extra crunch roundup: selling saas to developers, cracking yc after 13 tries, all about expensify

Twilio's Growth Strategy: A Developer-First Approach

Prior to achieving a valuation near $56 billion and serving over 200,000 customers, the cloud-communications platform, Twilio, cultivated a unique growth strategy. This involved a deliberate focus on developers, bypassing conventional marketing methodologies.

Companies offering software directly to end-users typically rely on a growth model centered around discoverability, desirability, and ease of implementation – culminating in the pivotal “aha!” moment where a product seamlessly integrates into a user’s routine.

Why Traditional Marketing Fails with Developers

Evidence indicates that traditional marketing techniques are ineffective when targeting developers. This isn't due to an inherent resistance to sales pitches, but rather a preference for dependable and user-friendly tools.

Consequently, organizations aiming to develop and market software to developers on a large scale must abandon standard B2B strategies and engage with their audience on their own terms.

Immigration Law Insights from Sophie Alcorn

This week, our resident immigration law expert, Attorney Sophie Alcorn, contributed two insightful articles.

On Monday, she provided an analysis of a decision by the U.S. Department of Homeland Security not to terminate the International Entrepreneur Parole program. This program potentially enables founders from abroad to remain in the U.S. for up to 60 months.

Subsequently, on Wednesday, she addressed a query from an entrepreneur regarding the viability of sponsoring visas for employees currently working remotely within the United States.

Thank You & Weekend Wishes

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

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

Insights Gained from Thirteen Y Combinator Applications

Consider the dedication required to pursue a goal through thirteen unsuccessful attempts.

Alex Circei, the CEO and co-founder of Waydev, a Git analytics platform, experienced this firsthand, applying to Y Combinator thirteen times before finally receiving acceptance.

The accelerator program is highly selective, admitting approximately 5% of applicant startups annually.

Circei emphasizes that despite the intense competition, success is achievable. He believes the application process itself provides significant learning opportunities for any startup endeavor.

He recently shared four crucial lessons learned during his team’s repeated attempts to gain entry in an exclusive article for TechCrunch.

The initial lesson highlighted is the importance of prioritizing business value over personal preferences.

Lesson 1: Prioritize Business Value

Founders often become attached to their initial ideas. However, Circei advises entrepreneurs to objectively assess market demand and potential profitability.

Focusing on what customers truly need, rather than what founders *want* to build, is paramount.

Lesson 2: Demonstrate Traction

Simply having a compelling idea isn't enough. Y Combinator seeks startups that have already demonstrated some level of traction.

This could include early user adoption, revenue generation, or significant customer engagement.

Show, don’t just tell, that there’s a market for your product.

Lesson 3: Focus on a Small Market

Attempting to tackle a massive market initially can be overwhelming. Circei suggests concentrating on a smaller, more defined niche.

Dominating a specific segment can provide a strong foundation for future expansion.

A focused approach allows for more effective resource allocation and faster iteration.

Lesson 4: Iterate Based on Feedback

The Y Combinator application process provides valuable feedback, even in rejection. Circei stresses the importance of actively seeking and incorporating this feedback.

Each application should be an improvement over the last, reflecting lessons learned from previous attempts.

Continuous iteration is key to refining your pitch and demonstrating progress.

The Expensify EC-1

TechCrunch Daily Reporter Anna Heim conducted interviews with Expensify executives in March to gain insights into the company’s background and operational procedures.

Subsequently, their availability shifted unexpectedly.

Confirmation of our initial assessment regarding this altered responsiveness arrived on May 3rd, when the expense report management firm submitted a confidential initial public offering (IPO) filing.

Given its founding team’s predominantly peer-to-peer (P2P) hacking background, it’s understandable that Expensify deviates from conventional corporate structures.

Founder and CEO David Barrett stated, “Our recruitment process is markedly different, and our internal organizational structure is quite unconventional.”

He further elaborated that the company’s business model is also unique, notably lacking a dedicated sales force.

Analogous to the Form S-1 filing required of companies detailing their operations and capital allocation plans, TechCrunch EC-1s serve as both a historical account and an in-depth analysis.

The first installment of our Expensify series was released on Monday:

• “How a band of P2P hackers planted the seeds of a unique expense management giant” (2,400 words/10 minutes) — This article delves into the founders’ early experiences with Red Swoosh, a P2P content distribution startup predating Travis Kalanick’s involvement with Uber, and how those experiences shaped Expensify’s evolution.

Further articles from Anna’s series on Expensify will be published in the weeks ahead, so please check back for updates.

We anticipate providing continued coverage of this developing story.

Procore's Potential IPO and Renewed Activity in the Public Offering Market

Construction technology company Procore Technologies, valued as a unicorn, has announced a price range for its anticipated initial public offering (IPO). This development follows the company’s original filing for an IPO in February 2020, which was subsequently postponed due to the onset of the COVID-19 pandemic.

Previous IPO Attempts and Market Conditions

Procore revisited its IPO plans in March 2021, but encountered a weakening IPO market. Further filings, including S-1/A amendments in April and early May, were submitted. The current filing represents the first instance where a specific price has been established for the Carpinteria, California-based software firm.

Kaltura's Resumption of IPO Plans

Procore isn't alone in reviving previously paused IPO ambitions. Kaltura, a company specializing in video distribution software, has also successfully restarted its IPO process. This raises the question of whether the IPO market is experiencing a resurgence in activity.

Signs of a Potential Reacceleration

The renewed efforts of both Procore and Kaltura suggest a possible reacceleration within the IPO market. It indicates that companies are becoming more confident in their ability to successfully launch public offerings.

Procore’s move to set a price range is a significant indicator. The company is aiming to nearly double its private valuation with this offering.

The timing of these developments is noteworthy, as it coincides with improving market conditions. This could encourage other companies to reconsider their own IPO plans.

Essential Guidelines for Health Technology Innovators

Dr. Bobbie Kumar, a practicing family physician, outlines crucial principles for guiding the development of successful healthcare products, services, and innovations.

The Core Principle of Value

Simply creating a novel instrument for use within healthcare isn't sufficient, according to Dr. Kumar. While a new tool might possess a function, it must demonstrably fulfill a requirement or resolve an issue.

This resolution should lead to quantifiable improvements in patient results. Fundamentally, the question to ask is: does the innovation provide genuine value?

Understanding the Need

Before investing in development, a thorough assessment of the existing landscape is vital. Is there a genuine gap in current healthcare practices?

Does the proposed solution offer a significant advantage over existing methods? Identifying a clear, unmet need is paramount to success.

Measurable Outcome Improvement

The impact of any health technology must be demonstrable. Vague promises of improvement are insufficient.

Measurable outcomes, such as reduced hospital readmission rates or improved patient adherence to treatment plans, are essential for validating the innovation's worth.

Focusing on tangible results ensures the technology is not only innovative but also genuinely beneficial to the healthcare system and, most importantly, to patients.

Understanding the International Entrepreneur Parole Program

Dear Sophie, a query regarding the International Entrepreneur Parole program has been received.

The founder of a two-year-old fintech startup, currently based in Johannesburg, expresses a desire to relocate to San Francisco.

This move is motivated by the proximity to their primary investor, and they are inquiring about the reinstated program and its application process.

What is International Entrepreneur Parole?

The International Entrepreneur Parole program allows qualifying foreign entrepreneurs to temporarily reside in the United States.

It’s designed to facilitate business growth and innovation within the country, offering a pathway for founders to scale their ventures.

Essentially, it provides a period of authorized stay for entrepreneurs whose startups have the potential to significantly contribute to the U.S. economy.

Eligibility Requirements

To be eligible, applicants must demonstrate a substantial ownership stake in a U.S. startup.

The startup must also have received, or be reasonably assured of receiving, significant investment capital.

Furthermore, the business plan needs to showcase a clear potential for economic benefit to the United States.

The Application Process

The application process involves submitting Form I-589, Application for Asylum and for Withholding of Removal.

Supporting documentation, including a detailed business plan, evidence of funding, and proof of ownership, is crucial.

Applicants should also be prepared to demonstrate the potential for job creation and economic growth.

Key Considerations

It’s important to note that parole is not a guarantee of future immigration benefits.

Successful applicants are granted a period of authorized stay, typically up to three years, which can be renewed.

However, obtaining a long-term visa or green card requires a separate application and meeting additional criteria.

Resources for Further Information

Detailed information about the International Entrepreneur Parole program can be found on the U.S. Citizenship and Immigration Services (USCIS) website.

Consulting with an experienced immigration attorney is highly recommended to navigate the complexities of the application process.

A Deep Dive into Better.com’s Significant SPAC Deal

Many individuals may have encountered the name Better.com without fully understanding its operations. The realm of mortgage technology is often niche, akin to the process of applying to preschool – relevant to a focused group during a specific timeframe.

This industry, while crucial for those involved, frequently remains outside the general public’s awareness.

Better.com, a digital mortgage lender supported by venture capital, revealed this week its plans to merge with a Special Purpose Acquisition Company (SPAC). This move will result in the company becoming publicly traded in the latter part of 2021.

The announcement from this unicorn arrives as the U.S. initial public offering (IPO) market demonstrates renewed activity following a quieter period in April.

Understanding the Significance

The decision to go public via a SPAC represents a notable event for Better.com. It allows the company to access public markets without undergoing the traditional IPO process.

This method has gained popularity recently, offering an alternative route for private companies to achieve a public listing.

What Does Better.com Do?

Better.com focuses on streamlining the mortgage application process through a fully digital platform. They aim to provide a faster and more transparent experience for homebuyers.

The company utilizes technology to automate many aspects of the mortgage process, potentially reducing costs and processing times.

• Digital Application: Homebuyers can complete the entire application online.
• Automated Underwriting: Technology assists in evaluating loan applications.
• Faster Closing Times: The streamlined process aims for quicker loan approvals and closings.

The company’s business model centers around leveraging technology to disrupt the traditional mortgage industry.

This approach seeks to address common pain points experienced by borrowers, such as lengthy paperwork and opaque processes.

The SPAC Route and Market Conditions

SPACs, also known as “blank check companies,” raise capital through an IPO with the intention of acquiring an existing private company.

This allows the private company to become publicly listed more quickly than a traditional IPO. The recent resurgence in IPO activity suggests a favorable environment for companies like Better.com to enter the public market.

The Evolving Workplace: A Post-Pandemic Shift

As technology companies initiate the process of reopening their offices, the conventional work environment is poised for significant alterations.

The widespread adoption of remote work, necessitated by the pandemic, has fundamentally reshaped perspectives on work itself.

Although certain businesses are gradually resuming in-office operations, influenced by geographical location and industry specifics, a substantial portion of information workers continue to operate from their homes.

Factors Driving the Change

This situation is anticipated to evolve further as vaccination rates increase and infection rates decline across the United States.

Numerous organizations have observed that employee productivity remains consistent, even within a remote work setting.

Furthermore, some employees now prioritize avoiding the challenges of commuting – congested roadways and crowded public transit – having experienced the benefits of remote work.

Challenges and Preferences

Conversely, other employees have encountered difficulties adapting to remote work, struggling with limited space or frequent domestic interruptions.

These individuals may express a strong desire to return to a traditional office environment.

A Hybrid Future

Considering these contrasting experiences, it appears likely that a complete reversion to the pre-pandemic model of five-day-a-week office commuting is improbable for many companies.

A hybrid approach, blending remote and in-office work, seems increasingly probable as organizations navigate the future of work.

The Significance of Public Offering Pathways for Unicorn Companies

A recent discussion on TechCrunch’s Equity podcast featured Yext CFO Steve Cakebread and Latch CFO Garth Mitchell. They explored the optimal timing for companies to become publicly traded, alongside the advantages and disadvantages inherent in the process.

The conversation highlighted the varying approaches to going public, with Yext having completed a traditional IPO and Latch utilizing a special-purpose acquisition company (SPAC) merger.

The two CFOs offered valuable insights into the considerations surrounding delayed public offerings and the circumstances where different debut strategies prove most effective.

Despite past scrutiny from the TechCrunch team regarding certain SPAC deals, both executives contended that these transactions can represent a viable path to public markets.

The Case for Earlier IPOs

Steve Cakebread’s recently published book formed a key foundation for the discussion. It proposes that initiating a public offering sooner rather than later benefits a company’s internal functionality.

Furthermore, the book suggests that an earlier IPO allows the broader public an opportunity to share in a company’s growth and achievements.

In the current environment of highly competitive private markets and inflated public valuations, Cakebread’s perspective warrants careful evaluation.

Key Takeaways from the Discussion

• The timing of a public offering is a critical strategic decision.
• Both traditional IPOs and SPAC mergers can be appropriate depending on the company’s specific situation.
• Going public earlier can positively impact internal operations.
• Public markets should have access to participate in a company’s success.

The insights shared by Cakebread and Mitchell provide a nuanced understanding of the complexities involved in navigating the path to becoming a publicly traded company.

This discussion underscores the importance of carefully weighing the costs and benefits of each option to determine the most suitable route for long-term success.

Source: https://techcrunch.com/2021/05/12/for-unicorns-how-much-does-the-route-to-going-public-really-matter/

Understanding the Role of SDK Integrations for Developers

Ken Harlan, CEO and founder of Mobile Fuse, explores the advantages and disadvantages associated with utilizing software development kits (SDKs).

Harlan points out that discussions within the digital media sector frequently center on the substantial influence wielded by major corporations such as Google and Facebook.

The typical emphasis is placed on the extensive data collections and broad audience access these companies possess.

However, Harlan argues that there are underlying factors contributing to the strong hold these companies maintain over both application developers and publishers.

The Significance of SDKs

Specifically, SDK integrations represent a key element in establishing and reinforcing the significant position of these large technology companies.

These integrations are not merely about functionality; they are fundamental to the power dynamic within the industry.

The reliance on SDKs creates a level of dependence that extends beyond simple convenience.

• SDKs provide essential tools and features for app development.
• They streamline the integration of various services.
• However, they also introduce potential control by the SDK provider.

This dependence can impact developers’ autonomy and publishers’ control over their own platforms.

Understanding the implications of SDK integrations is therefore crucial for anyone operating within the digital media landscape.

The Value of Low-Code and No-Code Platforms

Following Appian’s first-quarter earnings report, The Exchange spoke with CEO Matt Calkins regarding the low-code market and current customer feedback. A compilation of recent venture capital investments in low-code and no-code companies has been assembled to support the broader discussion.

Growing Investment in the Space

The rate of venture capital funding directed toward companies specializing in these two categories is notably accelerating. This suggests strong collective performance within the low-code and no-code sectors.

Recent market conditions demonstrate that securing funding isn't universally easy for startups, despite the overall strength of the private capital market. However, the consistent investment in low-code and no-code indicates their perceived value.

Understanding the Current Landscape

• Low-code development platforms enable faster application creation with minimal hand-coding.
• No-code platforms allow even non-technical users to build applications through visual interfaces.
• Increased venture capital investment signals confidence in the future of these technologies.

The observed trend implies that these platforms are proving successful and meeting a significant market need. This is further reinforced by the willingness of investors to allocate substantial capital to companies operating within this space.

Matt Calkins’ insights, combined with the funding data, paint a picture of a thriving and rapidly evolving market. The demand for quicker, more accessible application development is clearly driving growth in both low-code and no-code solutions.

Bird’s SPAC Filing Reveals Challenges with the Scooter Business Model

An examination of Bird’s SPAC filing indicates that the scooter business has faced significant hurdles. The documentation suggests that Bird struggled to establish a viable business model, particularly as evidenced by its financial performance.

The company’s 2019 and 2020 results, as detailed in the filings, portray a business burdened by substantial costs and unable to generate profitable revenue.

Bird experienced negative gross profit during both of those full-year periods, suggesting its initial approach was ultimately unsuccessful in the marketplace.

Root Causes of Unprofitability

The source of Bird’s considerable losses and unprofitable revenue streams can be traced to deeply flawed unit economics.

These economic factors were, in essence, remarkably detrimental to the company’s financial health.

The company’s financial data demonstrates a pattern of unsustainable costs relative to the income generated from its scooter operations.

Dear Sophie: Evaluating the Feasibility of Visa Sponsorship for Remote Immigrant Workers

Dear Sophie,

Our company is experiencing a period of significant growth and is actively recruiting new personnel. Currently, all team members operate on a fully remote basis.

This remote work model is anticipated to persist indefinitely, even following the conclusion of the pandemic. We are exploring the possibility of hiring candidates residing outside of the United States for several open roles.

A key question arises regarding the practicality of providing visa sponsorship to enable these individuals to work remotely while physically located within the U.S.

— Selective in Silicon Valley

Considering Visa Sponsorship for Remote Employment

The inquiry from "Selective in Silicon Valley" highlights a growing trend among companies embracing remote workforces. Sponsoring a visa for a remote worker presents unique challenges and requires careful consideration.

Generally, U.S. work visas are tied to a specific job location. This means the visa petition must demonstrate a legitimate need for the employee to work at that designated location.

However, with a fully remote setup, establishing this connection can be complex. Immigration authorities may scrutinize whether the remote arrangement is a genuine business necessity or simply a way to circumvent location requirements.

Potential Visa Options and Their Limitations

Several visa categories could potentially be utilized, but each has its own limitations in the context of remote work:

• H-1B Visa: Typically used for specialty occupations requiring theoretical or technical expertise. Demonstrating a need for the employee to be physically present, even remotely within the U.S., is crucial.
• L-1 Visa: For intracompany transferees. This requires the employee to have worked for a related company abroad for at least one year prior to the transfer.
• TN Visa: Available to citizens of Canada and Mexico in certain professions. Similar location requirements apply.

Successfully navigating these visa options for remote workers necessitates a strong legal justification and meticulous documentation.

Key Considerations Before Proceeding

Before pursuing visa sponsorship, several factors should be evaluated:

• Legal Counsel: Engage experienced immigration attorneys to assess the viability of sponsorship based on the specific role and the candidate’s circumstances.
• Compliance: Ensure full compliance with all U.S. immigration laws and regulations.
• Tax Implications: Understand the tax implications for both the company and the employee.
• Remote Work Policies: Develop clear and comprehensive remote work policies that address immigration-related issues.

Careful planning and expert guidance are essential to mitigate risks and ensure a smooth visa application process.

A Successful Go-to-Market Strategy: The Hamburger Model

Caryn Marooney, a general partner at Coatue Management, and investor David Cahn emphasize that we currently operate in an era defined by product-led growth.

In this landscape, the engineering team and the software they create represent the most significant competitive advantage.

Customer satisfaction with a product is a key indicator of success; positive reception signals progress, while a lack of enthusiasm suggests a need for reassessment.

Even companies thriving on product-led growth will eventually encounter limitations.

Regardless of product quality, expanding the customer base and scaling from a startup to a company generating over $1 billion in revenue requires a strategic shift.

This is where the hamburger model comes into play, offering a framework for sustained growth.

Understanding the Hamburger Model

The analogy to a hamburger illustrates the essential components of an effective go-to-market (GTM) strategy for startups.

Each layer plays a crucial role in building a comprehensive and scalable approach.

• The bottom bun: Represents a bottom-up GTM strategy.
• The burger: Symbolizes the core product itself.
• The top bun: Represents enterprise sales efforts.

Successfully integrating these three elements is vital for long-term success.

The Rise of Subscription Models and the Challenges of Billing & Cash Flow

The prevalence of software subscriptions is rapidly increasing across numerous industries. This shift in business models, while appealing, introduces specific challenges for companies.

Key Obstacles in Subscription-Based Businesses

According to Krish Subramanian, co-founder and CEO of Chargebee, two primary difficulties consistently arise. These issues impact businesses irrespective of their scale or maturity.

• Customer Acquisition & Retention: A continuous effort is required to secure long-term commitments from customers. Persuading users to subscribe and remain subscribed is a constant undertaking.
• Managing the Funding Gap: Businesses often face a financial disparity between the moment a customer commits to a subscription and the actual receipt of payment.

Addressing Payment Challenges

Subramanian highlights that securing consistent, ongoing payments is a fundamental concern. This necessitates robust and reliable billing systems.

The challenge lies in bridging the financial gap that exists when customers initially subscribe. Companies must effectively manage their finances during this period before revenue is collected.

Successfully navigating these hurdles is crucial for the sustained growth and profitability of subscription-based businesses.

The Unspoken Principles of Venture Capital

Scott Lenet, president of Touchdown Ventures, poses a critical question for those involved in venture capital transactions: how should professionals navigate situations where counterparties seek to alter agreed-upon terms?

He specifically inquires about the appropriate boundaries – determining when modifications are acceptable and when resolute adherence to the original agreement is necessary.

The Value of Relationships Over Rigid Contracts

A fundamental understanding for both entrepreneurs and investors is that the true worth of a contract lies not in its legal standing, but in the sustained relationship management that ensures continued alignment among all involved parties.

The pursuit of legal enforcement is remarkably rare within the startup ecosystem. In fact, it’s often viewed as a counterproductive strategy.

Communication as the Primary Solution

Based on extensive experience, Lenet emphasizes that proactive and transparent communication represents the most dependable and effective approach to resolving disagreements.

Effective communication is, in his view, the cornerstone of successful venture capital dealings.

Rather than relying on the threat of legal action, fostering open dialogue and mutual understanding is paramount.

Maximizing Marketing Effectiveness for Startups with Limited Resources

The landscape of marketing is filled with numerous techniques, channels, and solutions, encompassing areas like search engine optimization, public relations, paid advertising, email marketing, and social media.

Dominik Angerer, CEO and co-founder of Storyblok, points out that this abundance can be overwhelming, particularly for startups operating with constrained time and financial resources.

Consequently, establishing and implementing a lasting marketing strategy often appears as a significant challenge.

The Power of Narrative in Startup Marketing

The extensive array of choices frequently complicates the process of identifying a successful strategy.

Angerer suggests that this complexity often overshadows a fundamental truth: a startup’s most valuable marketing tool is its unique story.

Building a Sustainable Marketing Approach

Startups often struggle with defining and executing marketing campaigns due to the sheer volume of available options.

A focus on crafting and sharing a compelling narrative can provide a clear and effective path forward.

This approach allows startups to leverage their inherent strengths and connect with their target audience on a deeper level.