TechCrunch+ Roundup: 2022 VC Predictions, Angel Investing & PACs

The Value of Direct Customer Interaction

In my experience with nascent startups, initial product roadmaps and marketing plans were often based on informed estimations.

Conversely, positions at larger organizations involved direct engagement with both existing and former customers to ascertain their needs and preferences. The superior results from the latter approach are readily apparent.

Regardless of the method – whether through an informal Reddit “Ask Me Anything” session or a Twitter Space – engaging with users of your offerings is consistently beneficial.

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While meticulously crafted personas are valuable, direct conversations with customers provide unparalleled insight into their satisfactions and purchasing motivations.

Early-stage companies can leverage a product advisory council (PAC) to harness the collective intelligence of their user base. Such councils offer numerous advantages, including validation of marketing initiatives and future product development strategies.

Building an Effective Product Advisory Council

Establishing a successful PAC requires founders to first articulate specific objectives and ensure reciprocal value for participants.

This seven-step guide details strategies and tactics for identifying influential members, optimizing communication, and fostering a sense of exclusivity.

Here’s a breakdown of key considerations:

• Define Clear Goals: What specific insights are you hoping to gain?
• Identify Key Members: Focus on users who are vocal, engaged, and representative of your target audience.
• Streamline Communication: Establish a consistent and efficient method for sharing information and gathering feedback.
• Create Value for Participants: Offer exclusive access, early previews, or other incentives.

Thank you for reading TechCrunch+ this week. Wishing you a restful weekend!

Walter Thompson
Senior Editor, TechCrunch+
@yourprotagonist

The Rationale Behind Microsoft’s Acquisition of Activision Blizzard in Light of its Market Capitalization

The concept of risk is inherent in any venture, making it perhaps inaccurate to characterize Microsoft’s intended acquisition of Activision Blizzard simply as a “bet.”

Given Microsoft’s substantial market capitalization, exceeding $2 trillion, the $68 billion expenditure for a gaming company renowned for franchises such as Call of Duty, Guitar Hero, and Candy Crush represents a relatively low-risk investment.

Strategic Implications of the Deal

Aaron Levie, CEO of Box, suggests that this acquisition firmly establishes Microsoft’s position within the burgeoning AR/VR gaming landscape.

Levie posits that, should one anticipate the growth of VR and immersive computing – for either consumer or professional applications – Activision provides Microsoft with the means to cultivate a self-reinforcing cycle of content and technological advancement.

This, in turn, is expected to attract a larger user base to these emerging technologies.

• The acquisition strengthens Microsoft’s content library.
• It accelerates development in AR/VR gaming technologies.
• It positions Microsoft for future growth in immersive computing.

Essentially, the purchase isn’t merely about acquiring gaming titles; it’s about securing a foothold in the next generation of computing platforms.

Christine Tsai of 500 Global Outlines Her Venture Capital Forecast for 2022

The year 2021 witnessed unprecedented levels of venture capital investment. Christine Tsai, CEO and co-founder of 500 Global, suggests that 2022 is likely to follow a comparable trajectory.

Tsai anticipates several key developments in the coming year. These include the increasing adoption of web3 technologies, a greater allocation of funding towards founders from underrepresented groups, and expanded investment activity in historically underserved geographic areas.

A continued wealth of possibilities for both startup founders and investors is indicated by current market trends.

Key Predictions for 2022

• Web3 Mainstream Adoption: The transition of web3 technologies from niche applications to widespread use is expected.
• Capital for Underestimated Founders: Increased funding will be directed towards entrepreneurs who have historically faced barriers to access.
• Investment in Overlooked Regions: Greater capital deployment is predicted in areas that have traditionally received less venture funding.

These forecasts suggest a dynamic and evolving landscape for the venture capital industry. Opportunities are expected to remain plentiful throughout 2022.

Tsai’s insights provide a valuable perspective on the anticipated shifts and trends within the startup ecosystem. The coming year promises continued growth and innovation.

The Future of Quantum Computing Investment: Beyond Venture Capital?

Quantum computing holds considerable promise for fields like machine learning and accelerating computer-aided drug design. However, the sector remains nascent and is still undergoing substantial development.

The year 2021 witnessed roughly 90 investment deals in quantum technologies, accumulating a total of $1.4 billion. This represents a notable increase from the $700 million invested in 2020. Despite this growth, the funding remains comparatively small when contrasted with the scale of investment in areas like SaaS.

Despite its early stage, the quantum computing landscape is already experiencing initial exits. IonQ, for example, achieved a $2 billion valuation following its 2021 SPAC merger. Rigetti Computing is also pursuing a similar path, with plans for a SPAC this year as it continues to refine its superconducting quantum computer.

A detailed analysis of the quantum computing market was recently conducted by Maria Lepskaya, a senior associate at Runa Capital. She categorized leading companies within the industry into 12 distinct quadrants. These quadrants represent specific quantum technologies and the corresponding developmental stages of the startups involved.

Lepskaya’s market map provides a structured overview of the diverse landscape of quantum computing innovation.

Key Areas of Quantum Computing Investment

• Quantum Hardware: Companies focused on building the physical quantum computers themselves.
• Software & Algorithms: Firms developing the software and algorithms needed to run on quantum hardware.
• Applications: Businesses exploring specific applications of quantum computing in various industries.

The increasing investment and emerging exits suggest a growing maturity within the quantum computing ecosystem. Further expansion beyond traditional venture capital funding will likely be crucial for sustained growth.

Continued innovation and the development of practical applications will be key to attracting a wider range of investors to this transformative technology.

Expanding Your Guatemalan Tech Company to the US: A Guide

A Guatemalan entrepreneur is seeking guidance on the optimal strategies for expanding their technology business into the United States.

Initial Considerations for US Expansion

Successfully launching a company in the US from an international base requires careful planning and execution. Several pathways are available, each with its own set of requirements and advantages.

Visa Options for Entrepreneurs

The most suitable visa will depend on the entrepreneur’s specific circumstances and investment level. Here are some common options:

• E-2 Treaty Investor Visa: This visa is available to nationals of treaty countries – including Guatemala – who are investing a substantial amount of capital in a US business.
• L-1A Intracompany Transferee Visa: If the Guatemalan company already has a qualifying relationship with a US entity, an executive or manager can be transferred to the US to establish or manage a branch, subsidiary, or affiliate.
• EB-5 Immigrant Investor Visa: This visa requires a significant investment (typically $800,000 or $1,050,000 depending on the location) that creates at least 10 full-time jobs for US workers.

Choosing the Right Visa

The E-2 visa is often the most accessible initial option for entrepreneurs from Guatemala. It doesn’t require the same level of investment as the EB-5, and the requirements are generally less stringent than the L-1A.

However, the L-1A visa can be advantageous if a US entity is already established or planned. The EB-5 visa is a path to permanent residency, but the substantial investment and job creation requirements present a significant hurdle.

Establishing a US Business Entity

Before applying for a visa, it’s crucial to establish a legal business entity in the US. Common options include:

• Limited Liability Company (LLC): Offers liability protection and flexibility in management.
• C Corporation: Suitable for companies seeking venture capital funding.
• S Corporation: Offers pass-through taxation.

The choice of entity will depend on the company’s long-term goals and tax considerations. Consulting with a US attorney and accountant is highly recommended.

Key Steps for a Successful Expansion

Beyond the visa and entity formation, several other steps are essential for a smooth expansion:

• Market Research: Thoroughly understand the US market, including target customers, competitors, and regulatory landscape.
• Business Plan: Develop a comprehensive business plan outlining the company’s strategy, financial projections, and operational details.
• Legal and Accounting Support: Engage experienced US legal and accounting professionals to ensure compliance with all applicable laws and regulations.
• Banking and Finance: Establish a US bank account and secure funding if needed.

Expanding to the US is a complex undertaking, but with careful planning and expert guidance, a Guatemalan tech company can achieve success in the American market.

Five Key Areas for Venture Capital Impact on Climate Change

In 2021, climate technology companies secured $32 billion in funding. However, this figure falls significantly short of the $2.5 to $4.8 trillion estimated as necessary for sufficient adaptation and mitigation initiatives.

Although private investment cannot independently bridge this funding gap, venture capitalists possess a distinct capability to influence this situation.

How VCs Can Drive Change

Supporting climate-focused startups allows VCs to reduce the perceived risk associated with established climate technologies. This backing also fosters credibility, attracting skilled professionals.

Furthermore, VCs can facilitate scaling operations and draw in diverse investor groups, ultimately influencing the broader ecosystem, according to investor Jamil Wyne and climate finance researcher Abrar Chaudhury.

• De-risking Climate Tech: VCs can validate and support technologies that have already demonstrated potential.
• Attracting Talent: Investment builds legitimacy, making climate startups more appealing to top-tier employees.
• Scaling Operations: VCs provide the resources and expertise needed for rapid growth.
• Expanding Investor Base: Successful VC-backed startups can attract further investment from various sources.
• Ecosystem Shaping: VCs play a crucial role in defining the future landscape of climate technology.

The evaluation of climate tech investments may differ from traditional VC verticals. Success will be measured not only by financial returns but also by its contribution to sustaining livelihoods and preventing market dominance by a single entity.

Essentially, climate tech’s impact extends beyond profitability to encompass the preservation of our future.

An Examination of Secfi’s 2021 Stock Option Equity Report

Having equity in the company one assists in developing is beneficial, however, employees frequently receive unfavorable outcomes when they are unaware of the most advantageous timing for exercising their stock options.

Data from Secfi indicates that, in the previous year, startup employees collectively incurred approximately $11 billion in unnecessary taxes.

This was due to exercising options following an exit event, instead of prior to it.

Frederik Mijnhardt, CEO, presented an analysis of key stock option trends observed in 2021 in a TechCrunch+ article.

His analysis highlighted the reasons why many employees were unable to exercise their options until after an IPO, despite strong public offerings.

This delay significantly increased their tax obligations.

Key Findings from the Report

Mijnhardt notes that the prevailing industry direction of substantial funding rounds and extended exit horizons suggests a continuing rise in the overall expense for startup employees to exercise their stock options.

This trend is anticipated to persist throughout 2022.

The increasing cost is a direct consequence of the current market dynamics.

• Mega-sized funding rounds are becoming more common.
• Exit timelines are lengthening.

Consequently, employees face a greater financial burden when realizing the value of their equity.

Avoiding Investor Alienation: A Guide for Startups Seeking Funding

Engaging potential investors with questions is a crucial part of the fundraising process. However, novice founders can inadvertently create a negative impression by posing questions that appear to test the investor’s expertise.

The Importance of Strategic Questioning

Prashant Fonseka, a partner at Tuesday Capital, suggests a specific approach to questioning venture capitalists. He advises founders to initially focus on questions that are relatively straightforward.

Asking complex or highly technical questions too early can be perceived as confrontational or as an attempt to demonstrate the investor’s lack of understanding. This can hinder the development of a positive rapport.

Timing is Key

More probing inquiries are best reserved for a later stage in the fundraising journey. Specifically, when you are in the position of choosing between several investors who have already expressed a strong interest in funding your venture.

Once investors have indicated their willingness to provide capital, and you’ve successfully demonstrated the viability of your company, a more in-depth discussion can be productive.

Focus on building a relationship first, and then delve into more challenging topics.

By adhering to this strategy, founders can maximize their chances of securing funding and establishing a strong partnership with their investors.

Fintech Investment Surpasses Global Venture Capital Growth

The financial technology, or fintech, sector has experienced remarkably swift expansion since the onset of the pandemic. This growth encompasses areas like Buy Now, Pay Later services, open banking initiatives, and the rise of social finance platforms.

Correspondingly, investment levels have mirrored this rapid development. In the previous year, fintech companies secured over 20% of all venture capital funding.

Fintech's Dominance in the VC Landscape

A comprehensive analysis conducted by Mary Ann Azevedo and Alex Wilhelm reveals how fintech has not only surpassed but significantly outperformed all other sectors.

This outperformance is so pronounced that the trends within fintech closely reflect, yet amplify, those observed in the overall venture capital market.

As they noted, “The dynamics observed in the venture capital market are also present within the fintech market, albeit in a more intensified manner. Fintech represents a more extreme version of broader venture trends.”

Key Observations on Fintech Investment

• Rapid Scaling: Fintech has scaled at an unprecedented rate since the pandemic.
• Investment Share: Over 20% of all venture investments were directed towards fintech in the last year.
• Market Mirroring: Fintech trends are a magnified reflection of the wider venture capital market.

The study highlights the exceptional momentum currently driving the fintech industry and its increasing influence on the venture capital ecosystem.

Potential Shifts in Investment Regulations May Impact China’s Venture Capital Environment

Despite its established position, China’s venture capital ecosystem faces uncertainty. Governmental efforts to regulate the technology sector have raised concerns about the future of startup funding within the nation.

Recent analysis presented in The Exchange suggests that while a significant downturn is anticipated, the Chinese venture market is unlikely to experience a complete failure.

A substantial number of investors, independent of corporate entities, remain actively engaged in China. Their continued participation will prevent a total collapse of investment figures, according to Alex Wilhelm’s report.

However, proposed changes to regulations concerning large technology firms could substantially affect the country’s venture scene.

Key Concerns Regarding New Regulations

The potential implementation of new rules targeting major tech companies represents a significant risk. These regulations could negatively impact the flow of capital into startups.

These changes could limit the ability of larger corporations to invest in early-stage companies. This would reduce a crucial funding source for many ventures.

Resilience Factors in the Chinese Venture Market

• Active Non-Corporate Investors: A robust network of independent investors continues to operate within China.
• Market Maturity: China possesses a well-developed venture investment infrastructure.
• Continued Innovation: Despite regulatory hurdles, innovation and entrepreneurial activity persist.

While challenges exist, the Chinese venture landscape demonstrates considerable resilience. The ongoing activity of non-corporate investors is a key stabilizing factor.

Key Considerations for Securing Angel Investment

Marjorie Radlo-Zandi, a seasoned angel investor, recently outlined five crucial factors she evaluates prior to making an investment.

Her guidance is straightforward and easily understood, making it especially useful given the current rapid pace of startup funding.

Realistic Projections are Paramount

Investors generally don't anticipate a first-time founder's pitch deck to represent a completely exhaustive market analysis. However, a conservative approach is preferable to excessive optimism.

Radlo-Zandi emphasizes that overly ambitious forecasts can damage your credibility. Avoiding such projections is strongly recommended.

The Current Landscape for Startups

The present moment is exceptionally favorable for launching a new venture. However, a compelling narrative is essential to attract venture capital.

Securing funding requires a well-articulated and believable story; gaps in your presentation can hinder your success.

NFT Volume, DAOs and the Intriguing Situation with LooksRare

For a considerable period, the NFT marketplace OpenSea enjoyed a dominant position with minimal competition.

However, this changed recently when LooksRare, a competitor, announced an airdrop of its $LOOKS token.

Following the announcement, LooksRare experienced a surge in activity and actually surpassed OpenSea in terms of trading volume.

Understanding the Shift

The reasons behind this shift are complex and involve considerations of incentives and the role of governance tokens.

As Alex Wilhelm detailed in The Exchange, a deeper examination of these factors is crucial to understanding the situation with LooksRare.

This also provides insight into the broader trend of increasing financialization across various sectors.

• Incentives: The $LOOKS token airdrop incentivized users to trade on the LooksRare platform.
• Governance Tokens: These tokens grant holders a degree of control over the platform’s future development.
• Financialization: The increasing application of financial principles and instruments to non-traditional areas.

The interplay of these elements is shaping the future landscape of NFT marketplaces.

Analyzing these dynamics is essential for comprehending the evolving nature of decentralized finance and the broader Web3 ecosystem.

LG's Pursuit of a Next-Generation Corporate Incubator

LG, the South Korean multinational corporation, has a diverse portfolio ranging from televisions to beverages. Consequently, its decision to establish a startup incubator program represents a logical extension of its innovation efforts.

Further details regarding this initiative were obtained through an interview conducted by Haje Jan Kamps with Sokwoo Rhee.

Rhee, LG’s Corporate Senior Vice President and leader of the North America Innovation Center, clarified the scope of “new businesses.” He indicated a broad interpretation of the term.

According to Rhee, LG is prepared to establish a completely new business division should a concept, proposal, or collaboration prove exceptionally successful.

Exploring LG’s Innovation Strategy

The willingness to form new business units highlights LG’s proactive approach to identifying and nurturing promising ventures.

This strategy demonstrates a commitment to expanding beyond its existing product lines and exploring emerging technologies.

Partnerships and innovative ideas are key components of LG’s incubator program.

Key Takeaways from the Interview

• LG is actively seeking new business opportunities.
• The company is open to creating new business units based on successful proposals.
• The North America Innovation Center plays a crucial role in identifying and evaluating potential ventures.

The incubator program is designed to foster innovation and drive growth for the company.

LG’s investment in this initiative underscores its dedication to remaining competitive in a rapidly evolving technological landscape.

Brazil's Fintech and Insurtech Sectors Poised for Growth with Favorable Regulations

A significant segment of the Brazilian population still lacks adequate access to banking services. However, the Pix instant payment system facilitated over 8 billion transactions in the past year.

Introduced by the Central Bank of Brazil in November 2020, Pix has rapidly gained traction, now utilized by 60% of the country’s citizens.

The evolving regulatory landscape and growing user base are significantly influencing the LatAm fintech startup ecosystem. To gain deeper insights, Anna Heim consulted with several industry leaders.

Expert Perspectives

• Amy Cheetham, a partner at Costanoa Ventures, shared her views.
• Javier Santiso, founder and general partner of Alma Mundi Ventures, contributed his expertise.
• Rodrigo Teijeiro, CEO of RecargaPay, offered valuable perspectives.
• Pedro Sônego de Oliveira, CEO of TruePay, also participated in the discussion.

These experts provided analysis on the current state and future trajectory of fintech innovation within Brazil.

The increasing adoption of Pix is a key driver of this growth, creating new opportunities for startups to develop innovative financial solutions.