Friday! [Backs out of driveway.] Hope you have a terrific weekend, everyone! See you in a few days.:)
Top News
EBay, Stripe, Mastercard and Visa are all dropping out of Facebook’s Libra cryptocurrency project, the companies announced Friday. The news comes one week after PayPal announced its withdrawal as government regulators continue to scrutinize the plans. CNBC has more here.
The SEC today says it has obtained a legal order to halt Telegram from distributing its crypto asset, known as gram. Telegram developed a messaging app that is popular with cryptocurrency traders and developers but the SEC order seeks to block it from distributing an asset that regulators say can’t legally be traded in the country. “Our emergency action today is intended to prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold,” said Stephanie Avakian, co-director of the SEC’s enforcement division, earlier today. The WSJ has more here.
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VC Brad Feld on WeWork, SoftBank, and Why Venture Firms May Have to Slow Their Pacing in 2020
Yesterday, we had a chance to talk with longtime venture investor Brad Feld of Foundry Group, whose book “Venture Deals” was recently republished for the fourth time and for good reason. It’s a storehouse of knowledge, from how venture funds really work to term sheet terms, from negotiation tactics to how to choose (and pay for) the right investment banker.
Feld was generous with his time and his advice to founders, many dozens of whom had dialed in, conference-call style. (You can find a full transcript of our conversation here if you’re a member of TechCrunch’s Extra Crunch.)
In the meantime, we thought we’d highlight some of our favorite parts of the conversation. One of these touches on SoftBank, an organization that Feld knows a little better than many other investors. We also discussed what happened at WeWork and specifically the difference between a cult-like leader and a visionary — and why it’s not always clear right away whether a founder is one or the other. These excerpts have been edited for length and clarity.
We were just talking about startups raising too much money, and speaking of which, you were involved with SoftBank long ago. Your software company had raised capital from SoftBank, then you later worked for the company as an investor. This way predates the Vision Fund, but you did know Masayoshi Son, which makes me wonder: what do you think of how they’ve been investing their capital? Just for factual reference, I was initially affiliated with SoftBank with a couple of other VCs; Fred Wilson, Rich Levandov and at the time Jerry Colonna, who now runs a company called Reboot. During that period of time, a subset of us ended up starting a fund that eventually became called Mobius Venture Capital, but it was originally called SoftBank Venture Capital or SoftBank Technology Ventures. We were essentially a fund sponsored by SoftBank, so we had SoftBank money. The partners ran the fund, but we were a central part of the SoftBank ecosystem at the time. I’d say that was probably ’95, ’96 to ’99, 2000. We changed the name of the firm to Mobius in 2001 because it was endlessly getting confused with the other [SoftBank] fund activity. I do know a handful of the senior principals at SoftBank today very well, and I have enormous respect for them. Ron Fisher [the vice chairman of SoftBank Group] is the person I’m closest to. I have enormous respect for Ron. He’s one of my mentors and somebody I have enormous affection for. There are endless piles of ink spilled on SoftBank, and there are loads of perspectives on Masa and about the Vision Fund. I would make the observation that the biggest dissonance in everything that’s talked about is timeframe, because even in the 1990s, Masa was talking about a 300-year vision. Whether you take it literally or figuratively, one of Masa’s powers is this incredible long arc that he operates on. Yet the analysis that we have on a continual basis externally is very short term — it’s days, weeks, months. What Masa and the Vision Fund conceptually are playing is a very, very long-term game. Is the strategy an effective strategy? I have no idea . . . but when you start being a VC, it takes a long time to know whether you’re any good at it out or not. It takes maybe a decade really before you actually know. You get a signal in five or six years. The Vision Fund is very young . . . It’s [also] a different strategy than any strategy that’s ever been executed before at that magnitude, so it will take a while to know whether it’s a success or not. One of the things that could cause that success to be inhibited would be having too short a view on it. If a brand-new VC or a brand new fund is measured two years in in terms of its performance, and investors look at that and that’s how they decide what to do with the VC going forward, there would be no VCs. They’d all be out of business because the first two years of a brand-new VC, with very few exceptions, is usually a time period that it’s completely indeterminate as to whether or not they’re going to be successful.
So many funds — not just the Vision Fund — are deploying their funds in two years, where it used to be four or five years, that it’s a bit harder. When you deploy all your capital, you then need to raise funding and it’s [too soon] to know how your bets are going to play out. One comment on that, Connie, because I think it’s a really good one: When I started, in the ’90s, it used to be a five-year fund cycle, which is why most LP docs have a five-year commitment period for VC funds. You literally have five years to commit the capital. In the internet bubble, it’s shortened to about three years, and in some cases it shortened to 12 months. At Mobius, we raised a fund in 1999 and a fund in 2000, so we had the experience of that compression. When we set out the raise Foundry, we decided that our fund cycle would be three years and we would be really disciplined about that. We had a model for how we were going to deploy capital from each of our funds over that period of time. It turned out that when we look back in hindsight, we raised a new fund every three years and eventually we lost a year in that cycle. We have a 2016 vintage and a 2018 vintage and it’s because we really deployed the capital over 2.75 to three years . . . It eventually caught up with us. I think the discipline of trying to have time diversity against the capital that you have is super important. If you talk to LPs today, there is a lot of anxiety about the increased pace at which funds have been deployed, and there has been a two year cycle in the last kind of two iterations of this. I think you’re going to start seeing that stretch back out to three years. From a time diversity perspective three years is plenty [of time] against portfolio construction. When it gets shorter, you actually don’t get enough time diversity in the portfolio and it starts to inhibit you.
Massive Fundings
Club Factory, a six-year-old, China-based cross-border e-commerce company, has reportedly raised a $100 million in Series D funding led by Qiming Venture Partners, with participation from Frees Fund, Bertelsmann Asia Investments, Bertelsmann, IDG Capital and “Fortune 500 companies in Asia and the United States,” according to the Economic Times. The company has now raised at least $220 million, according to Crunchbase data. Crunchbase News has more here.
Big-But-Not-Crazy-Big Fundings
Citrine, a six-year-old, Redwood City, Ca.-based data platform that says it ingests and analyzes technical data on materials, chemicals, and devices for any organization that produces a physical product, just raised $20 million in Series B funding. Prelude Ventures and Innovation Endeavors co-led the round, joined by Moore Strategic Ventures and Next47. More here.
Descartes Labs, a five-year-old, Sante Fe, N.M.-based satellite imagery analytics startup, has raised $20 million in new funding led by Union Grove Venture Partners, with participation from Ajax Strategies, Crosslink Capital, and March Capital Partners. TechCrunch has more here.
Exploding Kittens, a four-year-old, L.A.-based company whose card game “combines whimsical drawings of felines with cutthroat strategy,” has raised $30 million led by The Chernin Group, says the WSJ. More here.
Future Meat Technologies, a year-old, Jerusalem-based producer of GMO-free meat derived from animal cells, has raised $14 million in Series A funding co-led by S2G Ventures and Emerald Technology Ventures. TechCrunch has more here.
Polte, a three-year-old, Richardson, Tex.-based company that’s building a service that leverages 4G signal to track things for commercial and industrial use cases (it apparently uses less battery than acquiring GPS location and transmitting that over cellular), has raised $12.5 million in fresh funding in what it says is an extension of its Series A round. The company is not disclosing its investors. TechCrunch has more here.
XTransfer, a 2.5-year-old, Shanghai, China-based provider of cross-border financial services for China-based foreign trade enterprises, just raised $15 million in Series B-1 funding. eWTP Fund led the round, joined by China Merchants Venture Capital, 01VC, Yunqi Partners, and Gaorong Capital. Tech Startups has more here.
Smaller Fundings
Blue Canoe, a three-year-old, Bellevue, Wa.-based spoken language improvement platform for non-native English speakers, has raised $2.5 million in seed funding led by Tsingyuan Ventures, with participation from Qualcomm Ventures and Fantail Ventures. More here.
Florence, a five-year-old, Atlanta, Ga.-based company that makes clinical trials software, has raised $7.1 million in Series B funding led by Fulcrum Equity Partners, with participation from Atrium Health and Bee Partners. More here.
Jones, a 3.5-year-old, New York-based startup that automates insurance compliance for property managers, has raised $4.6 million in funding led by Hertz Ventures, with participation from JLL Spark, WeWork, MetaProp Ventures, Ground Up Ventures and 500 Startups. The Real Deal has more here.
Phitonex, a two-year-old, Durham, N.C.-based developer of fluorescent labels for life science research and biomarker detection, has raised $2 million in seed funding from unnamed investors. More here.
Remote Year, a 4.5-year-old, Chicago-based work-travel platform for professionals who want to live and work in different cities around the world and who pay the company tens of thousands of dollars to arrange their accommodations in different countries, has raised $5 million in new funding from Lightbank. Earlier backer Highland Capital Partners, which had led a $12 million round in the company three years ago, also joined the round. CityBizList has more here.
StrongSalt, a two-year-old, Sunnyvale, Ca.-based encryption platform as-a-service, has raised $3 million from Valley Capital Partners. More here.
Not-Saying-How-Much Fundings
Cornershop, a four-year-old, Chile-based on-demand grocery delivery startup that began life serving the Latin American market and recently shifted to offer service in Toronto, is selling 51 percent of its business to Uber for undisclosed terms in a deal that Uber expects will close early next year, after it receives all the necessary regulatory sign-offs. Cornershop had previously raised $31.7 million from investors including Accel, Jackson Square Ventures and others. TechCrunch has more here.
New Funds
Day One Ventures, a two-year-old, San Francisco-based early-stage venture capital firm that says it specializes in spearheading communications for its portfolio companies, has closed its first fund with nearly $20 million in capital commitments, according to a press release. The firm is led by Masha Drokova, formerly a PR director with Runa Capital and later founder of her own PR outfit. More here.
Ginkgo Bioworks, the Boston-based organism company, has raised $350 million for the Ferment Consortium, a new fund or funding Ginkgo spinout companies that will have full access to Ginkgo’s platform for cell programming. The fund is supported by Ginkgo’s major shareholders: Viking Global Investors, General Atlantic, and Cascade Investment. Ferment Consortium’s investors include Viking Global Investors, General Atlantic and Cascade Investment.
Trust Ventures, a nearly two-year-old, Austin-based venture firm backed by gazillionaire Charles Koch, is holding a first close on $70 million in capital commitments for what it expects will be a $100 million fund, it tells Crunchbase News. The outfit says it funds startups whose services “will greatly improve society but face significant public policy barriers that stifle growth.” More here.
Exits
Standard Cognition, a two-year-old, San Francisco-based autonomous retail startup that’s hoping to help merchants compete with Amazon Go and its cashier-lees checkout stores and which has raised $86 million in venture funding, has acquired DeepMagic, a two-year-old, New York-based maker of autonomous retail kiosks that enable customers to swipe a payment card when entering a smaller kiosk or store, then simply walk out with their items. Terms of the deal aren’t being disclosed, but DeepMagic had raised just $150,000 from angel investors. TechCrunch has more here.
Stratolaunch Systems, a space company founded by late billionaire and Microsoft cofounder Paul Allen, said today it is continuing operations after transitioning ownership, but did not name the new owner.
People
The top antitrust regulator at Federal Trade Commission, Bruce Hoffman, is stepping down after more than two years on the job. Hoffman helped create the Technology Enforcement Division, a small task force that monitors big platforms like Google, Facebook, and Amazon and that has been looking at the impact of mergers such as Facebook’s acquisitions of Instagram and WhatsApp. Hoffman’s departure begs the question: who’s hiring him?
Boeing’s board has removed CEO Dennis Muilenburg as chairman so he can focus on running the company after the 737 Max crisis, the company said today. Boeing is facing numerous investigations over its 737 Max planes following two fatal crashes — one in October of last year, one in March — that killed 346 people.
Earlier this year, WeWork cofounder Adam Neumann appeared on Forbes’ list of the world’s richest people, with a net worth of $4.1 billion. Today, Forbes announced it was lowering its estimate of his wealth to a measly $600 million-ish. More here.
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Essential Reads
Amazon is firing three delivery firms that will collectively shed 2,000 jobs following recent investigations of Amazon’s fast-growing delivery network by BuzzFeed News and ProPublica, which focused on how the intense financial and deadline pressure Amazon puts on its growing fleet of independent delivery contractors can lead to worker mistreatment and threaten public safety. The news organizations documented deaths linked to each of these three contractors. More here.
According to CNBC, WeWork is locked in negotiations this week with its largest shareholder, Softbank Group, over a new $1 billion investment to enable the shared office space company to go through a major restructuring, according to sources familiar with discussions. If the talks are successful, WeWork, which had to abandon an initial public offering last week because of investor concerns about how it was valued and its business model, will seek to negotiate a $3 billion debt deal with JPMorgan, say its the outlet’s sources.
“How stupid is Blizzard?” — Everyone
Detours
Master of pumpkins.
Soviet metro stations.
Classic cars turned all-electric luxury rides.
Retail
Therapy South Park Sox (socks).