Browsing Tag: Startups

Following voluntary employee furloughs and salary cuts in the U.K., Monzo is continuing to take tough decisions in order to shore up its financial position amidst the coronavirus crisis and resulting economic downturn.

The latest move — which TechCrunch understands was being considered prior to the pandemic, though undoubtedly the decision was escalated and made because of it — will see the U.K. challenger bank shutter its customer support office in Las Vegas.

The U.S. outpost employs 165 customer support staff, who will now lose their jobs, and provided overnight customer support to U.K. customers, a much loved feature of the bank. However, that has proven expensive for Monzo, which now claims more than 4 million customers, and disproportionate to the number of support requests made during overnight hours (12% of queries, apparently). Instead, overnight support will now happen from the U.K.

It should also be noted that this doesn’t appear to impact Monzo’s U.S. launch. Vegas support staff were servicing U.K. customers only, with U.S. customer support provided by a small team in London closer to the development and iteration of the Monzo USA beta.

Meanwhile, I also understand that Monzo Las Vegas employees are being given two months’ notice, with full pay and healthcare. And, as it should do, the bank is offering support with CVs and reaching out to other employers, and doing things like running interview prep sessions (however futile that may be with skyrocketing U.S. unemployment). In addition, it is supporting applications for extended healthcare cover after the end of notice period.

Lastly, as I caveated when exclusively reporting on Monzo’s planned furloughs, these measures, although extremely distressful for the employees affected (which should never be forgotten), are largely precautionary as the bank’s board looks to plan responsibly for however long the coronavirus-related economic uncertainty continues. (Related to this, I wouldn’t be surprised to see Monzo closing in on some additional funding from existing investors in the interim.)

In addition, unlike many fintechs, Monzo is a fully licensed bank, and therefore has a regulatory obligation to hold significant cash reserves. Under the license, customer deposits up to £85,000 are also protected as part of the U.K. government’s deposit protection scheme.

Source: Tech Crunch Startups | Monzo to shutter Las Vegas customer support office, 165 employees being let go

For more than two decades, virtual care has slowly made inroads into American medicine.

A somewhat nebulous and overwhelming term, “virtual care” refers to the integration of products like telehealth, remote patient monitoring, prescription delivery and even behavioral coaching into the fabric of medical practice. And while some early entrants, like Doctor on Demand in the primary care telehealth space and Mercy Virtual for remote-monitoring programs, have achieved some traction, the space has suffered from a lack of consumer scale, challenges with government regulation and significant technological and usability barriers.

This is not for lack of promise or even early results. The University of Pennsylvania was able to reduce its 30-day readmissions rate for heart failure patients by 73% using aggressive virtual care methodologies like telehealth and remote monitoring.

And yet, over the past month, the rapid spread of COVID-19 changed everything.

The global pandemic has jolted American medicine into making groundbreaking changes. Changes that may forever alter the path of virtual care and provide key insights and lessons for entrepreneurs looking to seize this moment.

Chief amongst these are leapfrog advances in sensor technology allowing a “consumer-grade” user experience at scale. Historically, medical-grade sensor technology has resulted in a lackluster and poor user experience that requires significant patient compliance. Now, many sensors can be deployed “in the background” and require few patient lifestyle changes. Numerous players are now advancing on this development and providing other entrepreneurs with a guidebook forward.

Source: Tech Crunch Startups | Fast-changing regulations give virtual care startups a chance to seize the moment

Many presume that the SBA’s “affiliation” rules will prevent venture-backed startups from applying for loans under the Paycheck Protection Program (PPP) of the CARES Act. I think that’s unfortunate, because the potential benefits of a PPP loan are compelling. For sure, you’re prudent to assume that, if you’ve closed on one or more preferred stock financings, your startup will indeed have an affiliation issue, based on protective covenants found in your charter and investor agreements; but you may be pleasantly surprised to hear of ways to amend your startup’s governing documents that, at least arguably, do not do essential violence to minority investor protections.

Because the terms of the PPP are so compelling – a loan that becomes a tax-free grant if spent on payroll, rent and utilities (in essence, for earlier stage startups, your burn) – it simply has to be looked at as a financing source. If the initial problems with the SBA’s rollout of the PPP can be fixed, this program may be the best way out there to mitigate the uncertainties that arise from the global pandemic. The brutal reality is that your next priced equity round is significantly further down the road than you had planned.

At the same time, no one wants to re-trade on essential terms with their startup’s preferred stock investors. The affiliation “fixes” should, if they are to be feasible, focus on preferred stock class voting thresholds or the makeup of voting groups in your charter and/or to selectively eliminate preferred director veto power in your Investors’ Rights Agreement.

Let’s step back for a second and address another common misperception: it’s important to understand that an affiliation analysis is distinct from application disclosure requirements driven by the PPP’s 20% owner threshold. The 20% threshold pertains to the scope of information an applicant needs to provide, what representations need to be made, and the like. An affiliation analysis, by contrast, speaks instead as to whether the applicant even qualifies as a “small business.” For the most part, this means, will the SBA deem the applicant to have fewer than 500 employees. If your business is “affiliated” with other startups in your VC firm’s (or firms’) portfolios, your company may be deemed big, not small, and so not eligible for the PPP.

Source: Tech Crunch Startups | Don’t apply for a PPP loan unless your affiliation issues are resolved

Startups are preparing for fundraising to become even harder to secure, due to a venture market slow down caused by COVID-19. The pandemic has led to less market activity, which means fewer liquidity deals for investors, which translates into less fresh capital (or dry powder) to put into startups.

As a result investors have told already-funded startups that they need to extend their runway until deal flow bubbles back up. Investors say this could take a couple of quarters, and looking at 2008 data, it could take a couple of years.

Canadian company Clearbanc has launched Clearbanc Runway, a new financing product to help startups secure money.

On Clearbanc’s website, founders can input the amount of their current runway, as well as cash balance, overhead, revenue, margin, growth rate and other criteria. Clearbanc will analyze the data and offer money in the form of non-dilutive capital. Founders can repay the cash through a revenue share agreement. In order to be eligible, companies must have a minimum of $10,000 monthly revenue and at least six months of consistent revenue history.

If Clearbanc sounds like a loaning company, it’s because it (almost) is: the company gives money to startups and charges interest above a repayment plan. However, the company says it can’t legally be described as a loaning platform because is not regulated as such. While loans include fixed payment timelines. compounding interest, and maturity dates, Clearbanc has none of those factors. Instead, Clearbanc takes a fixed percentage of sales and if a startup slows down,  Clearbanc just has to wait longer to get paid back. It claims no penalties for founders.

The company’s revenue share agreement charges a 6% flat fee, with repayments already a part of the funding plan. And if the startup that has taken an investment from Clearbanc is doing better month to month, the funding total that they can access will reflect that.

Clearbanc Runway is very similar to the company’s flagship product the 20-minute term sheet.

Clearbanc created the 20-minute term sheet to help companies get non-dilutive capital for advertising spend on Google and Facebook advertisements. The premise there was that startups should spend valuable venture capital money on other expenses since equity is involved. Clearbanc Runway fulfills a broader goal.

“Originally, we were just focused primarily on ad spend. Now we can fund any expense that used to maintain your company,” said Andrew D’Souza, the co-founder of Clearbanc. Clearbanc Runway will fund enterprise and software businesses, along with e-commerce businesses.

The subtle difference between the two products is that the new launch has a hint of conservatism in it. Clearbanc is in a unique position during this pandemic because it largely funds e-commerce businesses. Those internet businesses are experiencing an increase in traffic as brick-and-mortar stores close amid the COVID-19 pandemic.

But, noted D’Souza, “there’s a lot of volatility and a lot of uncertainty.”

“We’re certainly going to be more conservative than we would have been six months ago. It probably looks like us writing smaller checks, more frequently.”

Clearbanc isn’t competing for deal flow with venture capital firms. Instead, the company is going up against fintech companies that loan money to small businesses. And that’s neither a rare or new focus.

Last month, Plastiq raised $75 million to help small businesses pay for items with credit as an alternative to traditional lending resources. Payment processing giant Stripe also has Stripe Capital, its lending product that gives money to internet businesses for a flat fee.

In January, Lighter Capital raised $100 million to lend money to other startups, similar to Clearbanc’s revenue sharing agreement format. It all goes to show that there are a lot of players willing to give out loans, and it’s up to small businesses to decide which terms are the friendliest.

Not all small business loans will be accessible for venture-backed startups. For example, the $2 trillion stimulus package provided by the U.S. government shows that $349 million was set aside to loan out to small businesses. However, new guidance shows that most startups are still excluded from getting monetary help. Still, some are applying for the loan because it will be distributed on a first come, first serve basis.

Clearbanc says it can differentiate from competitors because of its speed.

“It’s great that people apply for [SBA loans], but it can take a long time,” D’Souza said. “There’s a huge backlog and it depends on your bank and what their systems are set up to do.”

Almost exactly a year ago, Clearbanc’s co-founder Michele Romanow was talking in terms of IPOs and unicorns. Clearbanc Runway has gone noticeably less grandeur, as D’Souza was talking in terms of helping companies avoid shuttering or undergoing mass layoffs.

The firm has invested, or dealt money into, over $1 billion across 2,200 companies.

Clearbanc has traditionally pitched itself as a way for e-commerce founders to grow their startups without giving up as much ownership as a traditional equity deal would include. Now, the company is pitching itself as a way for all founders to stay afloat, as venture capital becomes less of an option across the world.

Update: Clearbanc has said that it cannot be legally considered a loaning platform due to a different financial structure from traditional loaning companies. The story has been updated to clarify this. 

Source: Tech Crunch Startups | As VCs pull back, Clearbanc launches a way for startups to get runway

Though the effects of the coronavirus pandemic on restaurants has been crystal clear, many forget the impact this disease has had on food chain suppliers. With restaurants closed, these suppliers — who still have access to tons upon tons of food — no longer have customers.

Meanwhile, end consumers are dealing with their own stresses around securing food, deciding between venturing out to the grocery store and ordering food through increasingly unreliable grocery delivery services.

That’s where Pepper comes in.

Pepper launched late last year with an enterprise product focused on connecting restaurants with their suppliers. Most restaurants have 6+ different suppliers, and manually placed orders with each of them individually each night either by email, voicemail or text message. Oftentimes, there was no confirmation that the order was received, with employees receiving orders and hoping that everything arrived on time as it was requested.

To digitize the industry, Pepper developed an app that let restaurants input the contact information of suppliers and place orders quickly, and then let those suppliers press a single button to confirm the order was received and in progress.

In the six months since launch, things have changed dramatically for the startup, which has led co-founder and CEO Bowie Cheung to rethink the business.

Alongside facilitating orders between restaurants and suppliers, Pepper has now opened up a consumer-facing portal called Pepper Pantry, allowing everyday users to place an order directly with a food supplier.

Folks pay a flat $5 payments processing fee on the platform, and can choose from fresh meats, produce, dairy and other categories to have food delivered directly to their home.

Of course, this involved considerable adaptation on the part of Pepper and their suppliers, who are used to shipping pallets of food rather than bags or boxes. However, it has created some jobs on the supplier side as folks repackage food to amounts that are suitable for families or individuals, rather than businesses.

Cheung says the portions are still ‘bulk’ but more on par with a Sam’s Club or Costco purchase than the types of orders restaurants were placing.

Suppliers are able to choose their minimum order amount, which can range between $0 and $150. Thus far, eight suppliers have signed on to the Pepper Pantry platform, serving the greater NYC area (NYC, NJ, CT) and the greater Boston area.

Pepper declined to disclose its total funding amount, but did share that it has received investment from Greylock’s Mike Duboe and Box Group.

Source: Tech Crunch Startups | Pepper, a platform for restaurants and suppliers, pivots to deliver food to consumers

Domestic stocks rose today in the United States, with all major indices opening higher.

TechCrunch has slowed its daily coverage of the US stock market as volatility has receded. We try to avoid covering the stock market too much, but there are days when doing so would be derelict. The value of public companies impacts the value of private companies like startups, so we have to pay at least some attention on days when shares rise or fall sharply.

Today’s opening normally wouldn’t qualify as sufficiently violent to warrant coverage. But what the open today misses in total movement it makes up in oddness: This morning the US government reported that 6.6 million individuals filed for unemployment in the last week, adding to the roughly 10 million that did so in the preceding two weeks. Canada’s March unemployment, out this morning as well, was similarly awful.

And the layoffs have continued, with Yelp this morning announcing around 1,000 layoffs and 1,100 furloughs. Startups are cutting staff at a pace not seen in a decade, the economy is broadly expected to enter a recession and venture capitalists are slowing their investment cadence as revenue losses rise and valuations are expected to dip.

And yet, stocks are higher. Sure, the Fed announced a wave of new action this morning, but reactive band-aids to bleeding wounds don’t net out to zero in the short-term.

All this is to say that if you don’t get what you are seeing in the ticker tape this morning, you’re not alone. What the fuck is going on? I don’t know.

But, I suppose, here’s where things are at start of the day:

• Dow Jones Industrial Average: +305.81, +1.31%
• S&P 500: +30.63, +1.11%
• Nasdaq Composite: +67.94, +0.84%
• Bessemer cloud index: +13.73, +1.20%

More at the close.

Source: Tech Crunch Startups | Stocks gain despite 6.6M new US unemployment claims

Ready or not, edtech has been shoved into the spotlight as millions of students shifted to remote learning due to pandemic-related school shutdowns.

But backing these companies are investors who have long believed that edtech was always set up for great returns and a big impact. We reached out to several to find out about which trends they’ve been willing to put their money behind. (And frankly, what we’ve been missing.)

We got into how tech can help — or hurt — underserved students struggling to find Wi-Fi or a laptop and how braintech still is ripe for innovation. Investors also shared the parts of edtech that Zoom video conferencing doesn’t address and why gamifying learning is so important.

Here’s who we talked to:

• Jenny Lee, GGV
• Tetyana Astashkina, LearnLaunch
• Jean Hammond, LearnLaunch
• Marlon Nichols, MaC Venture Capital
• Mercedes Bent, Lightspeed Venture Partners
• Jennifer Carolan, Reach Capital
• Shauntel Garvey, Reach Capital
• Jan Lynn-Matern, Emerge Education
• Lesa Mitchell, Techstars 
• Tory Patterson, Owl Ventures
• Ian Chiu, Owl Ventures 
• Tony Wang, 500 Startups

Next week, we’ll publish the other findings we received from these investors, focusing on edtech in a post-COVID-19 world.

Responses below have been edited for length and clarity.

Jenny Lee, GGV

What trends are you most excited about in edtech from an investing perspective?

GGV Capital is focused on how technology is allowing startups to innovate and create new business models to (1) lower the reliance on physical locations and (2) to allow for teachers to teach online with multi-format (1:1, 1:n) virtual classrooms [and] (3) deliver highly interactive and personalized content via use of virtual characters, machine learning, natural language and voice recognition/processing. Edtech can be broken down into the process of (a) learning (reading, speaking, comprehension), (b) practicing, and (c) testing, and targets different age groups from 0-3 years old, 3-6 years, K-12 years and into exam prep and adult training. Over the last four to five years, we have invested in over 10 companies in the areas of language learning, test prep, holistic learnings (like logical thinking, programming etc) and K-12 homework assistant.

How much time are you spending on edtech right now? Is the market under-heated, over-heated or just right?

It’s a key investment sector for me, so I spend about 20-30% of my time with edtech startups. Over the last few years, it has been a steady sector, not over-heated, but the COVID-19 situation has thrown a bright spotlight on it as a sector benefiting from more stay-at-home children and parents anxious to keep them busy, learning and engaged. I expect the sector to heat up quite a bit as we have seen our portfolio companies attract a lot of new users, new revenue and new interested investors over the last several months as much of the world manages lock-down mode. We expect this trend to continue for our US-based and Asia-based edtech startups as well.

Source: Tech Crunch Startups | 12 major league edtech VCs discuss top trends, opportunities

Paidy, a Japanese fintech startup that allows customers to make online purchases without credit cards, announced today that it has raised a $48 million Series C extension from ITOCHU.

The company says it has now raised a total of $281 million in equity and debt. Its latest investment from ITOCHU, one of the largest Japanese trading companies, was equity funding. ITOCHU previously participated in Paidy’s Series B and C rounds, and this brings the total it has invested into the startup to $91 million (the company said it did an extension round instead of moving onto a Series D so it could issue the same type of preferred shares).

Paidy’s last funding announcement was in November 2019, with investors including PayPal Ventures. The company has now raised a total of $281 million in equity and debt.

The latest funding will be used to strengthen Paidy’s balance sheet during the COVID-19 pandemic and also support the development of more “buy now pay later” services it will launch later this year.

Paidy’s payment service allows users to make purchases online, and then pay for them each month in a consolidated bill. The company uses proprietary technology to score creditworthiness, underwrite transactions and guarantee payment to merchants. Since many Japanese consumers prefer not to use credit cards for online payments, Paidy’s service can help vendors increase their conversion rates, average order values and repeat purchases.

During the pandemic, the company says usage of its service has increased since more people are buying essential items online, despite declines in spending on travel, hotels and large-ticket items (a state of emergency was declared in Japan last week in Tokyo and six other prefectures).

Shuichi Kato, the executive officer and executive president of ITOCHU’s ICT and Financial Business company, said in a statement that, “We strongly beieve that they will keep playing a critical role in our retail finance strategy as their one-of-a-kind credit examination has been creating a new type of trust, appealing to a wide range of customers. Paidy has also proved that they are capable of implementing prompt solutions in the inevitable battles against fraud, evolving their services to the next level.”

Source: Tech Crunch Startups | Japanese payment service provider Paidy raises M from ITOCHU

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

This morning we’re taking a brief look at SaaS stocks ahead of earnings, making note of their recent movements (and recovery), and what those somewhat violent movements could mean for SaaS startups as we head into the new economic world.

Investors generally expect churn (revenue loss) to rise at SaaS firms. For modern software startups that need to raise new capital, more churn means slower growth. If public software companies trip over their earnings reports, clipping their valuations, it could set up a double-bind for a number of startups. Let’s explore.

A recovery, a return

Tracking the value of public SaaS companies is a fun way to understand a piece of the venture capital market. If public SaaS shares rise, their gains help founders raise new money at attractive prices, defending and extending private valuations. When SaaS stocks fall, they do the opposite.

Source: Tech Crunch Startups | Ahead of earnings, SaaS stocks show resilience

The aerospace market is evolving quickly and merging with other segments of tech, making it an exciting space for both startups and investors — but the complications of the global pandemic are being felt by both.

Bessemer Venture Partners investor Tess Hatch has been helping guide companies in their portfolio through these strange times, and has been rolling with the punches herself.

Hatch recently spoke to us about the advice she’s been offering startups, which companies are being hit hardest and where opportunity still lies in the frontier tech world. (This interview has been edited for length and clarity.)

Austerity measures and hard-hit hardware

TechCrunch: I’m interested in how the virus is affecting things in the investment world. Have you made any official accommodations, like a change of strategy, or putting off key investments, things like that?

Tess Hatch: Of course, we’re advising startups on things to do, like their employee safety, and implementing working from home, and tools and tips and tricks that can help that. Especially when it comes to hardware companies — it’s kind of hard to work from home when you’re manufacturing.

We’re advising them to really watch their burn, because their top line is not going to hit where they expected it to hit, like a double or triple revenue, it’ll maybe stay the same. If it increases even a little bit, they’re winning. We’re having these individual company-to-company conversations, just advising them on getting through, hopefully just these next couple of quarters, but it could be next year plus.

There is the question of new deals that we were looking at and this is a time where entrepreneurs will find amazing opportunities to solve the most pressing/immediate societal challenges and we are here to invest in them. We’re still taking new pitch meetings, new deals, we’re still busy, just doing it in the comfort of our pajamas rather than at the office.

So would you say that it has affected the frequency or the cadence of your investments, on a larger scale?

There’s really been like three partnership meetings since craziness happened. And the number of deals that we’ve talked about in the presentations we’ve had, those have remained the same, but ask that question in three more weeks, and I’m sure it I’ll have a better answer.

One of the funny things we’re talking about is that investors, one of their favorite things is to be able to predict how the future, at least the next year or two, is going to go. But this is one of the greatest times of uncertainty we’ve all lived through. So how are you approaching that when there’s so much that’s uncertain, but there’s so much that you need to know in order to effectively manage your portfolio, give advice and make sound investments?

Right now, it is shaking everything that we’ve believed in so strongly. However, we still are looking out, let’s say two to five-plus years. The real question is if this is going to be, with quarantining and lowering the curve, a little bit more under control by let’s say the summertime, or if this is going to be more than a couple of quarters, say a couple of years.

One of the many things we are advising is for our companies that are able, raise a bit of extra capital now while the water is shut off, but there’s still a little bit trickling from the showerhead… I have not seen anything like this in my short career, but there are partners at the firm who have been here 20-plus years and while they have never seen this particular situation, I’ve been amazed by their ability to deal with these unique challenges and advise our companies on how to get through this. It’s like you said, the uncertainty of just not knowing how long or how drastically this is affecting everything.

I think that the hardware companies that you mentioned, those may have it the hardest because they involve so much travel, so much mailing back and forth of prototypes for testing. Is there any specific advice that you have for hardware companies that are trying to build a product right now?

Unfortunately, most of them have stopped all travel. We’re trying to do as much as we can virtually. The majority of them are smaller teams that are actually making, let’s say, a drone, or an autonomous robot, and they’re just staying six feet apart and taking all of the necessary precautions, doing every-other shifts. So if, say it’s a six-person team, three of them are working in the morning and three of them are working in the afternoon to increase the distance between all of them. The offices — especially where we’re building drones — are huge, so there’s tons of space for everyone.

The real issue though, is our customers aren’t showing up to work, you know? One of our companies, Impossible Aerospace, sells drones to police and fire departments. This is one of the best times to use drones to deliver emergency medical supplies, or even toilet paper and hand sanitizer to people in need. The ones that do have the drones are happy and they’re using them, but the ones that don’t, they’re so overwhelmed with everything else that’s going on.

There are always leads to follow up on, contracts to hammer out and negotiate, improvements you can make to your sales process. Is this something that there actually is a lot of, that even hardware companies can focus on in these downtimes?

At a high level, I’m sure there are people in the organization that can turn and do that. But think about a sales person or business development, there are certain ones that, their entire job is shaking hands or going to these events. I mean, think of marketing spend with no conferences this year, and all that upsets.

Aerospace between air and space

You wrote an article last week for us about a sort of neglected area of the new space industry, the stratosphere. I feel like people have been chasing this for a long time, but that the drawbacks of being in atmosphere are too much, especially when LEO [low Earth orbit] is getting so cheap. Do you really think that things like balloons and blimps are in the cards?

I agree with you that LEO is definitely becoming more accessible and cheaper and this market is shifting from price per kilogram to time to orbit, with launch vehicles like Rocket Lab’s coming to fruition.

However, there are still so many things one needs to do to modify their sensor for LEO. And with LEO, you’re only over the same area of interest for let’s say 15 minutes of a 90-minute orbit. And even then, the revisit rate over the same spot of Earth, it depends on the orbit, but it’s daily, weekly, sometimes more than weekly. The only way to stay over a single point in space is GEO [geosynchronous orbit], and that’s 36,000 kilometers versus 500 to 1,200 [for LEO].

Source: Tech Crunch Startups | Bessemer’s Tess Hatch on the evolving aerospace market and COVID-19 adjustments