Extra Crunch Roundup: E-commerce, Marketing & CEO Insights

The Rise of Livestream Shopping in China and Beyond

Current projections indicate that Chinese livestream viewers will surpass $60 billion in expenditures this year on interactive, real-time digital shopping experiences.

Influencers are leveraging platforms such as Taobao and TikTok to promote a diverse range of products, spanning from beauty items to edible goods.

During Taobao’s Singles Day event in 2020, livestreams generated $6 billion in sales, representing a doubling of revenue compared to the previous year.

Western Startups Enter the Fray

Recognizing the growing potential, Western startups are actively participating in this trend. Companies like Whatnot and PopShop.Live have secured funding to enhance their operational infrastructure.

Alanna Gregory, senior global director at Afterpay, anticipates four key developments in the future:

• Enhanced Networks for broader reach.
• Software-as-a-Service (SaaS) streaming tools.
• Tools focused on Host Discovery and outreach.
• Host Marketplaces and specialized agencies.

Gregory emphasizes that SaaS streaming tools will be particularly valuable for brands seeking to capitalize on the expanding livestream commerce landscape, predicting a significant transformation across the industry.

Insights for Early-Stage Startups: Growth Marketing Strategies

Our team is currently engaging with growth marketers to provide entrepreneurs with actionable advice for navigating the core challenges faced by nascent startups.

This week, Miranda Halpern and Anna Heim conducted interviews with leading experts in growth marketing:

• The MKT1 interview: Exploring growth marketing strategies for 2021, including the considerations of hiring versus outsourcing.
• An interview with Max van den Ingh, founder of Unmuted, discussing success metrics beyond simple numbers.
• Insights from Karl Hughes, CEO of Draft.dev, on the critical role of specialized expertise in developer marketing.

Given the fundamental importance of growth, these articles are available for free access and sharing. We encourage readers to share experiences with agencies or individuals who have aided their startup’s user acquisition and retention efforts.

Thank you for reading Extra Crunch this week. We wish you a pleasant weekend.

Walter Thompson

Senior Editor, TechCrunch

@yourprotagonist

Record-Breaking Venture Capital Investment in Latin America

A comprehensive analysis of Q2 venture capital figures, conducted globally by Alex Wilhelm and Anna Heim, recently focused on the Latin American market.

Their research revealed a significant surge in investment within the region.

According to one investor, the current dynamism of the LatAm startup ecosystem is primarily driven by the quality of its human capital, rather than simply the availability of funding.

The Synergy of Talent and Capital

It was noted that a thriving startup market requires both skilled individuals and financial resources.

However, the increased visibility of Latin American startups is also attributable to underlying structural advantages.

These advantages include widespread digital penetration and the rapid expansion of e-commerce within the region.

Key Factors Driving Growth

• Strong Digital Adoption: Latin America exhibits high rates of internet and smartphone usage.
• E-commerce Acceleration: The region is experiencing a notable increase in online retail activity.
• Talent Pool: A growing number of skilled entrepreneurs and tech professionals are emerging.

The combination of these elements is creating a fertile ground for startup innovation and attracting substantial venture capital.

This confluence of factors is contributing to the unprecedented levels of investment currently being observed in Latin America.

Navigating Sponsorship for International H-1B Transfers and Green Cards

Dear Sophie,

Our company is facing significant hiring challenges, and a substantial number of potential engineering employees are currently in the U.S. on H-1B visas.

These candidates are seeking opportunities for H-1B transfers and eventual green card sponsorship. What course of action should we consider?

— Concerned in California

Understanding the Landscape

Sponsoring international hires for both H-1B transfers and green cards represents a considerable commitment, but it can be a strategically sound decision for companies struggling to fill critical roles.

The process involves navigating complex legal requirements and incurring associated costs. However, the benefits of securing skilled talent can often outweigh these challenges.

H-1B Transfers: A Closer Look

An H-1B transfer, formally known as a portability process, allows an employee already holding an H-1B visa to move to a new employer without needing to go through the lottery.

This is a more streamlined process than initially obtaining an H-1B, making it an attractive option for both the employer and the employee.

Green Card Sponsorship: Long-Term Investment

Sponsoring an employee for a green card (lawful permanent residency) is a longer-term undertaking. It demonstrates a commitment to the employee’s future with the company.

The process typically involves multiple stages, including a labor certification and the filing of an I-140 immigrant petition.

Key Considerations for Your Startup

• Legal Counsel: Engage experienced immigration attorneys to guide you through the complexities of both H-1B transfers and green card sponsorship.
• Financial Implications: Factor in the legal fees, filing costs, and potential advertising expenses associated with the processes.
• Employee Retention: Sponsorship can significantly increase employee loyalty and reduce turnover.
• Company Capacity: Assess your internal resources to manage the administrative burden of immigration sponsorship.

Carefully evaluating these factors will enable you to make an informed decision that aligns with your startup’s goals and resources.

Successfully navigating these processes can unlock access to a valuable talent pool and contribute to your company’s long-term success.

The "CEO for a Day" Initiative at Vincit USA

Inspired by shows like “Undercover Boss,” where leaders observe their workforce incognito, Vincit USA employs a different approach.

They’ve implemented a “CEO of the Day” program, granting employees a 24-hour period to assume the highest leadership role within the company.

This isn’t a symbolic gesture; the designated CEO is given complete budgetary control for the duration of their tenure.

The Core Requirement

A single, crucial condition accompanies this opportunity. The acting CEO must enact a decision that demonstrably enhances the work environment for all Vincit employees.

Ville Houttu, founder and CEO of Vincit, explained the program’s central aim: to foster improvements in the employee experience.

Since its introduction, Vincit USA has been recognized with numerous accolades for its positive workplace culture.

Positive Outcomes

Furthermore, the company has observed a notable decrease in employee turnover rates.

Houttu affirms that, despite its unconventional nature, the initiative has yielded substantial benefits.

“The program has proven to be incredibly valuable, delivering returns far exceeding the initial investment,” he stated.

Insights Gained from Five Years of Common Stock Investment in Startups

Pillar VC, a seed-stage venture capital firm located in Boston, distinguishes itself by purchasing common stock rather than issuing traditional term sheets to startup founders.

Jamie Goldstein, a founding partner at the firm, explains that numerous stipulations within a preferred term sheet can create a disconnect between the interests of investors and those of the company’s founders.

Throughout this unique investment approach, several unexpected lessons have been learned, and various obstacles have required innovative solutions.

The Rationale Behind Common Stock Purchases

The firm’s decision to focus on common stock stems from a desire to foster greater alignment with founders. Preferred stock often includes provisions that grant investors preferential rights, potentially leading to conflicts.

By investing in common stock, Pillar VC aims to share the same economic fate as the founders, incentivizing a collaborative and mutually beneficial partnership.

Key Learnings and Challenges

Over the past five years, Pillar VC has identified several crucial insights regarding this investment model. These findings relate to valuation, deal structuring, and ongoing portfolio management.

Initial challenges included establishing appropriate valuation methodologies for early-stage companies without the benchmarks provided by preferred stock deals.

• Establishing clear expectations regarding future funding rounds was also vital.
• Maintaining transparency and open communication with founders has been paramount.

Valuation proved to be a significant area of learning. Determining a fair price for common stock requires a different approach than assessing preferred stock, necessitating a deep understanding of the company’s potential and market dynamics.

Furthermore, the firm discovered the importance of structuring deals that protect the interests of all stakeholders while still allowing for future investment from other sources.

Impact on Founder-Investor Relationships

The common stock approach has demonstrably strengthened relationships between Pillar VC and the startups they support. Founders appreciate the firm’s commitment to shared success.

This alignment fosters a more collaborative environment, encouraging open dialogue and proactive problem-solving. It also reduces the potential for adversarial relationships that can sometimes arise with preferred stock investments.

Future Outlook

Pillar VC remains committed to its common stock investment strategy. They believe it represents a more equitable and effective way to support early-stage startups.

The firm continues to refine its approach based on ongoing learnings and anticipates further innovation in the venture capital landscape.

The Recent Regulatory Actions in China: A Positive Development for CCP-Aligned Startups

Over the past week, a significant volume of news has emerged from China regarding increased regulatory oversight. Alex Wilhelm analyzes these developments to identify potential benefits for startups operating within the country.

The core observation is that these actions by the Chinese Communist Party (CCP) could create advantageous conditions for certain businesses.

Specifically, it’s anticipated that resources and investment will become increasingly focused on industries prioritized by Beijing. Conversely, sectors facing stricter governmental control may experience a decrease in both capital and entrepreneurial attention.

A Shift Towards Centralized Planning

Wilhelm posits that the current situation represents a move towards greater central planning within the Chinese economy.

This shift suggests that business activities will be increasingly aligned with the objectives established by central authorities.

Central planning is expected to direct business endeavors toward goals deemed strategically important by the CCP.

• Increased investment in favored sectors.
• Reduced focus on industries under strict control.
• A stronger emphasis on alignment with CCP objectives.

The crackdown, encompassing areas like edtech and streaming services, is therefore viewed not as universally negative, but as a catalyst for resource allocation.

This reallocation is predicted to benefit startups whose missions are in harmony with the CCP’s overarching strategic vision.

Duolingo's Initial Public Offering Valuation Signals Positivity for the Edtech Sector

Originally, Duolingo, headquartered in Pittsburgh, projected an IPO price between $85 and $95 per share. This target was subsequently revised upwards to a range of $95 to $100 prior to the commencement of trading.

The company eventually debuted on the public market at a price of $102 per share, exceeding initial expectations.

As Alex Wilhelm points out, considering Duolingo’s projected revenues for the second quarter, the company currently possesses a run-rate multiple approaching 16x.

This figure contrasts with the average multiple of 14x observed among publicly traded SaaS companies.

“Duolingo, functioning as a consumer edtech company, is now assessed at a higher value per revenue dollar than the typical public enterprise SaaS organization,” Alex observes.

Utilizing Machine Learning for Enhanced Anomaly Detection in Finance

According to EZOPS CEO Bikram Singh, anomaly detection represents a notably challenging and often overlooked operational aspect within the asset-servicing segment of financial institutions.

The ability to pinpoint these anomalies within large datasets is paramount. Unsupervised learning techniques present a viable approach to achieving this.

The Importance of Proactive Anomaly Detection

Singh emphasizes the necessity for financial institutions to proactively identify anomalies, given the current focus on data integrity. Preventing flawed data from impacting subsequent operations is crucial.

Employing machine learning allows for not only the detection of data anomalies but also the identification of their root causes. This significantly minimizes the time required for investigation and correction of errors.

Benefits of a Machine Learning Approach

• Reduced Research Time: Machine learning streamlines the process of identifying anomaly sources.
• Improved Data Quality: Early detection prevents the propagation of inaccurate data.
• Enhanced Operational Efficiency: Faster anomaly resolution leads to more efficient workflows.

Successfully implementing these technologies can lead to substantial improvements in data management and operational resilience for financial firms.

The proactive identification of anomalies, facilitated by machine learning, is becoming increasingly essential in maintaining the integrity and reliability of financial processes.

African Startups Experience Surge in Funding, Driven by Fintech

Alex Wilhelm and Anna Heim recently completed an analysis of Q2 2021 venture capital investments, with a specific focus on the African continent.

Their findings suggest that Africa is poised to surpass previous benchmarks for venture capital funding this year.

Specifically, the first six months of 2021 witnessed approximately double the amount of capital secured by African startups compared to the same period in 2020.

Increased Capital Availability

The report highlights a significant increase in the accessibility of funding for businesses operating across Africa.

Currently, African startups have unprecedented access to capital resources.

Fintech as a Key Driver

The growth in funding is largely attributed to the thriving fintech sector within Africa.

Investments are heavily concentrated in companies innovating within the financial technology space.

Record-Breaking Funding Levels

Early indicators demonstrate that 2021 is on track to be a record-breaking year for venture capital investment in Africa.

This represents a substantial leap forward for the African startup ecosystem.

Empowering Developers is Key to Effective ‘Shift Left and Extend Right’ Security

The core goal of DevSecOps is to integrate security and compliance practices directly into the DevOps workflow. However, achieving this integration presents significant challenges, as noted by Idan Plotnik, founder and CEO of Apiiro.

Plotnik explains that simply identifying security risks earlier through scanning tools or security architects isn’t sufficient. True progress requires developers to possess comprehensive understanding and resources to proactively prevent vulnerabilities from being introduced.

Understanding the Shift Left and Extend Right Philosophy

The concept of “shifting left and extending right” is often misinterpreted. It’s not merely about earlier detection of issues.

Instead, it necessitates equipping developers with the necessary information and capabilities to avoid creating vulnerabilities in the first place. This proactive approach is fundamental to a robust security posture.

Essential Infrastructure Considerations for Scaling SaaS to the Enterprise Level

Prashant Pandey, Engineering Lead at Asana, highlights four crucial areas SaaS startups should prioritize when preparing their infrastructure to accommodate expanding customer demands.

Initially, SaaS solutions often gain traction with startups and small-to-medium businesses (SMBs). However, sustained growth necessitates infrastructure adjustments as these clients mature and larger enterprises begin adoption.

Successfully scaling to serve enterprise clients hinges on focused development in these four key domains:

• Prioritize robust security and unwavering reliability for your customer base.
• Empower IT administrators with comprehensive control over product utilization within their organizations.
• Integrate data isolation principles directly into your system’s foundational architecture.
• Enable seamless data interconnection across applications to effectively support customer workflows.

Addressing Security and Reliability

Enterprise clients demand stringent security protocols and guaranteed uptime. Meeting these expectations is non-negotiable for securing larger contracts.

Providing IT Admin Control

Large organizations require IT departments to manage software access and usage. Providing granular control features is essential for enterprise adoption.

Implementing Data Isolation

Architecting for data isolation ensures that each customer’s information remains segregated and protected. This is a fundamental requirement for enterprise-level data governance.

Supporting Data Interconnection

Modern enterprises rely on interconnected systems. Facilitating data exchange between your SaaS product and other applications streamlines workflows and enhances value.