Extra Crunch Roundup: VC Insights, CockroachDB & Stock Options

The Resilience Behind Cockroach Labs

The remarkable endurance of ants and camels served as inspiration when naming a startup specializing in open-source, cloud-based distributed database architecture. Consequently, “Cockroach Labs” emerged as the fitting choice.

Innovation within database technology often faces resistance, given its status as core infrastructure. For instance, Oracle Database debuted in 1979, while MySQL wasn't launched until 1995.

In the six years since its introduction, CockroachDB has evolved into a significant database competitor, now valued at $2 billion. Enterprise reporter Bob Reselman explored the company’s origins through a comprehensive four-part series.

Series Breakdown

• Part 1: Details the company’s beginnings, tracing back to the development of GIMP and contributions to Google’s infrastructure.
• Part 2: Provides a technical analysis of CockroachDB’s unique features, with a particular emphasis on geographical considerations and data storage methodologies.
• Part 3: Examines CockroachDB’s approach to developer engagement and its strategic shift towards cloud-based solutions.
• Part 4: Assesses the competitive environment and potential future pathways for the company.

Access to the complete Extra Crunch articles requires a membership. A 20% discount is available on one- or two-year subscriptions using the code ECFriday.

Insights into Startup Growth Marketing

The search for top startup growth marketers continues to yield valuable insights. Reporter Anna Heim interviewed Lucy Heskins, a SaaS and early-stage marketing consultant, to identify common mistakes made by startups before seeking her expertise.

Heskins highlighted that a frequent error is “hiring a marketer prematurely.” She often encounters startups believing they’ve achieved product-market fit when, in reality, they are far from it.

Heskins shared strategies from her playbook, advocating for aligning content marketing with the overall customer experience, rather than solely focusing on search engine rankings.

Due to the wealth of strategic advice for startups yet to make a marketing hire, this conversation has been made available on TechCrunch.

Recommendations for skilled growth marketers are welcome via this brief survey.

Thank you for your time.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

Essential Steps for Managing Your Stock Options

You've successfully become part of a startup team and have been granted Incentive Stock Options (ISOs)! This signifies ownership in the company, presenting a potentially significant future financial benefit.

Several key details require your attention. Are you familiar with the company’s 409A valuation? Do you know your specific strike price? Understanding the preferred share price and the type of options granted is also crucial.

If these terms are unfamiliar, you’re not alone.

The intricacies of stock options, particularly concerning federal tax implications, can be complex, especially for those new to equity compensation.

Recently, Vieje Piauwasdy, Director of Equity Strategy at Secfi, provided insights on this topic to Extra Crunch readers.

Piauwasdy acknowledges that confusion surrounding equity is common, and many recipients haven’t fully considered its implications.

Understanding Key Terms

It’s vital to grasp the meaning of several core concepts. The 409A valuation establishes the fair market value of the company’s stock.

Your strike price is the price you’ll pay per share when exercising your options. The preferred share price represents the value assigned to shares held by investors.

Knowing the type of options you received – whether they are ISOs or Non-Qualified Stock Options (NSOs) – is also essential, as it impacts tax treatment.

Three Important Actions to Take

• Familiarize Yourself with the Details: Obtain and review all documentation related to your stock option grant.
• Understand the Tax Implications: ISOs and NSOs are taxed differently. Seek professional advice to understand your potential tax liabilities.
• Plan for Exercise and Sale: Consider when and how you might exercise your options and eventually sell the shares.

Proactive management of your stock options is key to maximizing their potential value.

Ignoring these details could lead to unexpected tax burdens or missed opportunities.

The Future Trajectory of Suptech

Initially, it’s important to define what suptech actually encompasses.

As detailed in a recent guest contribution, Marc Gilman, General Counsel and VP of Compliance at Theta Lake, explains that “supervisory technology, or suptech,” is a term that has arisen to describe technologies specifically designed to aid in regulatory supervision.

Widespread Regulatory Adoption

Gilman points out that engagement with suptech is now commonplace among financial services regulators globally.

“Nearly all financial services regulators are currently involved in some form of suptech initiative,” he observes.

Key Areas of Suptech Focus

To provide a foundational understanding, Gilman highlighted three primary areas where suptech is being actively implemented.

• Regulatory Reporting: Streamlining and automating the process of submitting required reports.
• Machine-Readable Regulation: Transforming regulatory rules into a format that can be directly processed by computers.
• Market and Conduct Oversight: Utilizing technology to monitor market activity and ensure adherence to conduct standards.

These areas represent the core of current suptech development and deployment.

Rahul Vohra of Superhuman Details Product Optimization Strategies for Sustainable Expansion

Rahul Vohra, the co-founder and CEO of Superhuman, recently presented at TechCrunch Early Stage. He offered a detailed examination of the methods his team employed to optimize and improve their product in its initial phases.

The goal was to develop a form of “growth hacking” that would not only facilitate user acquisition but also prioritize excellent service and user retention.

A Framework for Entrepreneurs

Vohra presented a systematic approach. This framework is designed to be adaptable for entrepreneurs across diverse industries and areas of specialization.

The core principle involves continuous refinement based on user needs and feedback. It’s about building a product that genuinely solves problems for its target audience.

• Focus on Core Value: Identify the single most important benefit your product provides.
• Iterative Improvement: Constantly seek feedback and make small, incremental changes.
• Retention as Key: Prioritize keeping existing users happy over solely acquiring new ones.

Vohra emphasized that understanding the “jobs to be done” by your customers is paramount. This means identifying the underlying motivations and goals that drive their product usage.

He also highlighted the importance of qualitative research, such as user interviews, in gaining deeper insights. Quantitative data alone can be misleading without context.

Beyond Initial Growth Hacking

Traditional growth hacking often focuses on rapid, short-term gains. Vohra’s approach differs by emphasizing long-term sustainability.

He argues that a product built on a solid foundation of user value will naturally attract and retain customers. This reduces the need for aggressive, potentially unsustainable marketing tactics.

User experience is central to this philosophy. A seamless and enjoyable experience fosters loyalty and encourages word-of-mouth referrals.

Ultimately, Vohra’s message is about building a product that people love to use. This, he believes, is the most reliable path to lasting growth.

EB-1A Extraordinary Ability Green Card: A Detailed Overview

Dear Bashful in Berkeley,

Your colleague’s suggestion to explore the EB-1A extraordinary ability green card is a valid one, even without prestigious accolades like a Nobel Prize. It’s a common misconception that this visa category is reserved solely for globally renowned figures.

Understanding the EB-1A Visa

The EB-1A visa is designed for individuals who possess exceptional talent in the sciences, arts, education, business, or athletics. It allows qualified applicants to self-petition for a green card, meaning you don't require a job offer or employer sponsorship.

The key is demonstrating sustained national or international acclaim and the recognition of your achievements within your field. This is evaluated through a comprehensive review of evidence.

Criteria for Establishing Extraordinary Ability

USCIS assesses your eligibility based on a point system and substantial evidence. You must demonstrate that you have risen to the very top of your field.

Here are some of the categories considered:

• Receipt of major awards or prizes: While a Nobel Prize is significant, numerous other prestigious awards can qualify.
• Membership in associations requiring outstanding achievement: Selection to highly selective professional organizations is a positive indicator.
• Published material about you in professional or major trade publications: Significant media coverage demonstrating your expertise is valuable.
• Participation in judging the work of others: Being asked to evaluate the work of your peers demonstrates recognition.
• Original scientific or scholarly research contributions: Publications and citations are crucial for STEM fields.
• Authorship of scholarly books or articles: Demonstrates expertise and contribution to your field.
• Recognition for achievements in your field: Letters of support from experts are essential.
• High salary or remuneration: Compensation significantly above the average in your field can be considered.
• Commercial success in the performing arts: Relevant for artists and performers.

STEM OPT and the EB-1A

Your current status on STEM OPT following an unsuccessful H-1B lottery doesn’t preclude you from pursuing the EB-1A. In fact, it provides a pathway to remain in the U.S. while your application is pending.

It’s important to begin gathering evidence and potentially consult with an experienced immigration attorney to assess your chances of success. A strong case requires careful preparation and presentation.

Successfully obtaining an EB-1A green card can provide a stable and long-term immigration solution, independent of employer sponsorship or annual visa lotteries.

India Set to Achieve Unprecedented VC Funding as Unicorns Prepare for Key IPOs

Alex Wilhelm and Anna Heim recently focused their analysis on India in the latest edition of The Exchange. Their discussion highlighted India as a prime illustration of the increasing global trend of substantial venture capital investments.

The total venture capital funding received by India through the first part of 2021 has almost equaled the entire amount from 2020. Current projections indicate a potential record-breaking year for funding.

However, as the third quarter commenced, a potentially more significant development emerged: increased liquidity within the public markets.

Wilhelm and Heim examined recent venture capital outcomes and assessed the implications of Zomato’s initial public offering (IPO) for the country’s forthcoming IPOs.

Analysis of India’s Startup Market

Their report provides a detailed analysis of this rapidly expanding startup ecosystem. It explores the factors driving growth and the opportunities available to investors.

The flotation of Zomato is considered a pivotal event. It signals a potential wave of IPOs from other Indian unicorns.

This increased public market activity is expected to further fuel the growth of the Indian startup landscape.

• Record Funding: India is on track to surpass previous venture capital funding records.
• IPO Pipeline: Zomato’s IPO has opened the door for other unicorns to go public.
• Market Liquidity: Increased liquidity in public markets is a key driver of growth.

The analysis offers valuable insights into the dynamics of the Indian startup market. It is essential reading for anyone involved in venture capital or the technology sector.

Successfully Managing Employee Relations During an Acquisition

As COVID-19 vaccination rates rise and global economies begin to recover, two significant patterns are emerging.

Mergers and acquisitions saw a surge exceeding 150% year-over-year in the first six months of 2021, reaching a total of $2.4 trillion. Simultaneously, numerous polls indicate a strong desire among employees to explore new job opportunities.

For startups considering an exit strategy, the potential for financial gain alone may prove insufficient to hold onto employees experiencing exhaustion or discontent.

A lack of previous leadership experience is common among founders, and the inherent ambiguity of an acquisition presents a challenging environment for learning through experience. Therefore, the following communication approaches can be instrumental in preserving your high-performing team.

Key Communication Strategies

Transparency is paramount during times of change. Employees need to understand the rationale behind the acquisition and what it means for their future.

Open dialogue should be encouraged. Create safe spaces for employees to voice concerns and ask questions without fear of retribution.

Address anxieties directly. Common worries include job security, changes to benefits, and shifts in company culture. Provide clear and honest answers.

Focus on the Benefits

Highlight the positive aspects of the acquisition. This could include increased resources, expanded market reach, or opportunities for professional growth.

Emphasize how the acquisition will benefit employees specifically. Will there be new career paths available? Will compensation packages improve?

Showcase the acquiring company’s commitment to retaining talent. Demonstrate that employees are valued and that their contributions will be recognized.

Maintain Consistent Communication

Don't let communication lapse after the initial announcement. Regular updates are crucial to keep employees informed and engaged.

Utilize multiple communication channels, such as all-hands meetings, email newsletters, and one-on-one conversations.

Be proactive in addressing rumors and misinformation. Swiftly correct inaccuracies to prevent unnecessary anxiety.

Acknowledge and Validate Feelings

Understand that employees may experience a range of emotions, including sadness, fear, and uncertainty.

Acknowledge these feelings and validate their concerns. Empathy is essential for building trust and maintaining morale.

Offer support resources, such as counseling services or employee assistance programs, to help employees cope with the transition.

The Importance of Leadership

Founders and leaders must be visible and accessible throughout the acquisition process.

Strong leadership provides a sense of stability and reassurance during times of upheaval.

Demonstrate a commitment to the well-being of employees and a genuine desire to make the acquisition a success for everyone involved.

Doug Landis of Emergence Capital on Crafting a Compelling Startup Narrative

Beyond simply presenting data and figures, how can a startup effectively communicate its value proposition? Doug Landis posits that the key lies in storytelling. This concept, frequently discussed within Silicon Valley, holds genuine potential for differentiating a startup from its competitors during the pitch process.

Landis participated in the TechCrunch Early Stage: Marketing and Fundraising event, delivering a presentation focused on the importance of narrative construction for startups.

He began by tracing the roots of storytelling far back in human history, noting that, “For 400,000 years, humans have gathered to share accounts of their experiences – their hunts, their daily lives, and even their failures.”

The Power of Narrative in Startup Pitches

A compelling story isn’t merely embellishment; it’s a crucial component of a successful pitch. Investors aren’t solely interested in financial projections.

They seek to understand the underlying problem a startup is solving and the journey the founders have undertaken.

Landis emphasizes that a strong narrative should resonate emotionally with the audience.

Key Elements of a Startup Story

• Problem: Clearly articulate the pain point your startup addresses.
• Solution: Explain how your product or service alleviates this problem.
• Journey: Detail the challenges overcome and lessons learned.
• Vision: Paint a picture of the future your startup is building.

Focusing on these elements allows founders to move beyond a recitation of features and benefits.

Instead, they can create a connection with investors based on shared understanding and belief in the startup’s potential.

Why Storytelling Matters to Investors

Investors receive countless pitch decks, many of which present similar data. A well-crafted story helps a startup cut through the noise.

It demonstrates the founders’ passion, vision, and ability to connect with their target market.

Ultimately, storytelling isn’t about deception; it’s about effectively communicating the value and potential of a startup in a memorable and impactful way.

Adina Tecklu of Khosla Ventures Shares Pitching Expertise

The TechCrunch Early Stage 2021 event, concentrating on Marketing and Fundraising, began with an in-depth exploration of effective pitching strategies and slide deck optimization. Leading the discussion was Adina Tecklu, currently a Principal at Khosla Ventures, and previously responsible for establishing Canaan Beta, the consumer seed-stage initiative at Canaan Partners.

Key Elements of a Successful Pitch

Our conversation centered around crucial aspects of securing investment. These included understanding your audience – in this case, potential investors – and crafting a compelling narrative. We also examined standard slide inclusions, the role of appendix slides, and best practices for formatting.

Furthermore, we analyzed various pitch deck formats, identifying those that prove most effective and those that should be avoided.

Understanding Your Investor

• Knowing your customer extends to understanding the investor’s portfolio and investment thesis.
• Researching their previous investments demonstrates due diligence.
• Tailoring your pitch to align with their interests significantly increases your chances of success.

The Power of Storytelling

A strong narrative is paramount. Investors aren’t simply evaluating a business plan; they are evaluating the team’s ability to execute and the potential for significant returns.

Focus on articulating the problem you’re solving and the unique value proposition your solution offers.

Essential Slide Deck Components

Typical slide decks should include sections detailing the problem, solution, market opportunity, business model, team, and financial projections.

Each section should be concise and data-driven, supporting your claims with evidence.

Utilizing Appendix Slides

Appendix slides are valuable for providing supporting information without cluttering the main presentation.

Detailed financial models, technical specifications, and market research data can be included here for reference.

Formatting for Impact

Clean and consistent formatting is essential for readability. Avoid excessive text and prioritize visual aids.

Ensure your slides are visually appealing and reinforce your key messages.

Pitch Deck Formats: Dos and Don'ts

Certain formats are demonstrably more effective than others. Avoid overly complex or distracting designs.

Prioritize clarity and conciseness in your presentation materials.

The Implications of Apple's Entry into the Buy Now, Pay Later Market for Startups

The announcement of Apple’s intention to participate in the buy now, pay later (BNPL) sector has prompted analysis regarding its potential effects on existing startups.

Following this news, the stock values of publicly traded companies such as Affirm and Afterpay experienced declines.

However, this development does not necessarily signal the end for startups operating within the BNPL landscape, as Alex Wilhelm points out.

Apple’s gradual rollout of its BNPL offering, mirroring the availability of Apple Pay, could lead to a reduction in market share for broader BNPL services.

This could, in turn, impact the resources available to those generalized competitors.

A Potential Advantage for Niche BNPL Providers

Startups concentrating on specialized or highly focused BNPL solutions are anticipated to be less vulnerable to this increased competition.

They will likely benefit from a degree of protection from the resulting competitive pressures.

The competitive landscape will likely shift as Apple establishes its presence.

Companies offering unique value propositions may find opportunities to thrive.

• Apple’s Market Power: The company’s extensive user base and established payment infrastructure present a significant advantage.
• Niche Focus: Startups specializing in specific industries or demographics may be better positioned to withstand competition.
• Gradual Rollout: The phased implementation of Apple’s BNPL service will allow competitors time to adapt.

Ultimately, the impact of Apple’s entry will depend on the execution of its strategy and the ability of startups to differentiate themselves.

Understanding the Valuation of Today’s High-Growth Startups

A key question arises regarding the financial justification behind the substantial valuations assigned to many contemporary startups, particularly those with limited revenue but significant capital and high market caps.

Alex Wilhelm recently analyzed the underlying figures, clarifying the rationale for the present conditions within the venture capital landscape, benefiting both startups and investors.

According to his analysis in The Exchange, maintaining these elevated startup valuations is contingent upon sustained robust growth rates and favorable public market multiples.

The Interplay of Growth and Market Conditions

Wilhelm posits that a decline in public market multiples necessitates an improvement in growth rates to compensate, and conversely, strong growth can offset less favorable market conditions.

Essentially, the current system allows for expensive startup valuations to be justified, but this is predicated on a delicate balance between growth and market performance.

This dynamic highlights the inherent risks and rewards associated with investing in high-growth, early-stage companies.

• Strong growth rates are essential for justifying high valuations.
• Favorable public market multiples provide a supportive environment.
• A reciprocal relationship exists: growth can offset market downturns, and vice versa.

Understanding this interplay is crucial for both startups seeking funding and investors evaluating opportunities.

Lisa Wu of Norwest Details a VC-Focused Approach to Fundraising

During last week’s TechCrunch Early Stage: Marketing and Fundraising event, Lisa Wu from Norwest Venture Partners presented insights on how founders can adopt the mindset of a venture capitalist throughout their operations.

There's a striking similarity in the skillsets required of both successful investors and founders. Both must be able to prioritize effectively amidst distractions, thoroughly assess information, and present their ideas with strong belief.

Wu’s presentation was both practical and captivating, incorporating real-world examples and interactive exercises, including a technique she referred to as the “eyebrow test.”

Understanding the VC Perspective

Founders often approach fundraising from the perspective of needing capital. However, Wu emphasized the importance of shifting this viewpoint.

Instead, founders should consider what a VC is actually looking for in an investment. This involves understanding their portfolio strategy, risk tolerance, and desired return on investment.

Key Areas of VC Focus

Wu highlighted several key areas that VCs scrutinize when evaluating potential investments.

• Market Size: VCs seek opportunities in large and growing markets.
• Competitive Landscape: A clear understanding of the competitive environment is crucial.
• Team: The quality and experience of the founding team are paramount.
• Traction: Demonstrable progress and early adoption are highly valued.

Successfully addressing these areas demonstrates to investors that a founder has thoroughly considered the business and its potential.

The "Eyebrow Test"

Wu introduced the “eyebrow test” as a quick method for evaluating the strength of a business idea.

The test involves asking yourself if the idea is compelling enough to raise the eyebrows of potential investors. If not, it may require further refinement or a different approach.

Thinking Like an Investor Long-Term

Adopting a VC mindset isn't just about fundraising; it's a fundamental shift in how founders approach their businesses.

It encourages data-driven decision-making, a focus on scalability, and a long-term vision for growth. This perspective can be invaluable throughout the entire lifecycle of a startup.

Revolut’s $33B Valuation: An Analysis of 2020 Financial Performance

A re-examination of Revolut’s 2020 financials has been conducted by Alex Wilhelm to assess the justification behind the U.K.-based fintech company’s substantial $33 billion valuation.

The analysis reveals a business demonstrating significant financial progress, though some data points concerning recent customer acquisition remain unclear.

Key Findings from the 2020 Results

Wilhelm’s investigation focuses on dissecting the financial data to understand the drivers behind the increased valuation.

The findings suggest a positive trajectory in the company’s financial health, despite certain gaps in the available information regarding user base expansion.

• Revenue Growth: A significant increase in revenue was observed during 2020.
• Cost Management: Revolut demonstrated effective control over operational expenses.
• Profitability: The company moved closer to achieving sustained profitability.

These factors collectively contribute to a more favorable financial profile for Revolut.

However, the rate of new customer onboarding is an area where further clarity is needed to fully validate the valuation.

Implications of the Valuation

The $33 billion valuation positions Revolut as a major player in the competitive consumer fintech landscape.

It reflects investor confidence in the company’s potential for continued growth and market disruption.

Successfully navigating future challenges, including maintaining rapid growth and achieving consistent profitability, will be crucial for justifying this high valuation.

Further Considerations

Ongoing monitoring of Revolut’s performance, particularly its customer acquisition costs and retention rates, will be essential.

The competitive environment within the fintech sector is dynamic, requiring Revolut to continually innovate and adapt to maintain its position.

Achieving a 75% Increase in E-commerce Orders Through a Single A/B Test for a Leading Brand

Jasper Kuria, managing partner at The Conversion Wizards, details how the CRO (Conversion Rate Optimization) consultancy implemented an A/B test resulting in significantly improved conversion rates for a large, multibillion-dollar organization.

Kuria posits that comprehensive redesigns, encompassing multiple variables rather than isolated single-element tests, are more prone to delivering considerable improvements. Furthermore, this approach necessitates less testing time and website traffic to attain statistical significance.

The following outlines the modifications that collectively contributed to a 75% increase in order volume.

The Strategy Behind the A/B Test

The core principle guiding this A/B test was to move beyond incremental changes and embrace a more holistic redesign. This involved simultaneously altering several key elements of the e-commerce experience.

Key Changes Implemented

• Product Page Headline: The original headline was replaced with a more benefit-driven statement.
• Product Image: A higher-quality, more visually appealing product image was utilized.
• Call-to-Action (CTA) Button: The CTA button’s text was revised to create a greater sense of urgency.
• Social Proof: Customer testimonials were prominently displayed on the product page.
• Shipping Information: Clear and concise shipping details were added near the CTA button.

These changes were implemented concurrently in a single A/B test variation, contrasting with the control group which maintained the original page design.

Results and Significance

The redesigned product page demonstrated a remarkable 75% increase in orders compared to the control group. This substantial uplift highlights the power of comprehensive A/B testing.

Statistical significance was achieved relatively quickly due to the magnitude of the effect and the simultaneous changes made. This underscores the efficiency of testing multiple variables at once.

Lessons Learned

This case study demonstrates that significant gains in e-commerce conversion rates can be achieved through bold, holistic redesigns. Focusing on multiple elements simultaneously can accelerate the testing process and deliver impactful results.