.”

But that’s not surprising. The Exchange was on it.

“In the wake of the Microsoft-Nuance deal, The Exchange reported that it would be reasonable to anticipate an even more active and competitive market for AI-powered startups,” Alex and Anna note. “Our thesis was that after Redmond dropped nearly $20 billion for the AI company, investors would have a fresh incentive to invest in upstarts with an AI focus or strong AI component; exits, especially large transactions, have a way of spurring investor interest in related companies.”

Their expectation is coming true: Investors reported a fierce market for AI startups.

Dear Sophie: What is a diversity green card and how do I apply for one?

Dear Sophie,

I started a tech company about two years ago, and ever since I’ve dreamed of expanding my company in the United States.

I would love to have a green card. Someone mentioned that I should apply for a diversity green card. Would you please provide me with more details about it and how to apply?

— Technical in Tanzania

How to start a company in 4 days

Pulley founder and three-time YC alum Yin Wu offers a tactical guide to getting a startup running in four days. Yes, just four days.

“The logistics of setting up a startup should be simple, because over the long run, complicated equity setups and cap tables cost more money in legal fees and administration time,” Wu notes.

Read on for guidance on how to get your business going in less than a week.

Health clouds are set to play a key role in healthcare innovation

Innovaccer founder and CEO Abhinav Shashank and CTO Mike Sutten write in a guest column that the U.S. healthcare industry is in the middle of a massive transformation.

This shift, they write, “is being stimulated by federal mandates, technological innovation, and the need to improve clinical outcomes and communication between providers, patients and payers.”

Improving healthcare now means we need to process tremendous amounts of healthcare data. How do we do it? The cloud, which “plays a pivotal role in meeting the current needs of healthcare organizations.”

What SOSV’s Climate Tech 100 tells founders about investors in the space

SOSV’s Benjamin Joffe and Meghan Hind round up a “who’s who” from the venture capital firm’s SOSV Climate Tech 100, a list of the best startups addressing climate change that SOSV has supported from the very beginning.

“What can founders learn from the list about climate tech investors? In other words, who invested in the Climate Tech 100?” they ask.

The fintech endgame: New supercompanies combine the best of software and financials

Now that we can transact from anywhere, a new, hybrid class of software companies with embedded financial services are scooping up consumers — and investors are following the action.

Using data from a Battery Ventures report about “the intersection of software and financial services,” this post examines why these companies can be so hard to value and offers a framework for better understanding their business models and investor appeal.

After 30 years, ‘Crossing the Chasm’ is due for a refresh

Geoffrey Moore’s “Chasm,” a framework for marketing technology products that has been one of the canonical foundational concepts to product-market fit for three decades, needs a bit of an upgrade, Flybridge Capital’s Jeff Bussgang writes.

“I have been reflecting on why it is that we venture capitalists and founders keep making the same mistake over and over again — a mistake that has become even more glaring in recent years,” he writes.

Bussgang goes on to consider the Chasm — and propose tweaks for thinking about market size in the modern era.

“Who should my first marketing hire be?”

This is (by far) the most common question I’ve received since starting as Fuel’s CMO, and for good reason. Your first marketer will have an outsized impact on team dynamics as well as the overall strategic direction of the brand, product and company.

The nature of the marketing function has expanded significantly over the past two decades. So much so that when founders ask this question, it immediately prompts multiple new ones: Should I hire a brand or growth marketer? An offline or an online marketer? A scientific or a creative marketer?

Once upon a time, the number of marketing channels was fairly limited, which meant the function itself fit into a neater, tighter box. The number of ways to reach customers has since grown exponentially, as has the scope of the marketing role. Today’s startups require at least four broad functions under the umbrella of “marketing,” each with its own array of subfunctions.

Here’s a sample of the marketing functions at a typical early-stage startup:

Brand marketing: Brand strategy, positioning, naming, messaging, visual identity, experiential, events, community.

Product marketing: UX copy, website, email marketing, customer research and segmentation, pricing.

Communications: PR and media relations, content marketing, social media, thought leadership, influencer.

Growth marketing: Direct response paid acquisition, funnel optimization, retention, lifecycle, engagement, reporting and attribution, word of mouth, referral, SEO, partnerships.

Have you worked with a talented individual or agency who helped you find and keep more users?
Respond to our survey and help us find the best startup growth marketers!

As you can imagine, that’s a lot for one person to manage, let alone be an expert in. What’s more, the skill set and experience required to excel in growth marketing is quite different from the skill set required to succeed in brand marketing. The reality is that anyone who excels across all marketing functions is a unicorn and nearly impossible to find.

So who do you hire first?

Unless you’re lucky enough to nab that unicorn, your first hire should be a generalist who can tend to the full stack of the marketing function, learn what they don’t know, and roll up their sleeves to get things done. Someone smart, savvy and super scrappy who understands how to experiment across marketing channels until they find the right mix.

But this utility player should also bring deeper expertise in one of the big marketing functions: brand, product, communications or growth. Before making this key hire, you need to figure out which marketing priorities are most urgent and, consequently, which marketing “persona” is most appropriate for your business at the earliest stages.

To figure out which skill set you need most in-house, consider these five questions:

Which marketing channels have proven successful to date?

If you’ve done some marketing experimentation previously, have there been any bright spots? Which channels are proving the most efficient from a customer acquisition, conversion, retention, engagement, whatever your key KPI is, perspective? If you find a promising area, find a candidate that has expertise in it. For example, if you are seeing good results with Instagram ads, hiring a candidate who has expertise in growth marketing makes sense.

Where are the target customers?

If you don’t have much data from channel testing, consider how your target customers are currently finding competitive products or services. At TaskRabbit, we knew from early customer research that clients were finding help with home services either through recommendations from friends or by asking Google (i.e., SEO and SEM).

So, that was a natural place for us to start. Our focus from a resource and staffing perspective in the early days was on growth marketing — driving more word of mouth, plus optimizing our SEO and SEM.

How competitive is the market?

How competitive is the category you’re playing in? Are there dominant players with strong brands? Do these brands have endless marketing budgets? Are CACs exorbitant because well-capitalized competitors are outbidding each other? If so, you might want to focus on building an exceptional brand and product/customer experience.

That means disseminating a unique story through organic channels (word of mouth, PR, influencers and organic social media). A brand marketer or someone with deep PR and communications experience makes sense in this scenario.

Where do the founder’s skills lie?

Another aspect to consider is the skills the founder(s) — or other members of the founding/early team — bring to the table. If a founder has a strong vision for the brand and extensive experience building brands, then focus less on a brand marketing hire and rather supplement the branding skill set with another marketing priority (i.e., product marketing). Likewise, if a founder has a strong vision for the brand but no one on the team knows how to build one, that’s a skill gap that your first marketing hire should fill.

How important is trust building?

Trust building has become an increasingly important aspect for brands as customers become more and more discerning. But trust building tends to be more critical in certain areas than others: New, nascent industries or markets, sectors with a lot of human interaction (services businesses, dating platforms, etc.), industries that are fundamentally changing consumer behavior (ride-sharing in its earliest days), or industries where the stakes or cost is relatively high (luxury goods).

If trust building is critical, consider a branding expert who understands how to build trust and credibility, and build an experience that consumers are passionate about. This person will likely have deep expertise in PR and brand building, as these channels tend to inspire the most trust among consumers.

What level of experience is necessary?

Once you’ve answered these five questions, you should have a pretty good idea of the type of marketing experience you want. But just how much experience should that person have? I typically recommend that seed-stage founders look for senior manager or director-level candidates at midsized companies.

At this experience level (six to 10 years), these candidates’ salaries tend to be more in line with a young company’s budget. Moreover, at this stage of their career, they tend to be both strategic and tactical. This means they can level up and think strategically about the business and the marketing function, but they are also happy to get their hands dirty and execute — actually dive into the Facebook platform and create ads, plan and host an event, or pitch a journalist.

Didi filed to go public in the United States last night, providing a look into the Chinese ride-hailing company’s business. This morning, we’re extending our earlier reporting on the company to dive into its numerical performance, economic health and possible valuation.

Didi is approaching the American public markets at a fortuitous moment. While the late-2020 IPO fervor, which sent offerings from DoorDash and others skyrocketing after their debuts, has cooled, valuations for public companies remain high compared to historical norms. And Uber and Lyft, two American ride-hailing companies, have been posting numbers that point to at least a modest recovery in the ride-hailing industry as COVID-19 abates in many parts of the world.

As further grounding, recall that Didi has raised tens of billions worth of private capital from venture capitalists, private equity firms, corporations and other sources. The size of the bet riding on Didi is simply massive. As we explore the company’s finances, then, we’re more than vetting a single company’s performance; we’re examining what sort of returns an ocean of capital may be able to derive from its exit.

In that vein, we’ll consider GMV results, revenue growth, historical profitability, present-day profitability and what Didi may be worth on the American markets, given current comps. Sound good? Into the breach!

Inside Didi’s IPO filing

Starting at the highest level, how quickly has gross transaction volume (GTV) scaled at the company?

GTV

Didi is historically a business that operates in China but has operations today in more than a dozen countries. The impact and recovery of China’s bout with COVID-19 is therefore not the whole picture of the company’s GTV results.

COVID-19 began to affect the company starting in the first quarter of 2020. From the Didi F-1 filing:

Core Platform GTV fell by 32.8% in the first quarter of 2020 as compared to the first quarter of 2019, and then by 16.0% in the second quarter of 2020 as compared to the second quarter of 2019.

The dips were short-lived, however, with Didi quickly returning to growth in the second half of the year:

Our businesses resumed growth in the second half of 2020, which moderated the impact on a year-on-year basis. Our Core Platform GTV for the full year 2020 decreased by 4.8% as compared to the full year 2019. Both our China Mobility and International segments were impacted, but whereas the GTV for our China Mobility segment decreased by 6.6% from 2019 to 2020, the GTV for our International segment increased by 11.4% from 2019 to 2020.

Holding to just the Chinese market, we can see how rapidly Didi managed to pick itself up over the last year. Chinese GTV at Didi grew from 25.7 billion RMB to 54.6 billion RMB from the first quarter of 2020 to the first quarter of 2021; naturally, we’re comparing a more pandemic-impacted quarter at the company to a less-affected period, but the comparison is still useful for showing how the company recovered from early-2020 lows.

The number of transactions that Didi recorded in China during the first quarter of this year was also up more than 2x year over year.

On a whole-company basis, Didi’s “core platform GTV,” or the “sum of GTV for our China Mobility and International segments,” posted numbers that are less impressive in growth terms:

You can see how quickly and painfully COVID-19 blunted Didi’s global operations. But seeing the company settle back to late-2019 GTV numbers in 2021 is not super bullish.

Takeaway: While Didi managed an impressive GTV recovery in China, its aggregate numbers are flatter, and recent quarterly trends are not incredibly attractive.

Revenue growth

French startup Lydia is better known as the dominant app for peer-to-peer payments. But the company has been adding more features, such as a debit card, account aggregation, donations, money pots and more. This week, the company is adding savings accounts thanks to a partnership with French fintech startup Cashbee.

If you aren’t familiar with Cashbee, the company lets you open savings accounts through a mobile app. After connecting your bank account with Cashbee, you can transfer money back and forth between your bank account and a savings account.

Right now, Cashbee partners with My Money Bank for the savings accounts. Cashbee doesn’t keep your money, it just acts as a middle person between your bank account and My Money Bank. With those savings accounts, users can expect an interest rate of 0.6% after an introductory rate of 2% for a few months.

Lydia basically offers the same terms and conditions with a few differences. Instead of earning 2% interest for the first three months, Lydia users only earn more interest during the first two months.

The other big difference is that Lydia asks you to put at least €1,000 on your savings account when you open it. If you go through Cashbee’s app, you only have to put €10 or more. But users can do whatever they want after that when it comes to putting some money aside and withdrawing money from the savings account.

But the fact that Cashbee is seamlessly integrated in Lydia is interesting. It’s going to expose Cashbee to a lot more users as Lydia has more than 5 million users. It’s also an important feature if Lydia wants to become a financial super app.

This savings feature competes with Livret A, the most prevailing savings account in France. Everybody can open a Livret A in a retail bank. You get an interest rate of 0.5% net of taxes. On paper, 0.6% is better than 0.5%. But Cashbee’s savings accounts aren’t net of taxes.

If you’re a student and don’t pay any taxes, that’s a better deal. But many people pay 30% in taxes on accrued interests, which means that you end up earning 0.42% in interests net of taxes with a Cashbee account.

But it’s hard to beat the simplicity of Lydia’s solution here. For instance, you can save up to €1,000,000 on your savings account while the Livret A is limited to €22,950. In other words, if you’re already using Lydia to send, receive and spend money, you might want to check out those savings accounts.

 

Now that we have your attention, know this: Prices go up tonight on passes to TC Early Stage 2021: Marketing & Fundraising. If you’re an early-stage founder (pre-seed through Series A), don’t miss this chance to save $100 on our two-day virtual event dedicated to helping you build a stronger startup. It’s one of the best investments you’ll ever make.

It’s Now O’clock: Buy your pass here before the sale expires tonight at 11:59 p.m. (PT).

Why should you attend TC Early Stage 2021? Chloe Leaaetoa, the founder of Socicraft and an Early Stage 2020 attendee, explains:

What you learn at Early Stage is so much better than the random information you find on YouTube. You get to interact with industry experts and ask them specific questions. It’s like a mini bootcamp, and you’re going to walk away with a lot of knowledge.

What can you expect at Early Stage 2021? The first day is packed with presentations designed to help you learn (or deepen your knowledge of) essential startup skills — product fit, growth marketing, fundraising and a whole bunch more. We’ve tapped some of the best startup ecosystem experts who will not only impart their wisdom, but they’ll also take and answer your questions.

Check out the event agenda and our roster of speakers.

We’re talking an interactive experience — from which you’ll take away tips and advice that you can implement in your business now when you need it most. Case in point, again from Chloe Leaaetoa:

Sequoia Capital’s session, Start with Your Customer, looked at the benefits of storytelling and creating customer personas. I took the idea to my team, and we identified seven different user types for our product, and we’ve implemented storytelling to help onboard new customers. That one session alone has transformed my business.

Day two is all about the TC Early-Stage Pitch-Off. Tune in and watch as 10 early-stage founders bring the heat. Each team will deliver a five-minute pitch in front of TC editors, global investors, press and hundreds of attendees. After each team pitches, they’ll engage in a five-minute Q&A with our panel of top VC judges.

You’ll learn so much by watching those pitches and hearing the VC’s questions. It’s a great way to improve your own pitch deck. And if notetaking is not your forte, don’t stress. All sessions, including the pitch-off, will be available courtesy of video-on-demand.

TC Early Stage 2021: Marketing & Fundraising takes place July 8-9, but you have just hours left before the early bird flies south and the prices head north. It’s now o’clock — beat the deadline and register here before 11:59 p.m. (PT) tonight.

Is your company interested in sponsoring or exhibiting at Early Stage 2021: Marketing & Fundraising? Contact our sponsorship sales team by filling out this form.

( function() { var func = function() { var iframe = document.getElementById('wpcom-iframe-5411631f4bb18bf52c73b95079bc13e0') if ( iframe ) { iframe.onload = function() { iframe.contentWindow.postMessage( { 'msg_type': 'poll_size', 'frame_id': 'wpcom-iframe-5411631f4bb18bf52c73b95079bc13e0' }, "https:\/\/tcprotectedembed.com" ); } } // Autosize iframe var funcSizeResponse = function( e ) { var origin = document.createElement( 'a' ); origin.href = e.origin; // Verify message origin if ( 'tcprotectedembed.com' !== origin.host ) return; // Verify message is in a format we expect if ( 'object' !== typeof e.data || undefined === e.data.msg_type ) return; switch ( e.data.msg_type ) { case 'poll_size:response': var iframe = document.getElementById( e.data._request.frame_id ); if ( iframe && '' === iframe.width ) iframe.width = '100%'; if ( iframe && '' === iframe.height ) iframe.height = parseInt( e.data.height ); return; default: return; } } if ( 'function' === typeof window.addEventListener ) { window.addEventListener( 'message', funcSizeResponse, false ); } else if ( 'function' === typeof window.attachEvent ) { window.attachEvent( 'onmessage', funcSizeResponse ); } } if (document.readyState === 'complete') { func.apply(); /* compat for infinite scroll */ } else if ( document.addEventListener ) { document.addEventListener( 'DOMContentLoaded', func, false ); } else if ( document.attachEvent ) { document.attachEvent( 'onreadystatechange', func ); } } )();

The U.S. insurance technology market is hot and has been for years now. Back in early 2020, to pick an example, TechCrunch reported on a wave of funding events among domestic insurtech marketplaces. Those companies have since gone on to raise hundreds of millions of dollars more.

And after a long period of incubation, we’ve seen neoinsurance players from the U.S. like Root and Metromile go public. Hippo is working to join the cohort.

The Exchange explores startups, markets and money. 

Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.

So from the perspective of venture capital activity, startup growth and exits, insurtech is proving itself in the States. Even if growth remains the name of the game in insurance tech and profits are often scarce.

What about other markets? The recent Wefox round caught The Exchange’s eye. A $650 million insurtech round would have commanded our attention regardless of its location. But to see a European insurance technology startup raise that amount of cash made us wonder if there’s as much money present for the EU market’s insurtech startups as we’ve seen here in the U.S.

After all, with business-focused neoinsurance provider Embroker raising a big round this week in the United States, to pick an example, it seems that attacking the massive and antiquated insurance market is good startup sport. Why wouldn’t that concept apply to Europe?

To find out more, we got in touch with a number of VCs from Europe to hear their perspectives on what’s happening on the ground, including folks from Accel, Astorya.vc and Insurtech Gateway. To ground us, we collated the biggest recent rounds from the EU insurance technology market. Let’s go!

A quick note on insurtech exits

Venture capitalists and startup founders get paid when they generate an exit. Lately, exits in the space have featured a number of IPOs.

The older a startup gets, the more it has to deal with public-market investors. Crossover funds and the like make their appearance before unicorns go public. And then former startups have to pitch not the venture capital market, but the public markets. It’s a different game.

That’s the impression that The Exchange got chatting with the CEO of Root, Alex Timm, this earnings cycle. He noted that public tech-focused investors don’t always grok the insurance elements of his business, while insurance investors don’t always grok the tech side of Root.

The war for talent in the tech world can be brutal — and so, it turns out, can the war between platforms that help companies source it. In the latest developement, Toptal — a marketplace for filling engineering and other tech roles with freelance, remote workers — has filed a lawsuit against direct competitor Andela and several of its employees, alleging the theft of trade secrets in pursuit of “a perfect clone of its business”, according to the complaint. All of the Andela employees previously worked at Toptal.

Toptal’s lawsuit, filed in the Supreme Court of the State of New York and embedded below, alleges that the employees reneged on confidentiality, non-solicitation and non-compete agreements with Toptal. Toptal also alleges interference with contract, unfair competition and misappropriation of trade secrets.

While both Toptal and Andela have built businesses around the idea of remote freelancers filling tech jobs — a concept that has increased in profile and acceptance as people shifted to remote work during the pandemic — the pair only emerged as very direct competitors in the last year or so.

Toptal was co-founded by CEO Taso Du Val in 2010, and since then it has grown to become one of the world’s most popular on-demand talent networks. The company matches skilled tech personnel like engineers, software developers, designers, finance experts and product managers to clients across the globe. According to company data, it currently serves over 1,000 clients in more than 10 countries.

Andela, on the other hand, only recently turned to using a similar approach. Founded in 2014 in Lagos, Andela’s original business model was based on building physical hubs to source, vet, train and house talent across the continent. It did this in Kenya, Nigeria, Rwanda and Uganda.

However, Andela struggled with scaling and operating that business model, and in 2019 it laid off 400 developers. Early last year as the pandemic took hold, it laid off a further 135 employees. However this time around it did so with a strategy pivot in mind: after testing satellite models in Egypt and Ghana, the talent company decided to go forego physical hubs completely and go remote, first across Africa in 2020 and globally this year.

“We thought, ‘What if we accelerated [the African remote network] and just enabled applicants from anywhere?’ Because it was always the plan to become a global company. That was clear, but the timing was the question,” Andela CEO Jeremy Johnson told TechCrunch in April.

Yet Toptal believes Andela’s choice to scrap its hubs and source remote talent from everywhere was specifically to replicate Toptal’s business model — and success.

“Until recently, Andela operated an outsourcing operation focused on in-person, on-site hubs in Africa,” Toptal notes in the complaint. “Over the course of the past year, Andela has moved away from its prior focus on in-person hubs situated in Africa and is engaging in a barely disguised attempt to become a clone of Toptal.”

Toptal claims that for Andela to pull off a “perfect clone of its business,” it poached key Toptal employees to exploit their knowledge, and that the ex-employees knowingly breached their confidentiality and non-solicitation obligations to Toptal.

Companies often try to uncover each other’s trade secrets by poaching, and many blatantly copy a competitor and do so without repercussions. On top of this, these two are hardly the only two places to for tech talent to connect with remote freelance job opportunities. Others include Fiverr, Malt, Freelancer.com, LinkedIn, Turing, Upwork and many more.

In a global economy with an estimated 1 billion so-called knowledge workers, and with freelancers accounting for some 35% of the world’s workforce, it’s a pretty gigantic market, which you could alternately look at as a major opportunity, but also a ripe field for many players with multiple permutations of the marketplace concept.

So why is Toptal crying foul play? The company says its ex-employees have not only revealed Toptal’s trade secrets and confidential information to compete unfairly but are also poaching additional Toptal personnel, clients and the talent that Toptal matches and sources to clients.

The ex-employees cited by Toptal include Sachin Bhagwata, vice president of enterprise; Martin Chikilian, head of talent operations; Courtney Machi, vice president of product; and Alvaro Oliveira, executive vice president of talent operations. Toptal says three additional former employees in non-executive roles breached express covenants not to compete in their agreements with Toptal.

While some of the allegations focus on the expertise of the employees, one of the trade secret allegations more directly references Toptal’s technology.

Toptal claims Machi tapped into her extensive knowledge of Toptal’s “proprietary software platform” and used that to help transform Andela “from a group of outsourcing hubs situated in various African locations into a fully remote, global company like Toptal.”

Asked to comment on the suit, Johnson at Andela said he believes Toptal is suing Andela for being competitive.

“With regards to the situation overall, I can say that frivolous lawsuits are the price of doing anything that matters,” he told TechCrunch in an email. “And this is the kind of baseless bullying and fear tactics that make employees want to leave in the first place. We will defend ourselves and our colleagues vigorously.”

Toptal has an unconventional story for a company that started only a decade ago. It is one of the few companies in the Valley that doesn’t issue stock options to its investors or employees. Even Du Val’s co-founder, Breanden Beneschott, was ousted from the company without any shares, according to an article from The Information.

How did it pull this off? In 2012, Toptal raised a $1.4 million seed via convertible notes and investors were entitled to 15% of the company, according to The Information article.

But there was one condition: Toptal had to raise more money.

However, the company hasn’t needed to secure additional capital because of its profitability and growing revenue ($200 million annually as of 2018, per The Information). So investors are stuck in limbo — as are employees who joined hoping that the company would raise money down the line so their stock options would convert.

The Information story strikes a distinct note of resentment, noting that some employees felt “tricked out of stock in a company that Du Val has said publicly is worth more than $1 billion.”

Given that situation, TechCrunch asked Du Val if he thought it played any role in employee departures, and ex-employee relations.

“The issuance of stock options does not excuse theft of trade secrets,” he replied. “Also, there are more than 800 full-time people at Toptal [but] the complaint names seven individual defendants.”

The full complaint is embedded below.

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

We’re closing our survey soon, so this is your last chance (probably) to get your voice heard!

Despite it being a short week, as always, it was a busy, busy time. We had Grace on the dials today, and Danny, Natasha and Alex making chit-chat about the tech world. As with every week this year, we had to cut and cut and cut to get the show down to size. Here’s what made it in in the end:

Medium saw more employees depart the company after CEO Ev Williams published a “culture memo.” While the Medium memo doesn’t wholly ban politics, some allege that the undertone of the statement, timed weeks after a failed unionization attempt, created an unsafe environment. A week later, Natasha covered another controversy, this time at Y Combinator. We riff on the takeaway, and what this story looks like three months from now.The issue of company culture is attracting companies. Or more precisely startups, with Blendoor dropping a new report this week that TechCrunch covered, and Vault raising $8.2 million to provide a software solution to aid employees in reporting misconduct.On the funding round beat, we explored ChartHop’s new $35 million round that Danny had many thoughts about, fake-chicken nuggets startup Nuggs raising $50 million and Faculty’s latest deal that will help power its vision for the future of male grooming. We also got into Lifted’s elder-care focused round, a startup in the larger health tech beat that Natasha is giving some of her attention to.And we wrapped with the ExtraHop exit. We spent a minute trying to figure out why the company was valued at $900 million in its exit. The number, while large, felt light based on what we knew about the company.

Thanks for hopping along with us this week and every week. Quick programming note: Natasha will take Alex’s spot on the Monday show for next week since he’s out, so be nice, and send her stuff to mention.

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

Beauty and wellness businesses have come roaring back to life with the decline of COVID-19 restrictions, and a startup that’s built a platform that caters to the many needs of small enterprises in the industry today is announcing a big round of funding to grow with them.

Fresha — a multipurpose commerce tool for independent wellness and beauty businesses such as hair, nail and skin salons, yoga instructors and more, based first and foremost around a completely free subscription platform for those businesses to schedule bookings from customers — has picked up $100 million.

Fresha plans to use the funds to expand the list of countries where it operates, to grow the categories of companies that use its services (mental health practitioners is one example; fitness is another) and to build more services complementing what it already provides, helping customers do their work by providing them with more insights and data about what they do already. It will also be making acquisitions to expand its customer base.

General Atlantic is leading this Series C, with Huda Kattan, Michael Zeisser of FMZ Ventures and Jonathan Green of Lugard Road Capital also participating, along with past investors Partech, Target Global and FJ Labs.

Fresha has raised $132 million to date, and it’s not disclosing its valuation. But as a point of reference, when it closed its Series B (as Shedul; the company rebranded in February 2020), it was valued at $105 million.

Chances are that figure is significantly higher now.

Fresha’s current range of services include a free-to-use platform for booking appointments; free software for managing accounts; a payments service that includes both a physical point of sale and digital interface; and a wider marketplace both to provide goods to the businesses (B2B); and for the businesses to sell goods to customers (B2C).

The London-based company has 50,000 business customers and 150,000 stylists and professionals in 120+ countries (mostly in the U.K., the U.S., Canada, Australia, New Zealand and Europe), with some 250 million appointments booked to date.

And while many businesses did have to curtail how they operated (and in some countries had to stop operating altogether), Fresha found that it was attracting a lot of new business in part because of its “free” model that meant customers didn’t have to pay to maintain a booking platform at a time when they weren’t taking bookings, but could use Fresha to generate revenues in other ways (such as through the sale of goods, vouchers for future services and more.)

So in a year when you might have thought that a company based around providing services to industries that were hard hit by COVID would have also been hard-hit, in fact Fresha saw a 30x increase in card payment transactions versus the year before, and more than $12 billion worth of booking appointments made on its platform.

In a market that is very crowded with tech companies building platforms to book beauty (and other) services and to manage the business of independent retailers — they include giants like Lightspeed POS, as well as smaller players like Booksy (which also recently raised) and StyleSeat, but also players like Square and PayPal, and many others — the core of Fresha’s offering is a booking platform built as a totally free product.

Why free? To attract more users to its other services (such as payments, which do come at a price), and because co-founders William Zeqiri (CEO) and Nick Miller (product chief) — pictured above, respectively left and right — think this the only way to build a business like this in a crowded market.

“We believe that software is a commodity,” said Zeqiri in an interview. “A lot of our competitors are beating each other on price to the bottom. We wanted to consolidate the supply side of the software, gather data about the businesses, how they use what they use.”

That data led, first, to identifying the need for and building out software and launching its B2B and B2C marketplaces, and the idea is that it will likely lead to more products as it continues to mature, whether it’s better analytics for its current customers so that they can better price or develop their services accordingly, or entirely new tools for new categories of users.

Meanwhile, the services that it already provides, like payments, have taken off like a shot, not least because they’ve served a need for any virtual transactions, like selling vouchers or items.

Miller noted that while a lot of its customers actually interface with tech with a lot of reluctance — they are the essence of “physical” retailers when you think about it — they also found themselves having to use more digital services simply because of circumstances. “Looking back at what happened, tech adoption accelerated for our customers,” said Miller. He said that current customers usage for the point-of-sale systems and online payments is roughly equal.

Looking ahead, Fresha’s investor list is notable for its strategic mix and might shed some light on how it grows. Kattan, a “beauty influencer” and the founder of Huda Beauty, is investing by way of HB Investments, a strategic venture arm; while Zeisser’s FMZ focuses on “experience economy” investments today, but he himself has a long history working at tech companies building marketplaces, including years with Alibaba as head of its U.S. investment practice. These speak to areas where Fresha is likely interested in expanding its reach — more marketplace activity; and perhaps more social media angles and exposure for its customers at a time when social media really has become a key way for beauty and wellness businesses to market themselves.

“Fresha has emerged as a leader powering the beauty and wellness industry,” said Aaron Goldman, Global co-head of financial services and managing director at General Atlantic, in a statement. “William, Nick and the Fresha team have built a product that is resonating with the market and creating long-term value through the intersection of its payments, software and marketplace offerings. We are thrilled to be partnering with the company and believe Fresha has significant opportunity to further scale its innovative platform.”

“I’ve witnessed firsthand the positive impact Fresha has for beauty entrepreneurs,” added Kattan. “The company is a force for good in the growing community of beauty professionals around the globe, who are increasingly adopting a self-employed approach. By making top business software accessible without any subscription fees, Fresha lets professionals focus on what they do best — offering great experiences for their customers.”

Practical interventions to ensure AI fairness include creating an AI fairness charter and implementing training and testing.Read More

Activision Blizzard posted its first-ever report on sustainability at one of the world's largest independent video game companies.Read More

AI can lower the cost of doing business, but enterprises have to consider cost management to make it less expensive to acquire and deploy.Read More

AI is increasingly being used to assist engineers in creating physical products -- a potentially positive development for enterprises.Read More

Researchers at the Allen Institute and University of Washington created an AI system that can understand the sequence of events in videos.Read More

New York mayoral candidate Andrew Yang dressed up as a metaverse avatar at one of his events to reach tech-savvy voters.Read More

The UNESCO Science Report 2021 discusses AI, robotics, Industry 4.0, and a spike in scientific research, patents, and spending.Read More