Oh, how the tables have turned.

It used to be that if you were a fintech startup or, for lack of a better term, a digitally native financial services business, you might be eyeing an acquisition from an incumbent in the industry.

But lately, fintech upstarts are the ones doing the acquiring. Over just the last year or so, we’ve seen:

In February 2020, LendingClub announced plans to acquire Radius Bank in a cash-and-stock transaction valued at $185 million. The deal closed in February 2021, leading to a very quick and surprising second-quarter profit.In March of this year, SoFi agreed to acquire Golden Pacific Bancorp (GBP) for about $22.3 million in a deal that was designed to accelerate its acquisition of a national bank charter.Earlier this month, blockchain-based lender Figure Technologies agreed to merge with mortgage firm Homebridge Financial Services, which has 180 retail branches and funded more than $25 billion in home loans in 2020.And last fall, fintech startup and challenger bank Jiko acquired Wadena, Minnesota-based Mid-Central National Bank in a deal that took years of due diligence and whose sales price fell in the range of a Series A round, according to the founder.

So what’s going on here? Why are fintechs now acquiring legacy financial services businesses, instead of the other way around?

The pandemic was a catalyst for showing companies looking to cut costs just how much they were spending on their software tools. New York-based Tropic’s platform not only uncovers those savings, but also brings a click-and-approve approach to buying software. Today, the company announced a $25 million Series A round of funding.

Canaan Partners led the round, with participation from Founder Collective and Mo Koyfman’s new fund, Shine. It gives Tropic $27.1 million in total funding since the company emerged from stealth in 2020, CEO David Campbell told TechCrunch.

Prior to founding the company with Justin Etkin, Campbell was in technology and sales roles, selling software contracts of every size, and realized how complex and rigid the contracts were getting as companies grew larger and the lack of price transparency increased. The complexity of some contracts can cause companies to overpay, even locking companies into payments they can’t afford, Campbell said.

On top of that, more buyers are younger now and their experience with purchasing software is pulling out their phone to download an app, while buying a customer relationship management tool will take six months to buy and cost thousands of dollars.

“Looking at the space, we are in a mirror maze of software, including companies using software to build products that they then sell back to the software companies,” Campbell said. “Companies are only buying software once a year, yet the process can be so complex.”

Tropic’s SaaS procurement model gathers the whole process under one platform. Unlike some competitors’ approaches, it takes on the heavy lifting so when companies have to buy or renew a contract, users can access Tropic’s one-click purchasing service to outsource the transaction. After the contracts are signed, its platform manages the technology and ensures financing is in order. This approach saves companies 23%, on average, on the software purchases, which Campbell said “moves the needle” for many companies where software is the No. 1 cost after salary.

In recent years, cloud software has become a fast-growing spend category across most businesses. Campbell said the average company can have more than 100 software contracts, while that jumps to over 500 for enterprise organizations. Meanwhile, global spend on enterprise software is forecasted to reach $599 billion by the end of 2021, a 13.2% increase over the previous year, according to Statista.

In the last 12 months, the company added over 60 customers, counting Qualtrics, Vimeo, Zapier and Intercom, surpassed $250 million in managed spend and processed transactions for over 1,200 vendors. The company is seeing 100% quarter over quarter growth, and in the last quarter, doubled its annual recurring revenue, Campbell said.

Tropic will use the funding for R & D and to deepen integrations with existing procurement tools in the cloud software ecosystem. Over the past year, the company’s headcount has grown to 50 and Campbell has “aggressive hiring plans between now and the rest of the year” focused on the tech side with engineering and product management.

Hootan Rashidifard, principal from Canaan Partners, said his firm was tracking the software procurement sector and learned about Tropic through Founder Collective, which led the company’s seed round.

“We’re seeing software and financial services converge and Tropic sits squarely at the intersection of both in a category with massive tailwinds,” Rashidifard said via email. “Software is accelerating the share of expenses while also penetrating every part of an organization, and software purchasing is becoming more decentralized. Tropic’s platform is in a fragmented market with high payment volume, which is ripe for layering on all kinds of adjacent services.”

 

Nuro doesn’t have a typical Silicon Valley origin story. It didn’t emerge after a long, slow slog from a suburban garage or through a flash of insight in a university laboratory. Nor was it founded at the behest of an eccentric billionaire with money to burn.

Nuro was born — and ramped up quickly — thanks to a cash windfall from what is now one of its biggest rivals.

In the spring of 2016, Dave Ferguson and Jiajun Zhu were teammates on Google’s self-driving car effort. Ferguson was directing the project’s computer vision, machine learning and behavior prediction teams, while Zhu (widely JZ) was in charge of the car’s perception technologies and cutting-edge simulators.

“We both were leading pretty large teams and were responsible for a pretty large portion of the Google car’s software system,” Zhu recalls.

As Google prepared to spin out its autonomous car tech into the company that would become Waymo, it first needed to settle a bonus program devised in the earliest days of its so-called Chauffeur project. Under the scheme, early team members could choose staggered payouts over a period of eight years — or leave Google and get a lump sum all at once.

Ferguson and Zhu would not confirm the amount they received, but court filings released as part of Waymo’s trade secrets case against Uber suggest they each received payouts in the neighborhood of $40 million by choosing to leave.

“What we were fortunate enough to receive as part of the self-driving car project enabled us to take riskier opportunities, to go and try to build something that had a significant chance of not working out at all,” Ferguson says.

Within weeks of their departure, the two had incorporated Nuro Inc, a company with the non-ironic mission to “better everyday life through robotics.” Its first product aimed to take a unique approach to self-driving cars: Road vehicles with all of the technical sophistication and software smarts of Google’s robotaxis, but none of the passengers.

In the five years since, Nuro’s home delivery robots have proven themselves smart, safe and nimble, outpacing Google’s vehicles to secure the first commercial deployment permit for autonomous vehicles in California, as well as groundbreaking concessions from the U.S. government.

While robotaxi companies struggle with technical hitches and regulatory red tape, Nuro has already made thousands of robotic pizza and grocery deliveries across the U.S., and Ferguson (as president) and Zhu (as CEO) are now heading a company that as of its last funding round in November 2020 valued it at $5 billion with more than 1,000 employees.

But how did they get there so fast, and where are they headed next?

Turning money into robots

“Neither JZ nor I think of ourselves as classic entrepreneurs or that starting a company is something we had to do in our lives,” Ferguson says. “It was much more the result of soul searching and trying to figure out what is the biggest possible impact that we could have.”

Nuro’s delivery autonomous vehicles (AVs) don’t have a human driver on board. The company’s founders Dave Ferguson (president) and Jiajun Zhu’s (CEO) vision of a driverless delivery vehicle sought to do away with a lot of the stuff that is essential for a normal car to have, like doors and airbags and even a steering wheel. They built an AV that spared no room in the narrow chassis for a driver’s seat, and had no need for an accelerator, windshield or brake pedals.

So when the company petitioned the U.S. government in 2018 for a minor exemption from rules requiring a rearview mirror, backup camera and a windshield, Nuro might have assumed the process wouldn’t be very arduous.

They were wrong.

In a 2019 letter to the U.S. Department of Transportation, The American Association of Motor Vehicle Administrators (AAMVA) “[wondered] about the description of pedestrian ‘crumple zones,’ and whether this may impact the vehicle’s crash-worthiness in the event of a vehicle-to-vehicle crash. Even in the absence of passengers, AAMVA has concerns about cargo ejection from the vehicle and how Nuro envisions protections from loose loads affecting the driving public.”

The National Society of Professional Engineers similarly complained that Nuro’s request lacked information about the detection of moving objects. “How would the R2X function if a small child darts onto the road from the passenger side of the vehicle as a school bus is approaching from the driver’s side?” it asked. It also recommended the petition be denied until Nuro could provide a more detailed cybersecurity plan against its bots being hacked or hijacked. (Nuro refers to the bots as. R2, but in some written documents reviewed by TechCrunch, the term R2X is used)

The Alliance of Automobile Manufacturers (now the Alliance Automotive Innovation), which represents most U.S. carmakers, wrote that the National Highway Transportation Safety Agency (NHTSA) should not use Nuro’s kind of petition to “introduce new safety requirements for [AVs] that have not gone through the rigorous rule-making process.”

“What you can see is that many comments came from entrenched interests,” said David Estrada, Nuro’s chief legal and policy officer. “And that’s understandable. There are multibillion dollar industries that can be disrupted if autonomous vehicles become successful.”

To be fair, critical comments also came from nonprofit organizations genuinely concerned about unleashing robots on city streets. The Center for Auto Safety, an independent consumer group, thought that Nuro did not provide enough information on its development and testing, nor any meaningful comparison with the safety of similar, human-driven vehicles. “Indeed, the planned reliance on ‘early on-road tests … with human-manned professional safety drivers’ suggests that Nuro has limited confidence in R2X’s safe operation,” it wrote.

Despite such concerns, the National Highway Traffic Safety Administration (NHTSA) granted Nuro the exemptions it sought in February last year. Up to 5,000 R2 vehicles could be produced for a limited period of two years and subject to Nuro reporting any incidents, without a windshield, rearview mirror or backup camera. Although only a small concession, it was the first — and so far, only — time the U.S. government had relaxed vehicle safety requirements for an AV.

Now Estrada and Nuro hope to use that momentum to chip away at a mountain of regulations that never envisaged vehicles controlled by on-board robots or distant humans, extending from the foothills of local and state government to the peaks of federal and international safety rules.

If Nuro is to become the generation-defining company its founders desire, it will be due as much to innovation in regulation as advances in the technology it develops.

Regulate for success

“I don’t think any of the credible, big AV players want this to be a free-for-all,” said Dave Ferguson, Nuro’s co-founder and president. “We need the confidence of a clear regulatory framework to invest the hundreds of millions or billions of dollars necessary to manufacture vehicles at scale. Otherwise, it’s really going to limit our ability to deploy.”

Pandemic pizza was definitely a thing.

U.S. consumers forked out a record-breaking $14 billion to have pizza delivered to their doors in 2020, and nearly half of that total was spent with just one brand: Domino’s.

“Domino’s is the home of pizza delivery,” said Dennis Maloney, Domino’s chief innovation officer. “Delivery is at the core of who we are, so it’s very important for us to lead when it comes to the consumer experience of delivery.”

In its latest TV ad, an order of Domino’s pizza speeds to its destination inside a Nuro R2 delivery autonomous vehicle (AV). The R2 deftly avoids potholes, falling trees and traffic jams caused by The Noid — a character created by Domino’s in the 1980s to symbolize the difficulties of delivering a pizza in 30 minutes or less.

The reality is much more sedate. Domino’s currently has just one R2 that operates from a single Domino’s store on the generally calm streets of Woodland Heights in Houston, Texas. And since the AV’s introduction in April, The Noid has yet to put in an appearance.

“The R2 adds a bunch of efficiencies while not taking away from any existing capabilities,” Maloney said. “As we start getting the bot into regular operation, we’ll see if it plays out the way we expect it to. So far, all the indications are good.”

Partnerships are key for Nuro. The company’s business model is to sign contracts with established brands that either have their own branded vehicles or use traditional delivery companies like UPS or the U.S. Postal Service.

Nuro is carrying out trials and pilot deliveries with a number of companies, including fast casual restaurant chain Chipotle, Kroger grocery stores, CVS pharmacies, bricks-and-mortar retail behemoth Walmart, and, most recently, global parcel courier FedEx. While it is a dizzyingly impressive list for a company less than five years old, their interest was driven as much by global trends as by Nuro’s technology, admits Cosimo Leipold, head of partnerships at Nuro.

“Everybody today wants what they want and they want it faster than ever, but frankly they’re not willing to pay for it,” Leipold said. “We’ve reached a point where almost every company is going to have to offer delivery services, and now it’s just the question of how they’ll do it in the best possible way and with the most possible control.”

Nuro’s delivery AVs — aka bots — offer the tantalizing promise of safe, reliable and efficient delivery without sacrificing revenue and customer data to third-party platforms like Grubhub, DoorDash or Instacart. Alongside Nuro’s stated aim of driving the cost of delivery down to zero, it is little surprise that Nuro now finds itself in the enviable position of being able to pick and choose the partners it wants — and the less enviable position of having to choose which partner to prioritize.

Here’s the story of how one of Nuro’s biggest partnerships came to be, and the lessons and companies that will drive its future growth.

Deliveries with extra cheese

Domino’s has a long history of innovating in delivery, usually accompanied by a strong marketing campaign. In the 1980s, the company bought 10 customized Tritan Aerocar 2s, a Jetsons-styled three-wheeler, for use as delivery vehicles. In 2015, the company unveiled the DXP, a Chevrolet Spark modified with a single seat and a built-in warming oven, designed specifically for transporting pizza.

In early 2021, a Nuro autonomous delivery vehicle pulled to a halt at a four-way stop in its hometown of Mountain View, California to let a user cross. This seemingly humdrum moment quickly looked like a decidedly science fiction storyline — the user was a small sidewalk robot from another startup on its own mission.

“Obviously, we yielded to it, but it was, wow, we have entered a different world,” said Amy Jones Satrom, head of Operations at Nuro.

Mountain View is home to competitor Waymo and other autonomous vehicle testing activity. But for those who want to take part in that science fiction scene, Houston provides the full experience.

Waymo is testing self-driving trucks in Houston, and a fully driverless shuttle service is due to start public service there early next year. Nuro’s Texas effort started in April, when an R2 robot began its commercial pizza delivery service in partnership with Domino’s. Some customers ordering pizzas from the Domino’s Woodland Heights store will see the option to have their pies delivered by robot.

Customers can trace the progress of the self-driving vehicle on the Domino’s app and, when it pulls up outside their home, tap in a unique PIN on its touchscreen to access their order. Nuro is also operating in Houston with Kroger supermarkets and FedEx.

“One of the things we laugh about is how customers constantly talk to the bot,” Dennis Maloney, Domino’s chief innovation pfficer said. “It’s almost like they think it’s ‘Knight Rider.’ It’s very common for customers to thank it or say goodbye, which is great because that indicates we’re creating an engaging experience that they’re not frustrated by.”

Creating an experience, where people want to chat with their new robot neighbors instead of chasing them down the street with pitchforks, falls to Jones Satrom’s operations team. It has to delicately balance speed, safety, convenience and congestion, even as Nuro embarks on a growth spurt that will see robots spreading to other cities, states and partners in the months ahead.

Here’s how it manages that, and what the future holds for Nuro’s ever-so-gentle robot invasion.

Mapping the territory

Few people are as well suited to overseeing Nuro’s high-stakes robot rollout as Jones Satrom, who started her career as a nuclear engineer on an aircraft carrier and previously managed the integration of Kiva Systems’ robots into Amazon’s warehouses.

Cisco announced on Friday that it’s acquiring Israeli applications-monitoring startup Epsagon at a price pegged at $500 million. The purchase gives Cisco a more modern microservices-focused component for its growing applications-monitoring portfolio.

The Israeli business publication Globes reported it had gotten confirmation from Cisco that the deal was for $500 million, but Cisco would not confirm that price with TechCrunch.

The acquisition comes on top of a couple of other high-profile app-monitoring deals, including AppDynamics, which the company bought in 2018 for $3.7 billion, and ThousandEyes, which it nabbed last year for $1 billion.

With Epsagon, the company is getting a way to monitor more modern applications built with containers and Kubernetes. Epsagon’s value proposition is a solution built from the ground up to monitor these kinds of workloads, giving users tracing and metrics, something that’s not always easy to do given the ephemeral nature of containers.

As Cisco’s Liz Centoni wrote in a blog post announcing the deal, Epsagon adds to the company’s concept of a full-stack offering in their applications-monitoring portfolio. Instead of having a bunch of different applications monitoring tools for different tasks, the company envisions one that works together.

“Cisco’s approach to full-stack observability gives our customers the ability to move beyond just monitoring to a paradigm that delivers shared context across teams and enables our customers to deliver exceptional digital experiences, optimize for cost, security and performance and maximize digital business revenue,” Centoni wrote.

That experience point is particularly important because when an application isn’t working, it isn’t happening in a vacuum. It has a cascading impact across the company, possibly affecting the core business itself and certainly causing customer distress, which could put pressure on customer service to field complaints, and the site reliability team to fix it. In the worst case, it could result in customer loss and an injured reputation.

If the application-monitoring system can act as an early warning system, it could help prevent the site or application from going down in the first place, and when it does go down, help track the root cause to get it up and running more quickly.

The challenge here for Cisco is incorporating Epsagon into the existing components of the application-monitoring portfolio and delivering that unified monitoring experience without making it feel like a Frankenstein’s monster of a solution globbed together from the various pieces.

Epsagon launched in 2018 and has raised $30 million. According to a report in the Israeli publication, Calcalist, the company was on the verge of a big Series B round with a valuation in the range of $200 million when it accepted this offer. It certainly seems to have given its early investors a good return. The deal is expected to close later this year.

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

This is Equity Monday, our weekly kickoff that tracks the latest private market news, talks about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here. I also tweet.

It’s a surreal day to talk about technology, but here we are. If you can pull your eyes away from the greater geopolitical tragedy that is our world today, here’s what we talked about:

T-Mobile may have suffered a material breach. If this bears out, it could be a leading tech story for the week. Vice has confirmed that at least some of the data in the leak appears genuine.Indian travel service ixigo is going public. The company’s IPO follows Zomato’s own domestic debut.And speaking of IPOs, the Tencent Music offering in Hong Kong could be on hold until next year.And a trio of American tech companies raised a raft of capital as last week concluded. Carta put together $500 million in a huge deal, as Chime raised $750 million. And as the week closed, Discord was reported to be hunting up a new round at a $15 billion price tag.

And stocks are set to open lower this morning. That’s the morning report. Equity is back on Wednesday.

Pepperdata CEO Ash Munshi says lack of appreciation for data management will lead to disappointing results for enterprise AI.Read More

Headlines warn about attempts to exploit gaps in key pharma supply chain cybersecurity. Here's how CISOs can respond. Read More

The report concluded that while respondents have confidence in their plans, teams, and products, they still regularly suffer data breaches.Read More

Unity Technologies is supporting the Lual Mayen Foundation's tech center to teach skills to refugees in Uganda.Read More

The metaverse won’t exist in a closed-garden VR space. It will emerge in various business models, content types, and classes of experiences.Read More

The unfortunate reality is that businesses rarely find citizen development to be the right model for their organizations.Read More

The key to getting more value from industrial internet of things (IIoT) and IoT platforms is getting AI and ML workloads right.Read More

Insurance companies are implementing applications of data science to detect fraud and provide a personalized customer experience.Read More

For enterprise IT teams, managing a cloud-based OS is far easier than managing installed OS and app combinations.Read More

Immutable has established an alliance with NRG Esports to create NFTs for the upcoming Guild of the Guardian's mobile role-playing game. Read More

This week Danny and Alex and Chris took to Twitter Spaces to chat about the current state of the crypto economy, and hang out with friends in a live Twitter Space. We’re doing more of these, so make sure that you are following the show on Twitter.

As a small programming note, I forgot to tell the folks who chimed in during the chat that we were recording it, so we had to cut most the Q&A portion of the show. We got Ezra’s permission, thankfully. The mixup was a bummer as we learned a lot. In the future, we’ll not make that mistake and keep all the voices.

So, what did we talk about? The following:

The current state of crypto regulation in America, and how the government may screw everything up. In short, tech moves fast, and government moves slow. This creates friction.Coinbase kicked the ever-loving shit out of its Q2 earnings. But as it turns out the future for trading-powered companies could include a few quarters of slower results.And everyone wants to fund the next Coinbase. You can understand why. The company is printing cash lately, helping drive more investment into localized exchanges in different markets.

Ok, we’re back Monday with your regularly scheduled programming!

By distributing the training of models across devices, federated learning ensures use of machine learning while minimizing data collection.Read More