Celebrating Two Years of Extra Crunch

It is with considerable satisfaction that I share news regarding the progress at Extra Crunch. Today marks our second anniversary, a significant milestone for the team.

The growth we’ve experienced is a direct result of dedicated effort from the entire TechCrunch staff. This includes contributions from respected guest writers and the active participation of our readership.

Over the past year, our membership has increased threefold. As Extra Crunch begins its third year, we are committed to accelerating our efforts in 2021.

What’s New for the Coming Year?

We plan to deliver even more valuable content to our members, including:

• Fresh analysis concerning the most rapidly evolving technology sectors.
• Comprehensive surveys of leading investors regarding current trends within your industry.
• Detailed profiles of prominent companies, tracing their development from inception.
• A significantly expanded schedule of live programming.

Access to full Extra Crunch articles is exclusive to members.
Utilize discount code ECFriday for a 20% reduction on one- or two-year subscriptions.

Initially, Eric and I debated whether to publish this announcement. We both believe in demonstrating our value through our work rather than simply outlining future plans.

The core reason for our pride stems from the fact that individuals globally rely on the insights gained from Extra Crunch to establish and expand their businesses. This impact is substantial!

Thank you for your continued support of Extra Crunch. We wish you a pleasant weekend.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

The Pursuit of Profitability in the Ride-Hailing Industry

Prior to the onset of the pandemic, my personal usage involved approximately seven to eight ride-hailing trips monthly. Following the implementation of physical distancing measures in March 2020, aimed at mitigating the spread of the coronavirus, I have utilized hailed rides a total of exactly 10 times.

Individual experiences will naturally differ, however, both Uber and Lyft documented substantial revenue declines last year as travel was significantly curtailed due to stay-at-home orders.

Currently, Alex Wilhelm posits that these two transportation networks are projecting adjusted profitability to be achieved by the fourth quarter of 2021.

He meticulously analyzed the financial data to assess whether the promises made to investors are genuinely justifiable.

Given his typical focus isn't on publicly listed companies, I inquired about his rationale for concentrating on Uber and Lyft at this time.

His response was succinct: “Complete bewilderment.”

Alex elaborated, stating that the market has valued these companies as if they are achieving exceptional success, rather than strategically manipulating their financials to project future profitability.

He acknowledged the inherent irrationality of the stock market, characterizing this situation as particularly unusual.

A Closer Look at Investor Expectations

The discrepancy between market valuation and underlying financial performance raises questions about investor sentiment.

Are investors accurately assessing the long-term viability of the ride-hailing model, or are they driven by speculative factors?

This situation highlights the complexities of evaluating companies in rapidly evolving industries.

• Uber and Lyft faced significant challenges during the pandemic.
• Both companies are aiming for adjusted profitability by Q4 2021.
• Investor expectations appear to be disconnected from current financial realities.

The path to sustained profitability for ride-hailing companies remains uncertain.

Continued adaptation and innovation will be crucial for navigating the evolving transportation landscape.

Highlights from Techstars Boston, Chicago, and Workforce Accelerators – As Chosen by TechCrunch

The term "four-hander" in dramatic arts refers to a play specifically designed for a cast of four performers.

This concept is being adopted here to introduce a compilation of standout startups from Techstars accelerators, curated by Greg Kumparak, Natasha Mascarenhas, Alex Wilhelm, and Jonathan Shieber.

Each member of the team has individually chosen four promising companies from the Chicago, Boston, and Techstars Workplace Development programs.

The authors emphasize that these selections represent their personal preferences, encouraging readers to independently evaluate the startups.

They suggest that exploring these very early-stage ventures is always a worthwhile endeavor.

Startups Selected from Techstars Boston

• Details regarding the specific startups chosen from the Boston accelerator will be found in the original TechCrunch article.
• The team’s selections highlight innovative companies emerging from this program.
• Further research into these ventures is encouraged.
• These companies represent a diverse range of technological advancements.

Startups Selected from Techstars Chicago

The TechCrunch team also identified several noteworthy startups from the Techstars Chicago accelerator.

These companies were selected based on their potential for growth and disruption within their respective industries.

A comprehensive overview of these selections can be found within the source article.

Startups Selected from Techstars Workplace Development

Techstars Workplace Development also yielded a number of promising startups.

The chosen companies demonstrate innovation in the realm of workforce solutions.

Readers are directed to the original TechCrunch report for a detailed examination of these ventures.

The team’s collective insights provide a valuable snapshot of the current startup landscape.

Metromile’s Public Entry and the Rise of Insurtech: A Conversation with CEO Dan Preston

This week marked the commencement of public trading for Metromile, an innovative neoinsurance provider. The company achieved this milestone through a merger with a special purpose acquisition company (SPAC).

The SPAC Route to Public Markets

Metromile’s debut is anticipated to be among the numerous public offerings facilitated by SPACs in 2021. Alex conducted an interview with CEO Dan Preston to gain insights into the process and the lessons learned during this transition.

The Value Proposition of SPACs

A key observation from Preston’s perspective is that SPACs cater to a particular type of organization. Specifically, those companies that benefit from a more detailed narrative when entering the public market.

SPACs allow businesses to articulate their vision and long-term strategies more effectively than traditional initial public offerings (IPOs) might permit.

Understanding Neoinsurance

Metromile represents a new wave in the insurance industry, often referred to as neoinsurance. This sector leverages technology to offer more flexible and personalized insurance solutions.

• Traditional insurance models often rely on broad generalizations.
• Neoinsurance companies, like Metromile, utilize data and technology to tailor policies to individual needs.

The company’s approach focuses on pay-per-mile insurance, potentially offering significant savings for drivers who travel less frequently.

Looking Ahead

As the insurtech landscape continues to evolve, Metromile’s experience with a SPAC offers valuable insights. It highlights the growing importance of storytelling and transparency in attracting investors.

The company’s public debut signals a broader trend of innovation within the insurance industry, driven by technological advancements and a desire for more customer-centric solutions.

Investment in Adtech and Martech: A Focus on Privacy and Compliance

A recent analysis explored the perspectives of venture capital investors specializing in adtech and martech. The goal was to understand current investment trends and the state of deal activity amidst the ongoing pandemic.

Investor Insights

Anthony Ha, a Senior Writer, and Eric Eldon, Managing Editor of Extra Crunch, gathered insights from three prominent investors. Their expertise lies in identifying and funding innovative companies within the advertising and marketing technology sectors.

• Eric Franchi, a partner at MathCapital, shared his firm’s investment strategy.
• Scott Friend, partner at Bain Capital Ventures, provided his perspective on market opportunities.
• Christine Tsai, CEO and founding partner of 500 Startups, offered insights into early-stage investments.

The discussions centered on emerging opportunities, particularly those related to data privacy and regulatory compliance. These areas are increasingly important for companies operating in the digital advertising landscape.

Key Areas of Interest

Investors are actively seeking solutions that address the evolving challenges of user privacy. This includes technologies that enable privacy-preserving advertising and facilitate adherence to regulations like GDPR and CCPA.

Compliance with data protection laws is no longer optional; it’s a fundamental requirement for success. Consequently, startups offering robust compliance tools are attracting significant investor attention.

The pandemic's impact on deal flow was also a topic of discussion. While initial disruptions were observed, activity appears to be recovering as the market adapts to the new normal.

Martech solutions that help businesses navigate these changes and build trust with consumers are considered particularly valuable. This includes tools for data governance, consent management, and transparent advertising practices.

Commercializing Deep Tech Startups: A Founder and Investor Handbook

The path to securing initial revenue for deep tech startups presents a considerable challenge. Founders in this sector frequently encounter numerous obstacles before achieving their first sale.

A key question arises: how can a company be scaled effectively when it currently lacks income and anticipates a prolonged period without it? Determining the Total Addressable Market (TAM) for a novel product within an evolving market also proves difficult.

Unique Challenges for Deep Tech Entrepreneurs

Vin Lingathoti, a partner at Cambridge Innovation Capital, highlights the distinct difficulties faced by entrepreneurs in the deep tech arena regarding growth management and risk mitigation.

Founders who possess advanced degrees, such as Ph.D.s and postdocs, sometimes struggle to acknowledge their limitations, particularly in areas outside of their technical expertise. This can include functions like marketing, sales, and human resources.

These individuals may find it challenging to delegate or seek assistance in these crucial non-technical domains.

Successfully navigating these hurdles is essential for translating groundbreaking research into viable commercial ventures.

Understanding these specific challenges allows both founders and investors to better prepare for the long journey of commercializing deep technology.

Assessing the Valuation of Metromile and Oscar Health

The merger between auto insurance innovator Metromile and INSU Acquisition Corp. II, a special purpose acquisition company (SPAC), was finalized this week.

Simultaneously, Oscar Health, a health insurance provider, revealed its intentions to proceed with an initial public offering (IPO) just last Friday.

Considering the recent public offerings of neoinsurance companies like Lemonade and Root in 2020, a favorable environment exists for other companies within this sector, according to Alex.

His analysis indicated that these firms demonstrate a consistent ability to expand their customer base.

Customer acquisition appears to be a strength across the board.

Metromile's Valuation Considerations

The completion of the SPAC merger raises questions regarding how investors will determine Metromile’s worth.

Key metrics will likely include growth in insured vehicles and the retention rate of existing customers.

The company’s per-mile pricing model will also be a focal point for valuation analysis.

Oscar Health's IPO Prospects

Oscar Health’s planned IPO is being closely watched by investors.

Factors influencing its valuation will encompass membership growth, medical loss ratio, and the effectiveness of its technology platform.

The company’s focus on a tech-driven, consumer-centric approach to health insurance will be scrutinized.

Lessons from Lemonade and Root

The successful IPOs of Lemonade and Root in 2020 provide a benchmark for valuing Metromile and Oscar Health.

These earlier offerings demonstrated investor appetite for innovative insurance models.

However, it’s important to note that past performance doesn't necessarily predict future outcomes.

Key Takeaways

• Metromile has completed its merger with a SPAC.
• Oscar Health intends to launch an IPO.
• Recent neoinsurance IPOs suggest a receptive market.
• Customer growth is a common strength among these companies.

Navigating Global Talent Acquisition: Advice for Your Startup

A common challenge for growing companies involves securing skilled personnel, and expanding the recruitment focus internationally can be a strategic solution.

You're right to consider a more focused international recruiting strategy, particularly when facing difficulties filling key roles domestically.

Expanding Your Reach: Key Considerations

Attracting talent from overseas requires a multifaceted approach. It’s not simply about posting jobs on international boards.

Several factors must be addressed to ensure success in global recruitment.

• Visa Sponsorship: Be prepared to navigate the complexities of visa sponsorship. Understand the requirements for different countries and the associated timelines.
• Competitive Compensation: Research salary expectations in target countries. Adjust your offers to be competitive, factoring in cost of living differences.
• Relocation Assistance: Providing comprehensive relocation assistance is crucial. This includes help with housing, transportation, and settling-in services.
• Cultural Sensitivity: Demonstrate cultural awareness in your communication and recruitment processes.

Optimizing Your International Recruitment Process

A well-defined process is essential for efficient international hiring.

Consider these steps:

• Targeted Job Boards: Utilize job boards popular in your desired countries. LinkedIn is a good starting point, but explore local platforms as well.
• University Partnerships: Establish relationships with universities abroad. This can provide access to a pipeline of promising graduates.
• Remote Interviewing: Leverage video conferencing for initial interviews. This reduces travel costs and allows you to screen candidates efficiently.
• Legal Compliance: Ensure all recruitment practices comply with local labor laws in both your country and the candidate’s country of origin.

Addressing Potential Challenges

International recruiting isn’t without its hurdles.

Anticipate and prepare for:

• Time Zone Differences: Be mindful of time zone differences when scheduling interviews and communication.
• Language Barriers: Assess language proficiency requirements for each role.
• Cultural Differences in Communication: Recognize that communication styles may vary across cultures.
• Background Checks: Conduct thorough background checks, ensuring compliance with relevant regulations.

By proactively addressing these considerations, your startup can significantly improve its ability to attract and secure top international talent.

Investment Trends in the Creator Economy: Opportunities for Startups

Individuals generating popular content on platforms like TikTok, Substack, and YouTube are increasingly able to turn their passions into income streams.

A growing number of these successful content creators are evolving into established media figures.

They are building comprehensive production and distribution networks, which has led to the development of what investors are calling “the enterprise-level infrastructure for the creator economy.”

Consequently, venture capitalists are demonstrating increased support for startups focused on assisting these creators with monetization, content creation, performance analytics, and content dissemination.

Natasha Mascarenhas and Alex Wilhelm conducted interviews with five prominent VCs to gain insights into the opportunities they are currently observing within the 2021 landscape.

VC Insights on the Creator Economy

• Benjamin Grubbs, the founder of Next10 Ventures, shared his perspective.
• Li Jin, founder of Atelier Ventures, contributed her analysis.
• Brian O’Malley, a general partner at Forerunner Ventures, offered his insights.
• Eze Vidra, managing partner at Remagine Ventures, provided his viewpoint.
• Josh Constine, a principal at SignalFire, also participated in the discussions.

These investors are actively seeking opportunities to support the evolving needs of digital creators.

The focus is on building tools and services that empower creators to thrive in the expanding digital media ecosystem.

Is the Prevalence of SAFEs Masking Actual Seed Funding Levels?

Simple Agreements for Future Equity (SAFEs) are becoming a more common method for startups to secure funding rapidly. However, they produce a significantly reduced amount of associated documentation.

This disparity leads to a disconnect in perception. Investors are observing a thriving market, while those who depend on publicly available information, such as members of the press, are receiving a contrasting impression.

According to Alex Wilhelm, SAFEs have effectively concealed much of the public data related to seed-stage investments, and even smaller funding rounds.

The result is a less transparent view of early-stage venture capital activity.

The Impact of Reduced Paperwork

Traditional equity financing generates substantial documentation that is often publicly accessible. This includes filings and announcements that provide insight into deal sizes and valuations.

SAFEs, being streamlined agreements, bypass many of these requirements. Consequently, the overall volume of seed funding may appear lower than it actually is when relying solely on public sources.

Cognitive Dissonance in the Market

The difference between investor perception and publicly reported data creates a form of cognitive dissonance. Investors directly involved in deals are aware of the activity, while external observers may underestimate the level of investment.

This situation highlights the challenges of accurately tracking seed funding in the current landscape.

• SAFEs offer a quicker and simpler fundraising process.
• They reduce the amount of publicly available data.
• This can lead to an underestimation of seed funding activity.

Understanding the role of SAFEs is crucial for interpreting trends in the startup ecosystem. It’s important to consider that public data may not fully reflect the true extent of investment happening at the seed stage.

The Rise in Container Security Acquisitions Reflects a Rapid Cloud Transition

Prior to the onset of the pandemic, a significant number of large enterprises were already actively acquiring startups specializing in container security. However, recent reports from Ron Miller indicate that this trend has accelerated considerably.

As more organizations embrace a cloud-native approach, new security complexities are emerging. Ensuring the proper configuration and security of containers, which encapsulate microservices, presents a rapidly escalating challenge.

Addressing Security Capability Gaps

According to Yoav Leitersdorf, managing partner at YL Ventures, these acquisitions are strategically aimed at bolstering the security offerings of larger corporations.

Specifically, the purchases are designed to address deficiencies and expand the range of security capabilities available to these companies.

The shift towards cloud-native architectures necessitates robust container security measures.

• Containers require careful configuration to prevent vulnerabilities.
• Securing these environments can quickly become a complex undertaking.

The increasing demand for comprehensive security solutions is driving the surge in acquisitions within the container security startup landscape.

This trend highlights the critical importance of securing modern, cloud-based applications.

Growth Strategies and Future Outlooks of Two Companies Approaching $50 Million ARR

Alex Wilhelm initially began tracking startups achieving $100 million in Annual Recurring Revenue (ARR) in December 2019.

However, a year later, he adjusted his reporting strategy to a new focus.

His initial efforts largely identified companies poised for initial public offerings (IPOs).

Subsequently, Wilhelm refined his criteria. He is now examining companies with approximately $50 million in ARR, beginning with SimpleNexus, a provider of digital mortgage software, and PicsArt, a photo-editing service.

A New Series Focusing on Mid-Sized Growth

This represents the latest installment in a series dedicated to analyzing companies in the $50 million ARR range.

Further interviews and in-depth data analysis regarding other companies within this group are planned and will be released soon.

Readers are encouraged to follow for ongoing updates and insights.

• The series aims to provide a detailed look at companies before they reach the $100M ARR milestone.
• SimpleNexus and PicsArt serve as initial case studies.
• Future reports will cover additional companies with similar revenue levels.

Wilhelm’s work offers valuable perspectives on the growth trajectories of emerging technology businesses.

Is Bumble Targeting Match.com's Revenue Multiple with its Increased IPO Valuation?

Bumble, the dating application, originally proposed an IPO price between $28 and $30 per share. However, a revised range of $37 to $39 has emerged.

This adjustment has led to calculations suggesting a potential maximum valuation for Bumble between $7.4 billion and $7.8 billion, as determined by Alex.

An analysis was conducted, utilizing revenue data from the third quarter of 2020, to estimate the company’s current annual run rate.

The purpose of this assessment was to determine if the pricing is justified and to compare Bumble’s financial standing to that of its competitor, Match.

Evaluating Bumble's Financial Performance

The analysis focuses on understanding whether Bumble’s valuation aligns with its revenue generation capabilities.

Specifically, it seeks to ascertain if Bumble is striving to achieve a similar revenue multiple to that currently enjoyed by Match Group.

Determining the company’s run rate is crucial for assessing its current financial trajectory.

• The Q3 2020 revenue figures serve as the foundation for this calculation.
• This allows for a projection of the company’s potential annual revenue.

By comparing Bumble’s projected revenue to its valuation, a clearer picture emerges regarding its market positioning.

This comparison with Match provides valuable context for understanding Bumble’s growth potential and investment appeal.

Oscar Health's IPO Filing: A Test for Venture-Backed Insurance

A recent report, co-authored by Jon Shieber and Alex Wilhelm, examines Oscar Health’s filing for an initial public offering (IPO) submitted last week.

Despite reporting a membership base of 529,000 and a 59% compound annual growth rate, the company currently operates at a loss.

Analyzing Oscar Health’s Financial Performance

Shieber and Wilhelm undertook a detailed analysis of Oscar Health’s 2019 results and 2020 performance indicators.

This scrutiny aimed to provide a more comprehensive understanding of the company’s financial standing.

The analysis revealed that the enterprise is, in fact, deeply unprofitable.

Implications for the Venture Capital Model

The IPOs of both Oscar Health and Clover Medical, via a high-profile SPAC, will serve as crucial benchmarks.

These events will assess the venture capital industry’s confidence in its capacity to successfully challenge established healthcare businesses.

Venture capital's ability to disrupt the traditional healthcare landscape is now under examination.

• The success of these IPOs will indicate whether the venture-backed insurance model is viable.
• Investor response will be a key indicator of market acceptance.
• The performance of these companies will influence future investment decisions.

Ultimately, these IPOs represent a significant test of the venture capital approach to healthcare innovation.

SoftBank's Venture Capital Performance and the J-Curve

Editor Danny Crichton analyzed Softbank’s Vision Fund, revisiting a question posed in 2017 regarding the expected returns at a late investment stage.

The latest earnings report from Softbank reveals a significant return on their $680 million investment in DoorDash, which yielded $9 billion. This performance is comparatively strong when assessed against other venture funds.

Investment Portfolio Overview

However, Softbank has committed $66 billion to 74 companies that have not yet exited. The current valuation of these 74 holdings totals $65.2 billion.

This illustrates the typical J-curve associated with venture capital, where initial investments may not show immediate returns.

• The DoorDash success represents a notable win for the fund.
• The overall portfolio value suggests a period of growth is still underway.

Crichton’s analysis highlights the complexities of evaluating venture capital funds, particularly those making investments at a later stage.

Understanding the J-Curve

The J-curve is a common pattern in venture capital. It depicts a period of negative cash flow followed by substantial gains as portfolio companies mature and achieve exits.

Softbank’s situation demonstrates this pattern, with early investments requiring time to generate significant returns.