TechCrunch+ Roundup: Deep Tech, HashiCorp IPO & Enterprise AI

The Impact of Venture Capital on Startup Dynamics

A significant influx of venture capital into the startup ecosystem is generating notable consequences across the board.

According to Alex Wilhelm’s analysis of Silicon Valley Bank’s Q4 2021 State of the Markets Report, venture capital firms are increasingly competitive, leading to higher valuations for startups even with lower profitability.

Shifting Power Dynamics

The trend towards larger funding rounds, coupled with elevated valuation multiples, is resulting in decreased equity ownership for investors.

This shift is simultaneously empowering startup founders, as investors are willing to offer more favorable terms – paying premiums and accelerating investment timelines – for smaller stakes in less profitable ventures.

An Auspicious Time for Entrepreneurs

The current investment climate presents a particularly opportune moment for aspiring entrepreneurs.

The explicit endorsement from venture capitalists regarding the favorable conditions for founders underscores the strength of the current market.

Founders with viable startup concepts are strongly encouraged to pursue their ventures.

Concluding Remarks

Thank you for your continued readership.

Walter Thompson
Senior Editor, TechCrunch+
@yourprotagonist

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Blending Personal Connection with Professionalism in Startup Funding

The recent pandemic has fundamentally altered the processes used by both investors and startup founders during business interactions. However, establishing a strong rapport remains crucial, as Brian Heater points out.

Laela Sturdy, a general partner at CapitalG, and Vlad Magdalin, co-founder and CEO of Webflow, appeared with Brian on TechCrunch Live. Their discussion centered on deal-making practices during the COVID-19 era and the evolving dynamics between startups and their investors.

Sturdy emphasized that while platforms like Zoom are valuable, face-to-face interactions offer a deeper level of understanding. She believes that in-person meetings elevate the process of getting to know potential partners.

Building trust and a genuine connection is still a vital component of successful fundraising.

The Importance of In-Person Meetings

Despite the rise of virtual communication, the value of in-person meetings hasn't diminished. They allow for a more nuanced assessment of character and long-term compatibility.

Investors often seek to understand the founders' motivations and vision beyond what can be conveyed through a screen.

This shift highlights a renewed focus on the human element within the traditionally data-driven world of venture capital.

Navigating the New Landscape

The pandemic forced a rapid adoption of remote communication tools. This necessitated adjustments from both sides of the investment table.

Founders had to learn to effectively pitch their ideas virtually, while investors developed new methods for due diligence and relationship building.

However, the desire for genuine connection remains, leading to a hybrid approach that combines virtual efficiency with the benefits of in-person interaction.

Key Takeaways from the Discussion

• The pandemic has changed fundraising, but personal chemistry remains important.
• In-person meetings offer a deeper level of connection than virtual interactions.
• A hybrid approach, blending virtual and in-person communication, is becoming the norm.

Ultimately, successful startup fundraising hinges on building strong relationships founded on trust and mutual understanding.

15 Industries Anticipated to Be Transformed by Deep Tech Within Five Years

Deep tech presents significant opportunities for reshaping global operations, though widespread implementation of many applications remains several years distant.

A future-focused analysis was conducted by Anna Heim, examining pi Ventures’ Deep Tech Shifts 2026 report.

This report identifies 15 deep tech subsectors projected to experience a critical turning point within the next five years.

Founding partner Manish Singhal emphasized the importance of investment timing. Investing prematurely can lead to diminished returns.

Conversely, delayed investment may also yield suboptimal outcomes, as the innovation loses its competitive edge.

Singhal stated, “Optimal results are achieved when investment aligns with the moment an innovation gains significant traction.”

Key Considerations for Deep Tech Investment

The report highlights the necessity of strategic timing in deep tech investments.

Early-stage investments carry the risk of market immaturity, while late-stage investments may lack the potential for substantial growth.

Identifying the precise inflection point is crucial for maximizing returns.

• Optimal timing is paramount for successful deep tech investment.
• Understanding the resonance point of an innovation is key.
• Careful analysis of market maturity is essential.

The Deep Tech Shifts 2026 report provides valuable insights for investors seeking to capitalize on the transformative potential of emerging technologies.

It offers a roadmap for navigating the complexities of the deep tech landscape and identifying opportunities for significant growth.

QED’s Optimistic Outlook on Latin American Fintech, Inspired by Nubank

The recent initial public offering of Nubank, a Brazilian digital bank, has sparked considerable attention within the financial technology sector.

To gain insights, Anna Heim and Alex Wilhelm conducted an interview with Lauren Morton, a partner at QED Investors.

QED was an early investor in Nubank, participating in its Series A, B, D, and E funding rounds.

However, their investment activity in Latin America has significantly expanded beyond their initial commitment to Nubank, as detailed in their report.

QED’s Expanding LatAm Investment Strategy

An extensive question-and-answer session with Morton revealed the rationale behind QED’s positive assessment of the Latin American fintech landscape.

She also provided several forecasts regarding the future of the industry in the region.

Morton highlighted the increasing opportunities and potential for growth within LatAm’s financial technology market.

QED’s continued investment demonstrates a strong belief in the region’s capacity for innovation and disruption.

Key Predictions for LatAm Fintech

The interview explored specific predictions regarding the evolution of fintech in Latin America.

These predictions cover areas such as market consolidation, emerging technologies, and evolving consumer behavior.

Nubank’s success is seen as a catalyst for further innovation and investment in the region.

QED believes that LatAm fintech is poised for substantial growth in the coming years.

The Impact of Chinese Regulations on Vision Fund 1’s Performance

Despite remaining the largest tech investment fund globally, SoftBank’s Vision Fund 1 has initiated an $8.8 billion share repurchase program following the release of its recent quarterly earnings report.

A significant contributor to this outcome was the intervention of Chinese regulatory bodies.

These regulators compelled ride-hailing service Didi, a key investment within the fund’s portfolio, to cease onboarding new users and remove its application from app stores.

Consequently, Didi’s stock price experienced a substantial decline.

Didi Investment Losses

The fund’s stake in Didi has now incurred a loss of approximately $5 billion relative to the original investment amount, as detailed by Alex Wilhelm.

This represents a considerable setback for Vision Fund 1.

The regulatory actions taken by the Chinese government directly impacted the valuation of a major portfolio company.

• The $8.8 billion buyback signals investor concern.
• Didi’s situation highlights the risks of investing in heavily regulated markets.
• Vision Fund 1’s performance is demonstrably affected by external geopolitical factors.

The situation underscores the potential for unforeseen regulatory changes to significantly influence investment outcomes.

It also emphasizes the importance of thorough risk assessment when deploying capital in international markets.

A Production-Focused Strategy for Implementing AI Throughout Organizations

Successfully training an AI model to perform a specific task presents significant challenges. Furthermore, the widespread deployment of AI solutions across an entire enterprise is a complex process that many organizations find difficult to navigate.

Given the evolving nature of the field, a standardized framework for managing these projects is currently absent. Consequently, organizations require established best practices to facilitate successful implementation.

Roey Mechrez, the co-founder and CTO of BeyondMinds, identifies the primary obstacles hindering enterprise-wide AI adoption. He provides comprehensive recommendations for resolving what he terms “the orchestration problem.”

Mechrez suggests that companies should adopt a broader perspective, considering the overall AI implementation process. A systematic approach to leveraging multiple AI models within a unified, resilient framework is crucial.

Understanding the Orchestration Problem

The orchestration problem, as Mechrez defines it, centers around the difficulties of managing a diverse portfolio of AI models. This includes version control, monitoring performance, and ensuring seamless integration with existing systems.

Effective orchestration requires a shift in mindset. Instead of viewing AI as isolated projects, enterprises should consider it a continuous process of model development, deployment, and refinement.

Key Barriers to Enterprise AI Adoption

Several key factors contribute to the challenges of enterprise-wide AI adoption. These include:

• Data Silos: Data is often fragmented across different departments and systems, making it difficult to access and utilize for AI training.
• Lack of Standardized Processes: Without consistent processes for model development and deployment, organizations struggle to scale AI initiatives.
• Skill Gaps: A shortage of skilled AI professionals can hinder the ability to build and maintain AI solutions.
• Integration Challenges: Integrating AI models with existing infrastructure can be complex and time-consuming.

Addressing these barriers requires a proactive and strategic approach.

Recommendations for Successful Implementation

Mechrez proposes several strategies for overcoming these hurdles. These include:

• Centralized AI Platform: Establishing a centralized platform for managing AI models can streamline development and deployment.
• Data Governance Framework: Implementing a robust data governance framework ensures data quality and accessibility.
• Investment in Training: Investing in training programs can help bridge the skill gap and empower employees to leverage AI.
• Collaboration Between Teams: Fostering collaboration between data science, IT, and business teams is essential for successful AI integration.

By prioritizing these areas, organizations can significantly improve their chances of successfully adopting AI at scale.

Still Utilizing CentOS 8? Your Migration Pathways

Users of CentOS 8, the widely adopted, freely available derivative of Red Hat Enterprise Linux, experienced disruption when Red Hat declared the end of support for version 8 after December 2021.

A commercially driven organization prioritizing its goals is understandable, but such a change in focus can create substantial challenges for certain users, according to Joao Correia, a technical evangelist at CloudLinux.

For those who haven’t yet identified a replacement, he outlines several open-source alternatives that organizations can employ to mitigate potential risks and maintain adherence to corporate security standards.

With limited time remaining, a swift transition is now crucial.

Available Alternatives to CentOS 8

Several viable options exist for organizations seeking to move away from CentOS 8. These alternatives aim to provide a stable and secure operating system environment.

• Rocky Linux: Created by one of the original CentOS founders, Rocky Linux strives to be a 100% bug-for-bug compatible downstream build of Red Hat Enterprise Linux.
• AlmaLinux: Another community-driven distribution, AlmaLinux also aims for binary compatibility with RHEL, offering a stable and reliable platform.
• Oracle Linux: Oracle provides its own Linux distribution, which is also compatible with RHEL and offers additional features and support options.

Each of these distributions offers a pathway to continued operation without relying on CentOS 8’s discontinued support.

Considerations for Migration

Migrating any operating system requires careful planning and execution. Several factors should be considered to ensure a smooth transition.

• Compatibility: Verify that all applications and services are compatible with the chosen alternative.
• Testing: Thoroughly test the new operating system in a non-production environment before deploying it to production servers.
• Security: Ensure that the new system is properly secured and configured to meet enterprise security policies.
• Support: Evaluate the available support options for the chosen distribution.

Addressing these points proactively will minimize disruption and ensure a successful migration.

Reducing Risk and Maintaining Compliance

Selecting a suitable CentOS 8 replacement is vital for minimizing risk and upholding security protocols.

Open-source alternatives like Rocky Linux and AlmaLinux provide community support and regular updates, contributing to a secure and stable environment. Careful evaluation of each option, coupled with thorough testing, is essential for a successful outcome.

HashiCorp’s IPO Filing: Growth Trends and Valuation Considerations

Last week’s IPO filing from HashiCorp provided detailed insight into the factors behind the software company’s expansion. A robust subscription model is a key driver, generating revenues that are largely predictable, possess high margins, and demonstrate consistent customer retention.

Growth Rate and Valuation

The company is currently projected to achieve a valuation of approximately $10 billion. However, a deceleration in the growth rate could influence the final IPO share price and overall valuation.

Investor sentiment during this period of reduced growth will be crucial. Any signs of discomfort among existing investors could impact the IPO’s success.

Key Takeaways from the Filing

• Recurring Revenue: HashiCorp’s business model is built on a foundation of consistent, recurring revenue streams.
• High Margins: The company benefits from substantial profit margins on its subscription offerings.
• Customer Retention: A “sticky” customer base indicates strong product value and loyalty.
• Valuation Sensitivity: The IPO valuation is potentially sensitive to the current growth trajectory.

The filing highlights the importance of maintaining growth momentum to justify the anticipated $10 billion valuation. Successfully navigating this deceleration will be paramount for HashiCorp’s public market performance.

Utilizing Section 1045 Rollovers to Preserve QSBS Benefits

For companies meeting the criteria for Qualified Small Business Stock (QSBS), founders can potentially eliminate federal capital gains tax upon the sale of their shares.

This tax benefit is contingent upon a holding period of at least five years.

As noted by Calvin Lo and Peyton Carr from Keystone Global Partners, the timing of a company sale is often outside of a founder’s direct control.

The Challenge of Premature Acquisitions

Many company acquisitions occur prior to the five-year holding period, potentially disqualifying founders and investors from significant tax advantages.

This situation can be particularly frustrating when a sale represents a favorable outcome.

Fortunately, a Section 1045 rollover presents a potential solution for preserving these tax benefits in certain circumstances.

How Section 1045 Rollovers Work

A Section 1045 rollover allows eligible gains from the sale of QSBS to be reinvested into another Qualified Small Business Stock.

This reinvestment effectively defers the capital gains tax liability.

By strategically utilizing this provision, founders can maintain their eligibility for the zero capital gains tax rate when they eventually sell the replacement QSBS after the required five-year holding period.