When you’re head-down and nose to the grindstone — I’m looking at all you hard-working early-stage startup founders — it’s easy to miss a deadline for an outstanding opportunity. Case in point: competing in Startup Battlefield at TechCrunch Disrupt 2021 in September.

We want every game-changing, innovative startup — from anywhere around the world — to have a shot at massive exposure to investors, media and other influential unicorn-makers. The $100,000 in equity-free prizemoney would be nice, too, right? That’s why we’re extending our application deadline for another full week.

It won’t cost you a thing to apply or to participate, so don’t let this trajectory-changing opportunity slip past you. Apply to Startup Battlefield here before May 27 at 11:59 p.m. (PT).

The TechCrunch editorial team will vet every application and ultimately choose roughly 20 startups to go head-to-head. Each team receives weeks of free, rigorous coaching from our seasoned Battlefield team. Your pitch, presentation skills and business model will reach new heights of excellence. You’ll also be ready to deftly handle all the questions you’ll receive from our expert VC judges.

Startup Battlefield plays out over several rounds, with the field progressively narrowing. Each time you make the cut, you’ll repeat your pitch-and-answer session to a new set of judges. All that training, prep and focus leads to a final showdown and one last grab for the brass ring. And then it’s up to the judges to decide which stand-out startup wins the championship and that huge check.

While only one startup wins the money and the title, every team that competes benefits from standing in a global spotlight. Sean Huang, co-founder of Matidor, competed in Startup Battlefield at Disrupt 2020. His team was one of the five finalists. Here’s what he said about his experience:

“Going through Startup Battlefield helped us simplify and improve our pitch. It helped us not only with brand messaging, but also to win other pitch competitions after Battlefield. By pitching in the finals, we booked a demo with one of the final panelists. We received inbound investment interest from 12 Tier-1 investors, and eight potential key clients came to our website for a demo session. We also received an endorsement letter for our Y Combinator application from a fellow Battlefield participant, with whom we formed a great connection.”

You’re head down and focused — that’s why we’re giving you a one-week extension. So… stop, look up and grab this opportunity to take your startup to whole new levels. Get your nose off that grindstone and apply to Startup Battlefield here before May 27 at 11:59 p.m. (PT).

Is your company interested in sponsoring or exhibiting at Disrupt 2021? Contact our sponsorship sales team by filling out this form.

( function() { var func = function() { var iframe = document.getElementById('wpcom-iframe-82e7089bb76c80e1d7d73433ec8b0f47') if ( iframe ) { iframe.onload = function() { iframe.contentWindow.postMessage( { 'msg_type': 'poll_size', 'frame_id': 'wpcom-iframe-82e7089bb76c80e1d7d73433ec8b0f47' }, "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 ); } } )();

After years in the backwaters of venture capital, edtech had a booming 2020. Not only did its products become must-haves after schools around the globe went remote, but investors also poured capital into leading projects. There was even some exit activity, with well-known edtech players like Coursera going public earlier this year.

But despite a rush of private capital — which has continued into this year, as we’ll demonstrate — edtech stocks have taken a hammering in recent weeks. So while venture capitalists and other startup investors are pumping more capital into the space in hopes of future outsize returns, the stock market is signaling that things might be heading in the other direction.

Who’s right? One investor that The Exchange spoke to noted that market turbulence is just that, and that he’s tuning into activity but not yet changing his investment strategy. At the same time, the recent volatility is worth tracking in case it’s a preview of edtech’s slowdown.

The Exchange explores startups, markets and money. 

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

Let’s look at the changing value of edtech stocks in recent months, parse some preliminary data via PitchBook that provides a good feel for the directional momentum of edtech venture capital, and try to see if there’s irrational exuberance among private investors.

You could argue that it’s public investors who are suffering from irrational pessimism and that private-market investors have the right of it. But since public markets price private markets, we tend to listen to them. Let’s go!

Falling shares

We’re sure that you want to get into the private-market data, so we’ll be brief in describing the public-market carnage. What follows is a digest of edtech stocks and their declines from recent highs:

Compared to its 52-week high, Chegg stock has lost over a third of its value.After reaching $62.53 per share in April, Coursera has shed about half of its value and is trading close to its $33 IPO price.2U closed at $33.92 per share yesterday, its shares also losing half of their value compared to their 52-week high.Staying on that theme, Stride (K12) closed at $26.77 per share yesterday, which is about half of its 52-week high.

Cisco has been busy on the acquisition front this week, and today the company announced it was buying threat assessment platform Kenna Security, the third company it has purchased this week. The two companies did not disclose the purchase price.

With Kenna, Cisco gets a startup that uses machine learning to sort through the massive pile of threat data that comes into a security system on a daily basis and prioritizes the threats most likely to do the most damage. That could be a very useful tool these days when threats abound and it’s not always easy to know where to put your limited security resources. Cisco plans to take that technology and integrate into its SecureX platform.

Gee Rittenhouse, senior vice president and general manager of Cisco’s Security Business Group, wrote in a blog post announcing the deal with Kenna that his company is getting a product that brings together Cisco’s existing threat management capabilities with Kenna’s risk-based vulnerability management skills.

“That is why we are pleased to announce our intent to acquire Kenna Security, Inc., a recognized leader in risk-based vulnerability prioritization with over 14 million assets protected and over 12.7 billion managed vulnerabilities. Using data science and real-world threat intelligence, it has a proven ability to bring data in from a multi-vendor environment and provide a comprehensive view of IT vulnerability risk,” Rittenhouse wrote in the blog post.

The security sphere has been complex for a long time, but with employees moving to work from home because of COVID, it became even more pronounced in the last year. In a world where the threat landscape changes quickly, having a tool that prioritizes what to look at first in its arsenal could be very useful.

Kenna Security CEO Karim Toubba gave a typical executive argument for being acquired: it gives him a much bigger market under Cisco than his company could have built alone.

“Now is our opportunity to change the industry: once the acquisition is complete, we will be one step closer to delivering Kenna’s pioneering Risk-Based Vulnerability Management (RBVM) platform to the more than 7,000 customers using Cisco SecureX today. This single action exponentially increases the impact Kenna’s technology will have on the way the world secures networks, endpoints and infrastructures,” he wrote in the company blog.

The company, which launched in 2010, claims to be the pioneer in the RBVM space. It raised over $98 million on a $320 million post-money valuation, according to PitchBook data. Customers include HSBC, Royal Bank of Canada, Mattel and Quest Diagnostics.

For those customers, the product will cease to be standalone at some point as the companies work together to integrate Kenna technology into the SecureX platform. When that is complete, the standalone customers will have to purchase the Cisco solution to continue using the Kenna tech.

Cisco has had a busy week on the acquisition front. It announced its intent to acquire Sedona Systems on Tuesday, Socio Labs on Wednesday and this announcement today. That’s a lot of activity for any company in a single week. The deal is expected to close in Cisco Q4 FY 2021. Kenna’s 170 employees will be joining the Security Business Group led by Rittenhouse.

 

New media poster child Substack announced today that they’ve added a small community-building consultancy team to its ranks, acquiring the Brooklyn-based startup People & Company.

The small firm has been working with clients to build up their community efforts, and its team will now be tasked with building up some of the newsletter company’s upstart efforts for writers in its network.

In a blog post, Substack co-founder Hamish McKenzie said that the company had previously used the People & Co. team to consult on their fellowship and mentorship programs and that members of the team would now be working on a variety of new efforts, from scaling programs to help writers with legal support and health insurance to community-guided projects like workshops and meetups to help crowdsource insights.

“These people are the best in the world at what they do, and now they’re not only working for Substack, but they’re also working for you,” McKenzie wrote.

Beyond Substack, previous partners with People & Company include Porsche AG, Nike and Surfrider.

Substack has been blazing ahead in recent months, adding new partners and raising cash as it aims to bring on more and more subscribers to its network. The firm shared back in late March that it had raised a $65 million round at a reported valuation around $650 million, according to earlier reporting by Axios.

 

Search engine optimization, PR, paid marketing, emails, social — marketing and communications is crowded with techniques, channels, solutions and acronyms. It’s little wonder that many startups strapped for time and money find defining and executing a sustainable marketing campaign a daunting prospect.

The sheer number of options makes it difficult to determine an effective approach, and my view is that this complexity often obscures the obvious answer: A startup’s best marketing asset is its story. The knowledge and expertise of its team, together with the why and the how of its offering provides the most compelling content.

Leveraging this material with best practice techniques enables any startup, no matter how limited its budget, to run an effective marketing campaign.

I know this approach works, because this is exactly what I did with my co-founder Alex Feiglstorfer when we set up Storyblok. To be clear, we are developers not marketers. However, our previous experience building CMS systems taught us that the main driver of organic engagement for most businesses was customer conversations around content.

Specifically, sharing experiences, expertise and what we learned. We had committed nearly all of our available cash to developing our product, so we knew that the only way to market Storyblok was to do it all ourselves.

As a result, we focused solely on problem-solving content. This took the form of tutorials on web development and opinion pieces on headless CMS and other topics within our areas of expertise. The trick was that what we published wasn’t made just for marketing, it was based on our own internal documentation of problems we encountered as we developed our product. In essence, we were “learning in public.” Through this approach we were able to acquire thousands of customers in our first year.

Retelling this story isn’t to blow my own trumpet, it’s to make clear that you don’t have to be a marketer by training or commit a huge amount of time and resources to successfully market your startup. So, how do you get started?

Getting your structure and technology right

Although there’s no one-size-fits-all approach to how you organize your startup’s marketing function, there are some basic principles that apply in nearly every situation. A recent survey of 400+ executives from CMS Wire helpfully identified the following factors as the “top digital customer experience challenges” for businesses:

Limited budget/resources.Siloed systems and fragmented customer data.Limited cross-department alignment/collaboration.Outdated/limited technology, operations or processes.Lack of in-house expertise/skills.

Challenges two to four are the pitfalls that we can focus on avoiding. They are directly related to how a startup produces, organizes and distributes its content.

With regard to the siloing of systems and fragmentation of customer data, the overriding goal is to ensure all your systems are integrated and speak to one another. In practice, this means that the data gathered in different departments — whether its feedback from sales, engagement on your website, customer service responses or product development information — is collected in a uniform and methodical manner and is readily accessible across the business.

Orbital imagery is in demand, and if you think having daily images of everywhere on Earth is going to be enough in a few years, you need a lesson in ambition. Alba Orbital is here to provide it with its intention to provide Earth observation at intervals of 15 minutes rather than hours or days — and it just raised $3.4 million to get its next set of satellites into orbit.

Alba attracted our attention at Y Combinator’s latest demo day; I was impressed with the startup’s accomplishment of already having six satellites in orbit, which is more than most companies with space ambition ever get. But it’s only the start for the company, which will need hundreds more to begin to offer its planned high-frequency imagery.

The Scottish company has spent the last few years in prep and R&D, pursuing the goal, which some must have thought laughable, of creating a solar-powered Earth observation satellite that weighs in at less than one kilogram. The joke’s on the skeptics, however — Alba has launched a proof of concept and is ready to send the real thing up as well.

Little more than a flying camera with a minimum of storage, communication, power and movement, the sub-kilogram Unicorn-2 is about the size of a soda can, with paperback-size solar panel wings, and costs in the neighborhood of $10,000. It should be able to capture up to 10-meter resolution, good enough to see things like buildings, ships, crops, even planes.

“People thought we were idiots. Now they’re taking it seriously,” said Tom Walkinshaw, founder and CEO of Alba. “They can see it for what it is: a unique platform for capturing data sets.”

Indeed, although the idea of daily orbital imagery like Planet’s once seemed excessive, in some situations it’s quite clearly not enough.

“The California case is probably wildfires,” said Walkinshaw (and it always helps to have a California case). “Having an image once a day of a wildfire is a bit like having a chocolate teapot… not very useful. And natural disasters like hurricanes, flooding is a big one, transportation as well.”

Walkinshaw noted that they company was bootstrapped and profitable before taking on the task of launching dozens more satellites, something the seed round will enable.

“It gets these birds in the air, gets them finished and shipped out,” he said. “Then we just need to crank up the production rate.”

When I talked to Walkinshaw via video call, 10 or so completed satellites in their launch shells were sitting on a rack behind him in the clean room, and more are in the process of assembly. Aiding in the scaling effort is new investor James Park, founder and CEO of Fitbit — definitely someone who knows a little bit about bringing hardware to market.

Interestingly, the next batch to go to orbit (perhaps as soon as in a month or two, depending on the machinations of the launch provider) will be focusing on nighttime imagery, an area Walkinshaw suggested was undervalued. But as orbital thermal imaging startup Satellite Vu has shown, there’s immense appetite for things like energy and activity monitoring, and nighttime observation is a big part of that.

The seed round will get the next few rounds of satellites into space, and after that Alba will be working on scaling manufacturing to produce hundreds more. Once those start going up it can demonstrate the high-cadence imaging it is aiming to produce — for now it’s impossible to do so, though Alba already has customers lined up to buy the imagery it does get.

The round was led by Metaplanet Holdings, with participation by Y Combinator, Liquid2, Soma, Uncommon Denominator, Zillionize and numerous angels.

As for competition, Walkinshaw welcomes it, but feels secure that he and his company have more time and work invested in this class of satellite than anyone in the world — a major obstacle for anyone who wants to do battle. It’s more likely companies will, as Alba has done, pursue a distinct product complementary to those already or in the process of being offered.

“Space is a good place to be right now,” he concluded.

As an entrepreneur, you started your business to create value, both in what you deliver to your customers and what you build for yourself. You have a lot going on, but if building personal wealth matters to you, the assets you’re creating deserve your attention.

You can implement numerous advanced planning strategies to minimize capital gains tax, reduce future estate tax and increase asset protection from creditors and lawsuits. Capital gains tax can reduce your gains by up to 35%, and estate taxes can cost up to 50% on assets you leave to your heirs. Careful planning can minimize your exposure and actually save you millions.

Smart founders and early employees should closely examine their equity ownership, even in the early stages of their company’s life cycle. Different strategies should be used at different times and for different reasons. The following are a few key considerations when determining what, if any, advanced strategies you might consider:

Your company’s life cycle — early, mid or late stage.The value of your shares — what they are worth now, what you expect them to be worth in the future and when.Your own circumstances and goals — what you need now, and what you may need in the future.

Some additional items to consider include issues related to qualified small business stock (QSBS), gift and estate taxes, state and local income taxes, liquidity, asset protection, and whether you and your family will retain control and manage the assets over time.

Here are some advanced equity planning strategies that you can implement at different stages of your company life cycle to reduce tax and optimize wealth for you and your family.

Irrevocable nongrantor trust

QSBS allows you to exclude tax on $10 million of capital gains (tax of up to 35%) upon an exit/sale. This is a benefit every individual and some trusts have. There is significant opportunity to multiply the QSBS tax exclusion well beyond $10 million.

The founder can gift QSBS eligible stock to an irrevocable nongrantor trust, let’s say for the benefit of a child, so that the trust will qualify for its own $10 million exclusion. The founder owning the shares would be the grantor in this case. Typically, these trusts are set up for children or unborn children. It is important to note that the founder/grantor will have to gift the shares to accomplish this, because gifted shares will retain the QSBS eligibility. If the shares are sold into the trust, the shares lose QSBS status.

In addition to the savings on federal taxes, founders may also save on state taxes. State tax can be avoided if the trust is structured properly and set up in a tax-exempt state like Delaware or Nevada. Otherwise, even if the trust is subject to state tax, some states, like New York, conform and follow the federal tax treatment of the QSBS rules, while others, like California, do not. For example, if you are a New York state resident, you will also avoid the 8.82% state tax, which amounts to another $2.6 million in tax savings if applied to the example above.

This brings the total tax savings to almost $10 million, which is material in the context of a $40 million gain. Notably, California does not conform, but California residents can still capture the state tax savings if their trust is structured properly and in a state like Delaware or Nevada.

Currently, each person has a limited lifetime gift tax exemption, and any gifted amount beyond this will generate up to a 40% gift tax that has to be paid. Because of this, there is a trade-off between gifting the shares early while the company valuation is low and using less of your gift tax exemption versus gifting the shares later and using more of the lifetime gift exemption.

The reason to wait is that it takes time, energy and money to set up these trusts, so ideally, you are using your lifetime gift exemption and trust creation costs to capture a benefit that will be realized. However, not every company has a successful exit, so it is sometimes better to wait until there is a certain degree of confidence that the benefit will be realized.

Parent-seeded trust

One way for the founder to plan for future generations while minimizing estate taxes and high state taxes is through a parent-seeded trust. This trust is created by the founder’s parents, with the founder as the beneficiary. Then the founder can sell the shares to this trust — it doesn’t involve the use of any lifetime gift exemption and eliminates any gift tax, but it also disqualifies the ability to claim QSBS.

The benefit is that all the future appreciation of the asset is transferred out of the founder’s and the parent’s estate and is not subject to potential estate taxes in the future. The trust can be located in a tax-exempt state such as Delaware or Nevada to also eliminate home state-level taxes. This can translate up to 10% in state-level tax savings. The trustee, an individual selected by the founder, can make distributions to the founder as a beneficiary if desired.

Further, this trust can be used for the benefit of multiple generations. Distributions can be made at the discretion of the trustee, and this skips the estate tax liability as assets are passed from generation to generation.

Grantor retained annuity trust (GRAT)

This strategy enables the founder to minimize their estate tax exposure by transferring wealth outside of their estate, specifically without using any lifetime gift exemption or being subject to gift tax. It’s particularly helpful when an individual has used up all their lifetime gift tax exemption. This is a powerful strategy for very large “unicorn” positions to reduce a founder’s future gift/estate tax exposure.

For the GRAT, the founder (grantor) transfers assets into the GRAT and gets back a stream of annuity payments. The IRS 7520 rate, currently very low, is a factor in calculating these annuity payments. If the assets transferred into the trust grow faster than the IRS 7520 rate, there will be an excess remainder amount in GRAT after all the annuity payments are paid back to the founder (grantor).

This remainder amount will be excluded from the founder’s estate and can transfer to beneficiaries or remain in the trust estate tax-free. Over time, this remainder amount can be multiples of the initial contributed value. If you have company stock that you expect will pop in value, it can be very beneficial to transfer those shares into a GRAT and have the pop occur inside the trust.

This way, you can transfer all the upside gift and estate tax-free out of your estate and to your beneficiaries. Additionally, because this trust is structured as a grantor trust, the founder can pay the taxes incurred by the trust, making the strategy even more powerful.

One thing to note is that the grantor must survive the GRAT’s term for the strategy to work. If the grantor dies before the end of the term, the strategy unravels and some or all the assets remain in his estate as if the strategy never existed.

Intentionally defective grantor trust (IDGT)

This is similar to the GRAT in that it also enables the founder to minimize their estate tax exposure by transferring wealth outside of their estate, but has some key differences. The grantor must “seed” the trust by gifting 10% of the asset value intended to be transferred, so this approach requires the use of some lifetime gift exemption or gift tax.

The remaining 90% of the value to be transferred is sold to the trust in exchange for a promissory note. This sale is not taxable for income tax or QSBS purposes. The main benefits are that instead of receiving annuity payments back, which requires larger payments, the grantor transfers assets into the trust and can receive an interest-only note. The payments received are far lower because it is interest-only (rather than an annuity).

Another key distinction is that the IDGT strategy has more flexibility than the GRAT and can be generation-skipping.

If the goal is to avoid generation-skipping transfer tax (GSTT), the IDGT is superior to the GRAT, because assets are measured for GSTT purposes when they are contributed to the trust prior to appreciation rather than being measured at the end of the term for a GRAT after the assets have appreciated.

The bottom line

Depending on a founder’s situation and goals, we may use some combination of the above strategies or others altogether. Many of these strategies are most effective when planning in advance; waiting until after the fact will limit the benefits you can extract.

When considering strategies for protecting wealth and minimizing taxes as it relates to your company stock, there’s a lot to take into account — the above is only a summary. We recommend you seek proper counsel and choose wealth transfer and tax savings strategies based on your unique situation and individual appetite for complexity.

How should venture capitalists and corporate innovators assess Din Djarin, the protagonist of The Mandalorian? He’s introduced as a bounty hunter, a mercenary vocation in the Star Wars mythos that has been reserved primarily for villains.

One of the most interesting aspects of Jon Favreau’s show is how Din Djarin wrestles with the orthodoxy of his Mandalorian beliefs. His insistence on honor makes the character an appealing hero, and his character’s growth is demonstrated by when he chooses to be flexible versus when he holds fast to the rules he believes.

Although “This is the way” emerged as the show’s quotable soundbite, there is another line that’s more relevant to venture capital and corporate innovation: “You’re changing the deal.” Din Djarin uses this phrase to spar with adversaries who try to advance their objectives by disregarding clearly understood agreements.

Of course, terms change in venture capital and entrepreneurship all the time, with investors and entrepreneurs finding themselves in Din Djarin’s position.

This challenge is built into the very structure of venture capital fund raising, in which a Series A financing is usually followed by Series B, and then Series C, and each of these transactions frequently adds, subtracts, and modifies terms, changing the deal from the perspective of the startup and existing investors.

In February, we announced our investment in Gig Wage. After some entertaining back and forth, I encouraged Craig Lewis, the founder/CEO of Gig Wage, to write up a quick story of how things unfolded, as he remembered them, and I’d post it here. I love founder stories, and origin stories, and always learn something from reflecting on them. So, in Craig’s words …

Two tech guys from Dallas walk into a bar…

Before I met Brad in person, I had known about him because he’s pretty much startup-famous from his books and from co-founding Techstars, but I didn’t know much about Foundry Group. I hadn’t even read any of his books at the time, but I knew I was interested in meeting him.

Brad and I first met at an event two years ago at UTD (University of Texas at Dallas), where he would be speaking. We met at the bar, I had my favorite go-to drink, the “Black American” (my concoction, inspired by a White Russian), and Brad was having water since he doesn’t drink. 

My first impression of Brad was that he’s freaking brilliant. You can tell when someone’s done a lot and is smart from their experience. I figured, ‘this guy’s seen it all from A to Z and has probably seen it from Z to A and then back again.’ And he could have easily been not cool, but he was totally humble and down-to-earth, and we just kind of vibed. When we spoke, it didn’t seem like an investor-entrepreneur thing, just two guys from Dallas talking tech.

Fast forward to about a year later, we had recently received an investment from Steve Case’s Rise of the Rest Revolution.  Entrepreneurs who are part of his portfolio take part in a quarterly book club, where we all read a book and one entrepreneur is chosen to interview the author of the book. I happened to be able to interview Brad when we got an early look at the latest edition of his book Venture Deals. Between meeting Brad and interviewing him, he had set up a few introductions for me, which was cool of him, and when we got to the interview, it was casual, like we knew each other from around and had kind of been in touch before. We did a live webinar Q+A for all of the entrepreneurs in the book club. After getting through all my questions about his book, we ended up talking about entrepreneurship, technology, and venture capital.

That’s when I started to realize that he’s a prolific investor, and I started to understand the Foundry Group a little better, although it didn’t fully click for me until we went through Techstars and I met Jaclyn Hester.  She was able to quickly get up to speed on the company we were building and my vision for Gig Wage. Funny enough, we still didn’t think we were going to do anything, but the managing director for Techstars (who I later ended up hiring) told me that Foundry Group is super legit. Eventually, we connected the dots and realized that my relationship with Brad was just organically building up to an investment from Foundry Group. As it was happening, these events just seemed like different moments, but looking back, it’s obvious that every piece of it mattered and eventually led us to where we are today.

When looking for an investment, it’s more about who wants to invest in us and what steps they take to invest in us than the other way around. We typically aren’t going around reaching out to see whose investments we can secure. What happened with Brad and the Foundry Group came down to them showing excitement for Gig Wage, not by me strategically or intentionally pursuing them by any means. I realized our goals aligned, and that’s pretty much how it happened.

The post The Founder’s Story of The Path To Us Investing in Gig Wage appeared first on Feld Thoughts.

Although recurring revenue businesses have been around for a long time, the trend toward a subscription economy has escalated rapidly in the last few years. IDC expects that by 2022, 53% of all software revenue will be purchased with a subscription model. Even the car subscription market is set to grow by 71% by 2022.

Many types of businesses are looking for ways to earn recurring revenue — and it has gone beyond business-to-consumer companies like Netflix and Dollar Shave Club. Business-to-business companies are also joining in, even those with products that last a long time. For instance, elevator-maker Otis offers Otis ONE, a subscription-connected elevator solution that offers predictive maintenance insights.

Promising, but there are pitfalls

Subscription business models are attractive, but there are two major pitfalls. At the top of the list is payment. Regardless of company size, there’s an ongoing need to convince customers to sign up long term.

Companies also need to accommodate new payment methods and ensure ongoing compliance with interstate and international tax laws. As a result, the payment process can quickly become painful.

As any company with recurring revenue scales, it becomes increasingly challenging to manage subscriptions, especially with homegrown systems, changing subscription offers and the complexities of converting customers from free trials to paid subscriptions. Subscription billing options should make it easy to manage all types of subscriptions, including integrating analytics to provide a more complete picture of the subscriptions landscape.

Businesses also have to keep in mind that every time they add more product categories or expand into new geographies, they need to tack on extra software code to change their operations and stay sales-tax-compliant. As they expand globally, this can become an obstacle to rapid growth and flexibility.

To keep the company focused and maintain growth without having to expend resources, subscription businesses need a specialized billing system so they can focus on customer acquisition and revenue growth rather than staying on top of billing complexity.

The CAC payback gap constrains growth

The second issue: How do businesses cover the funding gap between when customers sign up and when they pay? In the subscription economy, companies that would previously receive a customer’s payments all at once now earn revenue spread across a monthly or quarterly subscription fee.

A year and a half’s worth of global pandemic has had a profound impact on virtually every sector of the workforce. When it comes to future automation, food prep isn’t quite at the top of the list (that distinction likely goes to warehouse fulfillment, for the time being), but it’s certainly up there. And it’s easy to see why the events of 2020 and beyond have left many kitchens looking for alternative sources of labor.

San Francisco-based Chef Robotics today announced that it has raised a combined $7.7 million pre-seed and seed round, with the goal of helping automate certain aspects of food preparation. The list of investors is pretty long on this one (with seed and pre-seed rolled up into one), including Kleiner Perkins, Promus Ventures, Construct, Bloomberg Beta, BOLD Capital Partners, Red and Blue Ventures, Gaingels, Schox VC, Stewart Alsop and Tau Ventures, among others.

The product team includes ex-employees of Cruise, Google, Verb Surgical, Zoox and Strateos. Chef’s team isn’t quite ready to show off its robot just yet (hence generic kitchen stock photo #8952 up top) — not entirely unusual for a robotics company still in the early stages. What it has outlined, thus far, is a robotics and vision system destined to increase production volume and enhance consistency, while removing some food waste from the process. Fast casual restaurants appear to be a key focus for this sort of tech.

The company describes it thusly:

Chef is designed to mimic the flexibility of humans, allowing customers to handle thousands of different kinds of food using minimal hardware changes. Chef does this using artificial intelligence that can learn how to handle more and more ingredients over time and that also improves. This allows customers to do things like change their menu often. Additionally, Chef’s modular architecture allows customers to quickly scale up just as they would by hiring more staff (but unlike humans, Chef always shows up on time and doesn’t need breaks).

More details on the underlying tech soon, no doubt.

 

Legionfarm, the gaming platform that lets gamers play with pro players in their favorite games, has today announced the close of a $6 million Series A round. Investors in the round include SVB, Y Combinator, Scrum VC, Kevin Lin, Altair Capital, Ankur Nagpal and more.

Legionfarm launched out of Y Combinator at the beginning of last year with a mission to give pro players a way to generate income and amateur players the chance to get better by playing with a pro coach. It started out with an à la carte business model but has since added a subscription product.

It either costs $12/hour to play on an individual session basis (one hour of play) or you can pay $25 or $50/month. That gives gamers access to discounted prices for pros and unlimited sessions with pros who are brand new to the platform, which Legionfarm calls “rookies.”

The company was founded by Alex Beliankin, who is a former pro gamer and was once in the top .01% of World of Warcraft players. There are many, many pro caliber players out in the world who can’t necessarily make a living off of gaming. They either have to be signed by an org (super limited supply) or play in as many tournaments as possible (unreliable) or stream on Twitch.

Legionfarm gives these pros the opportunity to earn a living playing the games they love.

Meanwhile, gamers are always looking to get better but don’t often have the environments in a game to do so, particularly in Battle Royale games. Legionfarm, which supports a couple of the biggest BRs (Call of Duty: Warzone and Apex Legends), allows these players to team up with pros and learn from them.

The startup is also running a hardware support program, which lets pros on the platform effectively rent gear by paying for it over time in installments that come directly out of their earnings each month.

“Recently, we’ve learned that one pro player can acquire seven or more new customers to the platform if we work with the pro properly,” said Beliankin. “That’s the biggest growth point for us and the biggest challenge. We don’t need to demand in the performance channels, but through existing supply. If we manage to build some sustainable processes here, I think we’re going to skyrocket because we see some huge potential here.”

U.K.-based startup Sylvera is using satellite, radar and lidar data-fuelled machine learning to bolster transparency around carbon offsetting projects in a bid to boost accountability and credibility — applying independent ratings to carbon offsetting projects.

The ratings are based on proprietary data sets it’s developed in conjunction with scientists from research organisations including UCLA, the NASA Jet Propulsion Laboratory and University College London.

It’s just grabbed $5.8 million in seed funding led by VC firm Index Ventures. All its existing institutional investors also participated — namely: Seedcamp, Speedinvest and Revent. It also has backing from leading angels, including the existing and former CEOs of NYSE, Thomson Reuters, Citibank and IHS Markit. (It confirms it has committed not to receive any investment from traditional carbon-intensive companies.) And it’s just snagged a $2 million research contract from Innovate UK.

The problem it’s targeting is that the carbon offsetting market suffers from a lack of transparency.

This fuels concerns that many offsetting projects aren’t living up to their claims of a net reduction in carbon emissions — and that “creative” carbon accountancy is rather being used to generate a lot of hot air: In the form of positive-sounding PR, which sums to meaningless greenwashing and more pollution as polluters get to keep on pumping out climate changing emissions.

Nonetheless, the carbon offset markets are poised for huge growth — of at least 15x by 2030 — as large corporates accelerate their net zero commitments. And Sylvera’s bet is that that will drive demand for reliable, independent data — to stand up the claimed impact.

How exactly is Sylvera benchmarking carbon offsets? Co-founder Sam Gill says its technology platform draws on multiple layers of satellite data to capture project performance data at scale and at a high frequency.

It applies machine learning to analyze and visualize the data, while also conducting what it bills as “deep analytical work to assess the underlying project quality”. Via that process it creates a standardised rating for a project, so that market participants are able to transact according to their preferences.

It makes its ratings and analysis data available to its customers via a web application and an API (for which it charges a subscription).

“We assess two critical areas of a project — its carbon performance, and its ‘quality’,” Gill tells TechCrunch. “We score a project against these criteria, and give them ratings — much like a Moody’s rating on a bond.”

Carbon performance is assessed by gathering “multi-layered data” from multiple sources to understand what is going on on the ground of these projects — such as via multiple satellite sources such as multispectral image, radar, and lidar data.

“We collate this data over time, ingest it into our proprietary machine learning algorithms, and analyse how the project has performed against its stated aims,” Gill explains.

Quality is assessed by considering the technical aspects of the project. This includes what Gill calls “additionality”; aka “does the project have a strong claim to delivering a better outcome than would have occurred but for the existence of the offset revenue?”.

There is a known problem with some carbon offsets claimed against forests where the landowner had no intention of logging, for example. So if there wasn’t going to be any deforestation the carbon credit is essentially bogus.

He also says it looks at factors like permanence (“how long will the project’s impacts last?”); co-benefits (“how well has the project incorporated the UN’s Sustainability Development Goals?); and risks (“how well is the project mitigating risks, in particular those from humans and those from natural causes?”).

Clearly it’s not an exact science — and Gill acknowledges risks, for example, are often interlinked.

“It is critical to assess these performance and quality in tandem,” he tells TechCrunch. “It’s not enough to simply say a project is achieving the carbon goals set out in its plan.

“If the additionality of a project is low (e.g. it was actually unlikely the project would have been deforested without the project) then the achievement of the carbon goals set out in the project does not generate the anticipated carbon goals, and the underlying offsets are therefore weaker than appreciated.”

Commenting on the seed funding in a statement, Carlos Gonzalez-Cadenas, partner at Index Ventures, said: “This is a phenomenally strong team with the vision to build the first carbon offset rating benchmark, providing comprehensive insights around the quality of offsets, enabling purchase decisions as well as post-purchase monitoring and reporting. Sylvera is putting in place the building blocks that will be required to address climate change.”

Risk defense startup SpecTrust is emerging from stealth today with a $4.3 million seed raise and a public launch.

Cyber Mentor Fund led the round, which also included participation from Rally Ventures, SignalFire, Dreamit Ventures and Legion Capital.

SpecTrust aims to “fix the economics of fighting fraud” with a no-code platform that it says cuts 90% of a business’ risk infrastructure spend that responds to threats in “minutes instead of months.” 

“In January of 2020, I got a bug in my ear to, instead of an API, build a cloud-based service that handles all this complex orchestration and unifies all this data,” said CEO Nate Kharrl, who co-founded the company with Bryce Verdier and Patrick Chen. “And, it worked. And it worked fast enough that you can’t even tell it’s there doing its work.”

For example, he says, SpecTrust even in its early days was able to pull identity behavior information in seconds.

“Today, it’s more like five and seven milliseconds,” he said. “And, engineers don’t have to lift anything or adjust data models.”

Since the San Jose, California-based startup’s offering is deployed on the internet, between a website or app and its users, an organization gets fraud protection without draining the resources of its engineers, the company says. Founded by a team that ran risk management divisions at eBay and ThreatMetrix, SpecTrust is banking on the fact that companies — especially financial institutions — will be drawn to the flexibility afforded by a no-code offering.

Much of the industry is split up between compliance and onboarding, authenticating risk and payments, and user trust and safety, Kharrl said.

“We put all the tools together to address all things combined, to make sure the person an institution is talking to is who they say they are, and not acting with malicious intent,” he told TechCrunch. “We sit in between them and their traffic to make sure the risk and fraud teams have what they need to spot bad guys.”

Online businesses spend billions on risk defense yet still lose a lot of money to fraudsters, scammers and identity thieves, Kharrl said. And, the COVID-19 pandemic led to a global shift in the digital economy as more people came to rely on the internet to meet day-to-day needs. 

“With these new trends in commerce and banking came more opportunities for fraudsters, scammers and identity thieves to target people and businesses,” he added. For example, an alarming number of cybercriminals employed no-code attack tools and click-to-deploy infrastructure to launch sophisticated attacks.

Fintech and crypto companies are feeling the biggest impacts, as legacy software designed for big banks, for example, can be slow and expensive, said Kharrl. 

“We built SpecTrust to instantly put complete assessment, automation and enforcement capabilities in the hands of teams charged with fighting modern cybercrime threats,” he said.

Using its platform, the company says an organization’s risk team can review and investigate everything a customer does “from its first page view to its last click with unified behavior, identity, history and risk data.” 

Even non-technical staffers can do things like identify attack behavior, verify customer identity information, validate payment details and work to mitigate threats before they become losses, according to Kharrl.

Jon Lim of SignalFire says that SpecTrust has built an end-to-end risk protection platform that enables customers of all sizes and risk profiles “to access the latest innovative risk protection solutions, quickly respond to the evolving threat landscape and share the best practices and learnings across the entire customer base.”

And of course, it was drawn to the startup’s no-code platform and ability to provide visibility over every user interaction versus treating each interaction as an independent event.

“This not only delivers stronger protection to customers but also a smoother experience to the end user,” Lim said.

The fraud prevention space is hot these days. Sift, which also aims to predict and prevent fraud, in April raised $50 million in a funding round that valued the company at over $1 billion.

In the old software world — think Oracle and SAP — sales were the competitive advantage. Today, we live in a world of product-led growth, where engineers (and the software they have built) are the biggest differentiator. If your customers love what you’re building, you’re headed in the right direction. If they don’t, you’re not.

However, even the most successful product-led growth companies will reach a tipping point, because no matter how good their product is, they’ll need to figure out how to expand their customer base and grow from a startup into a $1 billion+ revenue enterprise.

The answer is the hamburger model. Why call it that? Because the best go-to-market (GTM) strategies for startups are like hamburgers:

The bottom bun: Bottom-up GTM.The burger: Your product.The top bun: Enterprise sales.

In the hamburger GTM model, your product is the meat. We’ll go through each layer before talking about some of the best ways to implement the model successfully at your company.

The hamburger model

The meat — product at the center: The hamburger model starts with a great product. As a founder, this means you don’t need to think about revenue on Day One. You do, however, need to obsess over your customers, what they want and how to build it. Nothing is more important.

The bottom bun — users not leads: In a top-down sales model, marketing creates leads that are then converted into sales by enterprise reps. In a bottom-up model, marketing creates users, not leads, and those users are never touched by sales. For companies that have been customer-obsessed from the very beginning because they built something people love, this bottom-up model can feel far more natural and fuel a successful business.

The top bun — building enterprise sales: Even the best bottom-up sales models aren’t enough on their own, and every company eventually needs top-down sales. It may sound counterintuitive, but even the companies most famous for their bottom-up approaches now have enterprise sales teams. That’s because there are certain types of customers — for example, healthcare, insurance and government — that require salespeople to engage with due to compliance and security reasons.

These are the basic elements of the hamburger GTM model: A killer product that sets you apart, a bottom-up sales strategy to convert users into paying customers, and a sales team to go after bigger customers that require more attention.

Retail giant Walmart announced this morning it’s acquiring the Tel Aviv-based startup Zeekit, which allows consumers to virtually “try on” clothing when shopping online. The company leverages a combination of real-time image processing, computer vision, deep learning and other AI technology to show shoppers how they would look in an item by way of a simulation that takes into account body dimensions, fit, size and even the fabric of the garment itself.

Deal terms were not disclosed. According to data from PitchBook, Zeekit had raised over $24 million in outside capital, but we’ve confirmed that’s inaccurate. Zeekit raised a $9 million Series A in 2016, and has raised a total of $16 million since 2014.

The company had already been working with a range of retailers and brands ahead of the acquisition, including Walmart, as well Macy’s, Asos, Tommy Hilfiger, Adidas and others. It had once worked with Rebecca Minkoff during Fashion Week to help women shop the show’s looks.

Zeekit was founded in 2013 by CEO Yael Vizel, VP of Research and Development Nir Appleboim and CTO Alon Kristal, with the premise that if online shoppers could see how clothing would look on their own bodies, the technology could reduce the rate of returns due to non-fitting, non-flattering items.

Walmart says customers will be able to use the Zeekit technology to virtually try on items from brands including Free People, Champion, Levi Strauss, ELOQUII Elements, Free Assembly, Scoop, Sofia Jeans by Sofia Vergara, plus its own private label brands, like Time and Tru, Terra & Sky, Wonder Nation and George.

When the technology goes live on Walmart.com, customers can choose to upload an image of their own or choose from a series of models that best represent their height, shape and skin tone in order to see themselves virtually in any item of clothing. The goal is to provide a similar experience to trying on clothing when shopping online as you would otherwise have had when in a retail store.

Shoppers will also be able to share their virtual outfits with friends for a second opinion, via the new integration, adding the social element back into online shopping.

In addition to the virtual try-on, Walmart says Zeekit’s technology may be used to build other fashion experiences over time, including a virtual closet experience where you could mix and match styles.

With the deal’s closure, Zeekit’s three co-founders will be joining Walmart.

“We’re confident that with the team’s expertise in bringing real-time image technologies, computer vision and artificial intelligence to the world of fashion, we’ll identify even more ways to innovate for our customers in our continued effort to be the first-choice destination for fashion,” said Denise Incandela, Walmart U.S. EVP of Apparel and Private Brands, in an announcement.

Walmart in years past had heavily invested in apparel, including by acquiring online brands like Bonobos, ModCloth, Eloquii and others, and even tried offering some brands, like Nike, their own shop on Walmart. com. Not all of these efforts paid off. Walmart sold ModCloth only a couple of years after buying it, for example, after ModCloth customers balked at being owned by a retail giant, and the brand remained unprofitable. More recently, Walmart partnered with online consignment shop ThredUP to list a large number of secondhand items on Walmart’s website.

In addition to the struggles around profitability, apparel more broadly has been a harder area for online retail to get right, often because of the difficulties involved with picking out items that have to fit unique bodies and the non-standard sizing fashion designers use — meaning clothing can run smaller or larger, depending on a given brand, even when shopping “your size.”

Another factor that may have impacted the acquisition was the pandemic, which pushed e-commerce years ahead, as retailers closed their doors and consumers stayed home to shop online due the circumstances of the health crisis. During this time, Amazon passed Walmart as the top apparel retailer in the U.S., according to Wells Fargo, which estimated its apparel and footwear sales grew 15% in 2020 to over $41 billion, or 20-25% higher than Walmart.

Walmart didn’t say when Zeekit would go live on Walmart’s website, only that it would show up “soon.”

We understand that, post-acquisition, Walmart will not continue to operate Zeekit’s existing business. Zeekit will work with their current customers on a transition plan.

Updated 5/13/21, 11:05 AM ET with more accurate funding totals. Previously we noted PitchBook data. We’ve since confirmed the figures directly. 

Managed service provider BIAS conducted a cross-platform migration for Office Depot to shift all applications to Oracle Cloud Infrastructure.Read More

VentureBeat’s annual Tech Showcase returns at Transform 2021: Accelerating Enterprise Transformation with AI and Data, hosted July 12-16.Read More

Ubisoft says it didn't make the decision to produce fewer games in 2021 -- that's something it decided to do back in 2018.Read More