Capital as a Service: Get Your First Check in 2021

The Distinction Between Funding and Revenue Generation

The observation made by Career Karma’s founder, Ruben Harris, during a conversation – that many founders confuse securing funding with actually generating revenue – has resonated deeply. It’s crucial to recognize that obtaining investment can, paradoxically, result in a financial cost, specifically through the dilution of ownership and equity.

Clearbanc's Unique Approach

This is where Clearbanc, a company I’ve followed closely for several years, presents a particularly attractive proposition. Co-founded by Michele Romanow and Andrew D’Souza, the company positions itself as a capital solution for early-stage founders that doesn’t require relinquishing equity.

Clearbanc leverages an algorithm to analyze a startup’s data, promising a “20-minute term sheet.” If a business demonstrates positive advertising spend and sound unit economics, investment ranging from $10,000 to over $10 million can be secured. The company profits through a revenue-share agreement, rather than taking an equity stake.

Introducing ClearAngel

According to D’Souza, while over 4,000 businesses have benefited from this model, more than 50,000 applications have been declined due to insufficient scale or repeatability. This week, Clearbanc announced a $10 million funding round dedicated to the development of a new product: ClearAngel.

The aim of ClearAngel is to support any online business generating early revenue, even before achieving widespread traction. D’Souza describes traditional “friends and family” funding as “quite elitist,” and Clearbanc intends to offer an alternative angel investment, coupled with founder-focused services like supply chain analysis, network introductions, and competitive landscape assessments.

To qualify for funding, a startup needs to demonstrate approximately $1,000 in monthly revenue. In exchange for an investment of $10,000 to $50,000, founders agree to remit up to 2% of their revenue over a four-year period.

Is Revenue-Share Always the Best Option?

Clearbanc’s repayment structure suits some startups, but a conventional bank loan might be more advantageous for others. A significant challenge for the company is that startups already generating substantial revenue may prefer to avoid a revenue-share agreement.

What happens if a startup receiving ClearAngel capital fails to meet the minimum revenue threshold?

D’Souza states that this would indicate a failure of the ClearAngel product itself. He acknowledges that some companies will inevitably struggle, accepting this as an inherent risk.

Alternative Capital: Weighing the Pros and Cons

Like venture capital, alternative financing options have both advantages and disadvantages. If the ultimate goal is to build a billion-dollar enterprise, which path is most effective? Could accepting a revenue-share agreement hinder a pre-seed startup’s ability to secure further capital? And what is the perspective of Y Combinator on this matter?

These are key questions that will be addressed in my upcoming panel discussion on alternative financing at TC Sessions: Justice. Attendance at the full conference is just $5, and the speaker lineup includes Arlan Hamilton of Backstage Capital and Congresswoman Barbara Lee.

Stay Informed

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Understanding Kubernetes Networking: A Deep Dive

Kubernetes networking is a complex subject, but fundamentally it’s about enabling communication between pods, services, and the outside world. It’s a crucial aspect of deploying and managing containerized applications at scale.

Core Concepts in Kubernetes Networking

Several key components work together to facilitate networking within a Kubernetes cluster. These include Pods, Services, and Network Policies.

Pods are the smallest deployable units in Kubernetes, representing a single instance of an application. Each pod is assigned a unique IP address within the cluster.

Services provide a stable network endpoint for accessing pods. They abstract away the underlying pod IPs, which can change dynamically. This ensures consistent access even as pods are created or destroyed.

Network Policies define rules for controlling traffic flow between pods. They allow you to restrict communication based on labels, namespaces, and IP addresses, enhancing security.

Kubernetes Networking Models

Kubernetes doesn’t dictate a specific networking implementation. Instead, it provides an API for networking, allowing various Container Network Interface (CNI) plugins to be used.

Common CNI plugins include:

• Calico: Known for its robust network policy enforcement and scalability.
• Flannel: A simple and easy-to-use CNI plugin, often used for basic networking.
• Weave Net: Provides a network overlay with encryption capabilities.
• Cilium: Leverages eBPF for advanced networking and security features.

The choice of CNI plugin depends on your specific requirements, such as network complexity, security needs, and performance expectations.

Service Discovery and Load Balancing

Kubernetes provides built-in service discovery and load balancing mechanisms. When a service is created, it receives a ClusterIP, which is a virtual IP address accessible within the cluster.

Kubernetes uses kube-proxy to manage network rules and forward traffic to the appropriate pods backing the service. This ensures that requests are distributed evenly across available pods.

There are different service types available:

• ClusterIP: Exposes the service on a cluster-internal IP.
• NodePort: Exposes the service on each node's IP at a static port.
• LoadBalancer: Provisions an external load balancer to expose the service to the internet.

Ingress Controllers for External Access

For more sophisticated external access, Ingress Controllers are often used. They act as reverse proxies, routing external traffic to the appropriate services based on hostnames or paths.

Ingress controllers allow you to consolidate multiple services behind a single external IP address, simplifying access and management. Popular Ingress controllers include Nginx Ingress Controller and Traefik.

DNS Resolution in Kubernetes

Kubernetes includes a cluster DNS service, typically implemented by CoreDNS. This service resolves service names to their corresponding ClusterIP addresses.

When a pod needs to access a service, it uses the service's name as a hostname. The cluster DNS service then resolves this name to the service's ClusterIP, enabling communication.

Network Policies: Securing Your Cluster

Network Policies are essential for securing your Kubernetes cluster. They allow you to define granular rules for controlling traffic flow between pods.

You can use network policies to:

• Isolate sensitive applications.
• Restrict access to databases.
• Prevent unauthorized communication between pods.

Implementing network policies is a best practice for enhancing the security posture of your Kubernetes environment.

Troubleshooting Kubernetes Networking

Networking issues can be challenging to diagnose. Common troubleshooting steps include:

• Verifying pod IP addresses and network connectivity.
• Checking service endpoints and kube-proxy configuration.
• Examining network policy rules.
• Using network debugging tools like `tcpdump` or `ping`.

Understanding the underlying networking model and components is crucial for effectively troubleshooting Kubernetes networking problems.

Effective Kubernetes networking is vital for building resilient, scalable, and secure applications. A solid grasp of these concepts will empower you to manage complex deployments with confidence.

Coinbase Initiates Public Offering Process

Following a substantial valuation of $100 billion in private secondary markets, Coinbase has officially submitted its filings for an initial public offering. As highlighted by Sara Mauskopf, founder of Winnie, the S-1 document represents a significant achievement. The cryptocurrency platform, as observed by Alex Wilhelm, experienced impressive growth of over 139% during 2020, markedly exceeding its performance in the previous year.

Key Information:

• The company is opting for a direct listing, rather than utilizing a Special Purpose Acquisition Company (SPAC), a distinction of note in the current market.
• Five crucial insights from Coinbase’s S-1 filing are available, covering aspects from revenue stability to the identification of key competitors.

Additional Points:

• Union Square Ventures (USV), a major investor in Coinbase, has been actively reducing its shareholding in anticipation of the IPO.
• Considering Coinbase’s current valuation, questions arise regarding an appropriate valuation for Stripe.

Mobility as a Service

A recent discussion was held with Eric Eldon, the managing editor at TechCrunch and previously a writer for Startups Weekly, concerning his collaborative efforts with Kirsten Korosec, our dedicated transportation editor.

His insights were as follows: The frequency of employees commuting to the office may be permanently reduced, or even eliminated entirely. Nevertheless, the fundamental need for personal transportation, or at least the desire for it, will persist. How will individuals navigate this new reality? What solutions will emerge?

The evolving demands and preferences of commuters, coupled with groundbreaking advancements in transportation technologies, are poised to significantly reshape urban landscapes, particularly as we collectively adapt to the changing dynamics of the workplace.

This subject will receive comprehensive coverage throughout the year as we collectively navigate the transition back to work.

Further exploration can be found in these articles:

• Ten investors forecast that Mobility-as-a-Service (MaaS), on-demand delivery, and electric vehicles (EVs) will define the future of mobility in the post-pandemic era.
• An examination of whether solid-state batteries can provide the necessary power for the next generation of EVs.
• Next week’s planned coverage will focus on the evolving landscape of real estate and proptech.

Spain Aims to Foster a Thriving Startup Ecosystem

The Spanish government, under the leadership of Prime Minister Pedro Sanchez, has revealed ambitious strategies to establish the nation as a prominent center for entrepreneurship. The newly implemented Startup Act represents the inaugural legislative effort specifically designed to cultivate technological innovation throughout Spain.

Key objectives include the encouragement of inventive endeavors, the attraction of both national and international investment capital, and the positioning of Spain as a leading incubator for emerging businesses.

Key Takeaways: A significant step towards fostering innovation involves streamlining and easing existing regulatory burdens.

Additional Developments This Week:

• The burgeoning startup environment in Lisbon is gaining momentum as Portugal strives to become a leading European technology force.
• Expert advice column: An examination of the most expedient immigration pathways available.

An Update for Equity Listeners

Dedicated followers of the Equity podcast may have detected a subtle shift in our programming, as we've been exploring the possibility of introducing a third weekly show. This week, the announcement was made public! In addition to our existing programs designed to keep listeners informed with tech news at the beginning and end of each week, we will now feature a Wednesday episode dedicated to an in-depth exploration of a specific topic, field, or individual.

Our inaugural mid-week installment was released this week, focusing on the subject of space exploration – and, naturally, included a generous helping of puns and commentary regarding Elon Musk.

You can find more details about the episode here: https://techcrunch.com/2021/02/24/spacex-is-really-just-spac-and-an-ex/

As the podcast approaches its fourth anniversary, I am also nearing my one-year mark as a co-host. We deeply appreciate the ongoing support from our audience and are excited to continue delivering both entertainment and valuable insights.

Recent Episodes Include:

• A critical look at the continued relevance of LinkedIn in 2021.
• An analysis of SpaceX, its structure, and recent developments.
• Examining the implications of the current trend of companies going public and what it means for startups.

Weekly Highlights

Featured in TechCrunch

A comprehensive startup bootcamp, long anticipated by many, has now been launched.

Exclusive Report: Venture Capital firms are actively pursuing Hopin, with valuations reaching $5-6 billion.

The startup ecosystem in Lisbon is experiencing significant growth, positioning Portugal as a potential leading tech hub in Europe.

Reports indicate that Lightspeed Venture Partners is nearing the appointment of a partner based in London, signifying an expansion of their European operations.

Contra aims to establish itself as a dedicated platform for freelance and independent professionals.

Highlights from Extra Crunch

Jason Boehmig of Ironclad shares insights, stating that the primary goal of pricing strategies is continuous improvement and refinement.

An analysis of the financial performance of prominent Buy Now, Pay Later (BNPL) companies – Klarna, Affirm, and Afterpay – is presented, coinciding with increased funding in the BNPL sector.

Four fundamental principles of venture capital investing are outlined.

This concludes a busy week of developments! For those who subscribe, please note that I am expanding coverage to include health technology, alongside edtech, for the TechCrunch team. Please share contacts for knowledgeable individuals in this field, and self-recommendations are welcome.

N