Some audience questions answered by Sramana: • What are the best examples of companies that have succeeded using the “Freemium” business model? • What businesses lend themselves best to a...

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Edtech was long defined by stodgy sales cycles, sluggish adoption and splashy pitches to K-12 districts with tight budgets, but the COVID-19 pandemic turned that reputation on its head in short order.

Now, companies in the space are entering Q2 — traditionally a slower time reserved for product development and extra focus on existing clients — busier than ever. In this piece, we’ll unpack some of the dollar signs indicating that edtech may be entering a new era.

Broader investor interest

A number of edtech founders who are not seeking venture capital have recently told me their inboxes are cluttered with notes from investors looking to chat.

It’s a refreshing break from the usual fundraising doom-and-gloom we’ve been hearing about during this pandemic, but I want to note the nuance: We’re seeing investors who have never been interested in edtech become bullish on the category as a whole. If these investors put their money where their mouths are, we’ll start to see an uptick of venture funding sector-wide.

For EdSights, co-founded by sister duo Claudia and Carolina Recchi, doors are opening. Before COVID-19, they say they mainly attracted interest from opportunity investors and edtech investors. Now, they’re talking to a number of VCs, none solely from edtech-focused funds.

Stripe and Shopify have transformed the face of commerce for small business users, yet when it comes to putting that cash somewhere, SMBs have found that the banking options aren’t quite as transformative.

Wise is a new challenger bank built specifically for small businesses. The startup is aiming to insert itself as an essential service in the small business repertoire by bundling banking with payment services powered by Stripe. Customers can receive payments, manage their cash and pay employees all via Wise’s app.

CEO Arjun Thyagarajan tells TechCrunch that his company has closed a $5.7 million seed round led by Base10 Partners . Abstract Ventures, Backend Capital, The Fund and Two Culture Capital also participated in the round.

While the advent of challenger banks has helped drive plenty of innovation on the consumer banking side, says Rexhi Dollaku, a principal at Base10 who led the Wise deal, “very little of that innovation has happened in the business banking context.”

Thyagarajan and his investors hope that the startup can keep churn low by embedding a wider scope of financial services products inside its core product, expanding beyond the traditional scope of banking features by offering functionality to power things like payroll and accounting.

Rather than plunging into direct customer sales, Wise is partnering with behemoth platforms like Shopify to onboard small businesses where they already are. “If you look at other [banking] options out there, they’re going direct to the customer; what we’ve learned is that it is better to partner,” Thyagarajan says. “They’re signing up inside these ecosystems so we want to partner with these ecosystems.”

The small team has already built up a customer base of 1,000 businesses. The average Wise customer has between 2-10 employees and is pulling in somewhere between $500,000 and $5 million in ARR, the company tells us. Bank accounts on Wise’s platform are FDIC-insured up to $250,000 through the startup’s partnership with banking partner BBVA USA.

While Thyagarajan says they’ve seen online spend increasing, the COVID-19 pandemic has impacted plenty of Wise’s potential customers, and has pushed the company to stay flexible in the businesses they cater to. “I think a lot of industries are going to get accelerated and fast-forwarded,” he says. “The customers we want to cater to are rapidly modernizing.”

Alongside the funding announcement, the startup shared that Raghav Lal, a former general manager of Small Business at Visa, will be joining the startup as its president.

Welcome from Sramana Mitra on Bootstrapping by Sramana Mitra LinkedIn Influencer Sramana Mitra, an expert on entrepreneurship, shares her insights on bootstrapping – starting up a new business...

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The year’s already off to a rocky start for hardware companies, and we’re only beginning to see the true impact COVID-19 will ultimately have on the market. Arm — the U.K. company behind the designs of chips for everyone from Apple to Qualcomm to Samsung — is hoping to kickstart developing by offering up access to around 75% of its chip portfolio for free to qualified startups.

The move marks an expansion of the company’s Flexible Access program. With it, Arm will open access to its IP for early-stage startups. While some of the biggest companies pay the chip designer big bucks for that information, the cost can be prohibitive for those just starting out.

“In today’s challenging business landscape, enabling innovation is critical – now more than ever, startups with brilliant ideas need the fastest, most trusted route to success and scale,” SVP Dipti Vachani, said in a statement. “Arm Flexible Access for Startups offers new silicon entrants a faster, more cost-efficient path to working prototypes, resulting in strengthened investor confidence for future funding.”

It’s a nice bit of access for up and coming startups. Of course, Arm’s not simply doing this out of the goodness of its heart. The company certainly has a vested interest in helping foster hardware startups amid what could shape up to be an unprecedented slowdown for the industry after a few years of rapid funding and growth.

Interested parties can access the full list of available IP here. Arm believes the launch of Flexible Access for Startups could help companies accelerate time to market by up to a year.

Every time we realize something new about the coronavirus, it’s always worse than we thought: maybe we don’t develop immunity to it; maybe six feet of social distancing isn’t far enough; maybe the spread won’t wane in warmer weather.

Every time we realize something new about the economy, it’s equally bleak: maybe we can’t safely reopen for months (Georgia and South Carolina notwithstanding), maybe unemployment will top Great Depression levels, maybe travel won’t resume till mid-2021, maybe most of the businesses who have shuttered their doors will never return.

But like everything in life, within all of the bad, there’s usually some good too. And for businesses who have to deal with regulation, this may be an unusually good time to get what you need.

The federal government does not have to balance its budget, which is why multi-trillion dollar legislation like the CARES Act is possible. But cities and states have to produce a budget every fiscal year that at least looks balanced on paper. In good times, that leads to lots of new spending. But in bad times, it requires a painful series of cuts, tax and fee increases and tough decisions that are normally avoided by politicians at all costs. All of that creates opportunity for startups.

Local government will desperately need new sources of revenue. Figuring out what a politician is going to do isn’t that difficult: identify the choice with the least political downside and that’s almost always the answer. That’s why controversial policy issues like legalizing mobile sports betting or recreational marijuana often stall in state legislatures when the budget is flush (disclosure, we’re investors in FanDuel) . But now, lawmakers face a very different situation: to balance the budget, they will either need to enact deep spending cuts, raise fees and taxes, or find new sources of revenue. All of a sudden, legalizing gambling and drugs doesn’t seem so risky, politically or substantively.

Any company that can offer material new tax revenues can now see their product or service legalized and permitted in a fraction of the time it would normally take. Companies who can offer direct savings to government can now secure contracts and win procurements at a rapidly faster clip. A broke government is a friendly government. This is the moment to be aggressive.
It was less than a year ago when Amazon tried to build its second headquarters in New York City.

Despite strong support from Governor Andrew Cuomo and tepid support from Mayor Bill de Blasio, the project was widely derided as an unfair corporate boondoggle and Amazon was swiftly run out of town. In good economic times, voters have the luxury of focusing on issues that aren’t critical to their own day-to-day survival and politicians have the luxury of saying no to new jobs and tax revenue to try to score points with the base.

Not anymore. Startups in blue cities and states up and down both coasts have vastly more political leverage than they’ve had in years. Issues like privacy, worker classification reform and fears of AI are all about to take a back seat to pocketbook issues like jobs, crime and access to health care. Startups who can promise to retain jobs can now drive meaningful changes on policy, regulation, permitting, zoning, licensing and everything else they need to operate.

Startups that can offer solutions to living in a pandemic (digital payments, D2C, telemedicine, teleconferencing, tele-anything) will become shiny new toys that lawmakers want to be seen with. Delivery drones, autonomous cars, at home medical testing and other concepts that seem a little edgy will now become ideas that lawmakers have to seriously consider – if a new technology could potentially save lives during a pandemic, you really don’t want to be the politician who killed the idea.

Proposals to screw with startups won’t automatically become the top priority for the San Francisco Board of Supervisors. Facebook even now has a much stronger argument to lobby for Libra (no one in this climate wants to use cash if they can help it). The power dynamic just flipped on its head. But that only works if you understand it and take advantage of it.

In the continual debate over whether tech startups should ask government for permission or beg for forgiveness over the last few years, the zeitgeist has shifted significantly towards asking for permission. The tech-lash against Facebook, Google, Amazon, Apple and Twitter created regulatory headaches for virtually every tech company, even some early stage startups.

All of that just changed. Regulators and lawmakers now have far bigger things to worry about than whether an electric scooter needs a particular type of permit. And if saying no to new ideas from new companies means turning away desperately needed jobs and tax revenue, for all of the same reasons that it was politically salient for lawmakers to reclassify all California sharing economy workers as full time employees or reject Amazon’s overtures or limit the spread of homesharing, the opposite is now true.

Now you get points for creating jobs and avoiding spending cuts. Now you’re far more reticent to tell a constituent that they can’t make a few extra bucks by renting out a room (assuming anyone ever travels again). The label of job killer will start to become politically toxic, even in the most progressive wards, districts and neighborhoods in the bluest cities on each coast. The dynamic is clearly shifting back to begging for forgiveness (don’t be stupid and do things that are clearly illegal but interpreting gray areas of regulation as friendly is now a lot easier).

Unlike the financial crisis in 2008, businesses are not the culprit here. Tech companies are actually even some of the heroes of fighting the coronavirus. But most important, being punitive towards startups is no longer a clear political winner, even in the most liberal cities and states. Even if it seems counterintuitive, now is exactly the time for startups to aggressively seek policy change and regulatory relief.

Politics is about leverage. Startups now have it. They should take advantage of it before things change again.

Chinese electric vehicle startup Nio has secured a $1 billion investment from several state-owned companies in Hefei in return for agreeing to establish headquarters in the city’s economic development hotspot and giving up a stake in one of its business units.

The injection of capital comes from several investors, including Hefei City Construction and Investment Holding Group, CMG-SDIC Capital and Anhui Provincial Emerging Industry Investment Co.

Nio’s factory is already in Hefei, which it operates with Anhui Jianghuai Automobile Group. However, the company’s headquarters and other operations are in Shanghai about 300 miles from the Anhui provincial city. Under this agreement, Nio will locate all of its Chinese operations, including R&D, sales, service and supply chain, in the Hefei Economic and Technological Development Area.

The investment is another important milestone of Nio for its long-term growth, Nio said in a statement Wednesday.

“After receiving the investments from the strategic investors, Nio will have more sufficient funds to support its business development, to enhance its leadership in the products and technologies of smart electric vehicles and to offer services exceeding users’ expectation,” the company said, adding that the launch of Nio China headquarters in Hefei enables Nio to improve its operational efficiency and to sustain its growth and competitiveness in the long run.

Despite the new capital, Nio faces a series of challenges, including a downturn in the Chinese automotive market. Electric vehicle sales in China declined 4%, to 1.21 million vehicles in 2019, from the previous year. The company’s ES8 and ES6 vehicles haven’t generated the same demand as Tesla’s Model 3. Meanwhile, the COVID-19 pandemic is dampening demand further as customers stayed home.

Structuring the deal requires some asset shuffling. The investment is targeted toward Nio China, a recently established business unit under Nio Inc.

Investors will put 7 billion yuan, or $1 billion, into Nio’s holding company. Nio will put its core China businesses and assets — which include vehicle research and development, supply chain and its power division — into Nio China, a subsidiary of the holding company. Nio’s parent company will also invest into Nio China.

At the end, investors will hold a 24.1% stake in Nio China while Nio will have a 75.9% controlling equity interesting into the unit.

The company expects the closing of the investments to take place in the second quarter of 2020, subject to the satisfaction of customary closing conditions.

Machine learning has quickly gone from niche field to crucial component of innumerable software stacks, but that doesn’t mean it’s easy. The tools needed to create and manage it are enterprise-grade and often enterprise-only — but Determined AI aims to make them more accessible than ever by open-sourcing its entire AI infrastructure product.

The company created its Determined Training Platform for developing AI in an organized, reliable way — the kind of thing that large companies have created (and kept) for themselves, the team explained when they raised an $11 million Series A last year.

“Machine learning is going to be a big part of how software is developed going forward. But in order for companies like Google and Amazon to be productive, they had to build all this software infrastructure,” said CEO Evan Sparks. “One company we worked for had 70 people building their internal tools for AI. There just aren’t that many companies on the planet that can withstand an effort like that.”

At smaller companies, ML is being experimented with by small teams using tools intended for academic work and individual research. To scale that up to dozens of engineers developing a real product… there aren’t a lot of options.

“They’re using things like TensorFlow and PyTorch,” said Chief Scientist Ameet Talwalkar. “A lot of the way that work is done is just conventions: How do the models get trained? Where do I write down the data on which is best? How do I transform data to a good format? All these are bread and butter tasks. There’s tech to do it, but it’s really the Wild West. And the amount of work you have to do to get it set up… there’s a reason big tech companies build out these internal infrastructures.”

Determined AI, whose founders started out at UC Berkeley’s AmpLab (home of Apache Spark), has been developing its platform for a few years, with feedback and validation from some paying customers. Now, they say, it’s ready for its open source debut — with an Apache 2.0 license, of course.

“We have confidence people can pick it up and use it on their own without a lot of hand-holding,” said Sparks.

You can spin up your own self-hosted installation of the platform using local or cloud hardware, but the easiest way to go about it is probably the cloud-managed version that automatically provisions resources from AWS or wherever you prefer and tears them down when they’re no longer needed.

The hope is that the Determined AI platform becomes something of a base layer that lots of small companies can agree on, providing portability to results and standards so you’re not starting from scratch at every company or project.

With machine learning development expected to expand by orders of magnitude in the coming years, even a small piece of the pie is worth claiming, but with luck, Determined AI may grow to be the new de facto standard for AI development in small and medium businesses.

You can check out the platform on GitHub or at Determined AI’s developer site.

Sramana Mitra: Switching gears a bit, tell us a bit of a few companies you’ve invested in. Maybe start with the two that are turning into unicorns. Tell us where you encountered them and how you...

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Atlassian is about as ubiquitous to software engineers as Google is to the rest of us. The Sydney-based company, which launched in 2002, develops tools and services for enterprise collaboration and marched efficiently to a public offering in 2015.

So it goes without saying that we’re thrilled to have Atlassian co-founder and co-CEO Mike Cannon-Brookes join us at Disrupt SF 2020, which runs September 14 to September 16.

As far as entrepreneurship goes, Cannon-Brookes is on a very short list of founders who have led a company from founding to public offering, and all the steps in between.

Atlassian was one of the early players in enterprise collaboration, particularly for engineering and development teams, and has over the years introduced a robust product suite, including Jira, Confluence and HipChat.

Cannon-Brookes has been at the helm for the entire journey, from raising early funding to product development to acquisitions (including Trello) to public offering and beyond. All the while, Cannon-Brookes kept the company’s HQ, and all invoicing, in its home country of Australia, becoming the most successful tech startup to ever launch out of the nation down under.

One of the more interesting features of the company? Unlike Microsoft and IBM and other big enterprise software companies, Atlassian has always operated without a proper sales team, using a fraction of spend on sales and marketing compared to other enterprise software giants.

“We had a hunch early on that salespeople break software companies,” Cannon-Brookes told the Australian Financial Review in 2015. “But convincing people this model would work has probably been the biggest struggle we’ve had. We’ve had a lot of smart people who wouldn’t join the company or give us money or advise us because it made no sense to them.”

The company developed an enormously successful distribution flywheel built on the back of one necessary ingredient: remarkable products. Great products at low prices mean that you can sell to everyone, and if you sell to everyone you have to do it online and with transparent pricing and a great free trial. But if you offer a free trial, you better have a remarkable product, and the flywheel spins on and on.

It has worked.

Atlassian products are used by more than 160,000 large and small organizations across the globe, including Spotify, NASA, Sotheby’s and Visa.

Cannon-Brookes is also a tech investor across sectors like software, fintech, agriculture and energy, with a seat on the board of Zoox.

We’re excited to sit down with Cannon-Brookes and hear more about the company’s trajectory over the last two decades and hear what comes next for the behemoth.

Disrupt SF 2020 runs September 14 to September 16 at the Moscone Center right in the heart of San Francisco. For folks who can’t make it in person, we have several Digital Pass options to be part of the action or to exhibit virtually, which you can check out here.

We’ll be announcing more speakers over the coming weeks, so stay tuned.

(Editor’s Note: We’re watching the developing situation around the novel coronavirus very closely and will adapt as we go. You can find out the latest on our event schedule plans here.)

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