China Algorithm Restrictions: Tech Crackdown Intensifies - Daily Crunch

Daily Crunch: August 27, 2021

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Greetings, and welcome to the Daily Crunch for Friday, August 27th, 2021. This week has been particularly eventful! The past 24 hours have brought substantial developments globally.

Key Highlights

These developments include China’s continued strengthening of its regulatory framework, Apple’s limited adjustments concerning the App Store, and a wealth of news regarding startups.

Furthermore, Melanie Perkins, the CEO of Canva, will be a featured speaker at the upcoming Disrupt conference.

— Alex

TechCrunch's Leading Three Stories

Recent developments highlight key shifts in the technology landscape. Here's a breakdown of the top three stories covered by TechCrunch.

China's Algorithm Regulation Plans

China is intensifying its efforts to regulate its technology sector. A government agency has proposed a new set of rules specifically targeting algorithms.

These regulations aim to restrict corporate data gathering practices and exert greater control over the digital environment. This move represents a continued trend of increased oversight within the Chinese tech market.

Growing Corporate Investment in Startups

Corporations are demonstrating a significant appetite for equity in startup companies. Analysis of recent corporate venture capital (CVC) activity reveals record-breaking investment figures.

CVCs are participating in a greater number of funding rounds, and the size of these investments is also increasing. Further investigation explores the motivations and mechanics behind this trend.

Apple's App Store Policy Adjustment

Apple has made a limited concession regarding its App Store policies. A recent settlement allows app developers to provide information on alternative payment methods outside of the iOS ecosystem.

Apple characterized this change as a clarification of existing policies. While Apple maintains a firm grip on the App Store, this development may signal a slight loosening of its control.

This adjustment could potentially open avenues for developers to bypass Apple’s in-app purchase system, though the extent of this impact remains to be seen.

Startups & Venture Capital Updates

Let's begin with a look at a16z, a prominent venture capital firm. While the company manages various funds, including those focused on crypto and general investments, they’ve recently unveiled a dedicated $400 million fund specifically for seed stage investments.

This substantial fund size suggests either a willingness to acquire significant equity stakes in early-stage companies or an intention to make a large number of initial investments. Time will reveal their strategy.

Recent IPO Filings & Public Offerings

Several companies are making moves toward going public. Here’s a breakdown of the latest developments:

• Rivian’s IPO Filing: For investors seeking opportunities in the electric vehicle (EV) sector, Rivian has confidentially filed for an initial public offering. This is a particularly promising development, representing a significant step beyond companies like Lordstown.
• The company has successfully secured $2.5 billion in external funding, bringing its total capital raised to over $10 billion. We are eager to see the tangible outcomes resulting from this considerable investment.
• Forbes to Go Public via SPAC: The well-known media and magazine company, Forbes, is leveraging the current trend of special purpose acquisition companies (SPACs) to become a publicly traded entity.
• An analysis of their investor deck is available, detailing future plans and the impact of the COVID-19 pandemic on their financial performance.
• Toast’s Public Offering: While coverage was delayed, further details regarding Toast’s IPO will be available on TechCrunch.com.

Innovative Startups & Emerging Technologies

Several startups are attracting attention with their unique approaches to existing challenges:

• Zeal Secures Series A Funding: This payroll API startup is operating within the rapidly expanding embedded fintech landscape. The question remains: is there sufficient market demand for a dedicated payroll API product?
• Despite previous skepticism, the growth of the OKR startup ecosystem demonstrates a surprising appetite for specialized software solutions.
• Sitenna Aims to Optimize 5G Infrastructure: As a participant in the upcoming Y Combinator cohort, Sitenna is focused on assisting telecommunications companies with the deployment of 5G antennas.
• The startup presents an interesting concept, and further information can be found in their published post. However, it’s important to note that Y Combinator’s demo day is approaching, signaling a period of increased news volume.
• Sastrify Raises $7 Million: Headquartered in Cologne, Sastrify is developing a platform to help businesses manage and optimize their SaaS spending.
• With the increasing prevalence of subscription-based software, controlling costs and understanding expenditure is becoming crucial. Sastrify addresses this need, and notably, the company has already achieved cash-flow positivity.

Establishing Rapport: Seven Strategies for Cultivating VC Relationships

A number of founders encounter emotional challenges prior to feeling prepared to present their venture directly to prospective investors.

To lessen this anxiety, Evan Fisher, the founder of Unicorn Capital, suggests that entrepreneurs leverage pre-pitch meetings to foster and solidify connections before formally requesting funding.

The benefits of pre-pitches extend beyond simply reducing nervousness; these discussions enable founders to gain valuable insight into the thought processes of venture capitalists and can occasionally result in unexpected, positive developments.

Fisher notes that “investors are inherently opportunity-driven,” and that a favorable initial impression can trigger a strong fear of missing out (FOMO) regarding a promising business.

(Extra Crunch is our subscription service designed to empower founders and startup teams. Registration is available here.)

Maximizing the Value of Pre-Pitch Interactions

Understanding the Purpose

Pre-pitch meetings aren't about delivering a full presentation. They are focused on initiating dialogue and building trust.

The goal is to establish a foundation for a more substantive conversation when the time comes to discuss investment terms.

Seven Key Approaches

• Seek Introductions: A warm introduction from a mutual connection significantly increases the likelihood of a meeting.
• Be Concise: Respect the investor’s time by delivering a succinct overview of your company.
• Focus on the Problem: Clearly articulate the problem your startup solves and its potential market.
• Demonstrate Traction: Showcase any existing progress, such as user growth or revenue.
• Ask for Advice: Seeking guidance positions you as receptive and demonstrates humility.
• Listen Actively: Pay close attention to the investor’s feedback and perspectives.
• Follow Up: A thoughtful follow-up email reinforces your interest and professionalism.

The Long-Term Benefits

Cultivating relationships with VCs before actively fundraising can yield significant advantages.

It allows founders to receive valuable feedback, refine their pitch, and potentially secure funding on more favorable terms.

The Investor Perspective

Venture capitalists are constantly evaluating numerous opportunities.

Founders who proactively build relationships demonstrate initiative and a genuine understanding of the investment landscape.

This proactive approach can differentiate a startup from the competition and increase its chances of securing funding.

Big Tech Inc.

Recent events have highlighted challenges and ambitions within several major technology companies.

Peloton Faces Scrutiny

Peloton experienced a difficult week, marked by a disappointing earnings report according to Wall Street analysts.

Adding to these concerns, the company received subpoenas from both the U.S. Department of Justice and the Department of Homeland Security.

Consequently, the company’s stock price declined, with hopes pinned on a more positive outcome as the week progresses.

Tesla's Expansion into Energy Retail

Tesla has filed an application to operate as a retail electric provider in Texas.

This move would allow the company to purchase wholesale electricity from generators and then resell it directly to consumers, as reported by TechCrunch.

Twitter Experiences Service Disruptions

Twitter encountered service outages and performance issues, reminiscent of its earlier days.

These disruptions brought back memories of frequent outages, including the iconic "Fail Whale" image.

While users may recall these past issues, Twitter itself likely does not view them favorably.

Open Source Software and the U.S. Government

Venky Adivi of Canonical shared insights regarding open source software and its relationship with the U.S. government.

The overall assessment indicates largely positive developments in this area.

Adivi’s analysis suggests a constructive environment for open source software within the governmental landscape.

TechCrunch Experts: Growth Marketing

Startup founders are being contacted to identify their preferred sources for current growth marketing strategies. Participation in the survey can be completed at this link.

A sample testimonial received is presented below.

Marketer: Natalia Bandach, Hypertry

Recommended by: Jean-Noel Saunier, Growth Hacking Course

Testimonial: “Natalia demonstrates an innovative perspective regarding growth strategies and testing methodologies. She consistently provides inventive solutions and a wealth of ideas, which are rapidly validated through experimentation.

Instead of concentrating on a single aspect, she prioritizes identifying the most effective approaches for a given business. Her experiment designs are vital for both immediate and sustained success.

She operates as a principled growth leader, ensuring the business delivers genuine value. Natalia is prepared to adjust strategies as needed, and does so quickly.

This agility is always balanced with a commitment to the team’s welfare, their professional development, and the prevention of burnout.”

Discussion Forum

Image Credits: Diversion Books

Danny Crichton will be hosting a conversation with Azeem Azhar on Twitter Spaces. This event is scheduled for Tuesday, August 31st, beginning at 1 p.m. PDT/4 p.m. EDT.

The discussion will center around Azhar’s forthcoming book, titled “The Exponential Age: How Accelerating Technology is Transforming Business, Politics and Society.” The book’s official release date is September 7, 2021.